The Solicitors Regulation Authority is moving slowly towards restricting fees for firms involved in financial product mis-selling cases.
The regulator will run a discussion paper from July through to September in an effort to better understand the market and to work out how to respond to parliament’s call for action in the sector. This approach was agreed by the SRA board at its meeting last week.
The result could be that fees are capped in certain circumstances, as the financial regulatory has already proposed. Law firms doing this kind of work may also be forced through transparency rules to give an upfront description of, and price for, the services they offer.
The Financial Guidance and Claims Act 2018 places a statutory duty on the SRA and Financial Conduct Authority to make rules preventiung excessive fees being charged by firms for all claims management agreements relating to financial products or services. The legislation did not set a firm target for when regulators should make rules, but the SRA is keen to press on.
The FCA has already proposed to cap the fees that may be charged for claims management activities that lead to redress. This would apply to all cases where those claims are already in the remit of an ombudsman scheme designed to be accessed directly by members of the public. For all other fees on financial product and services claims where the cap does not apply, charges will be ‘no more than is reasonable’. Firm plans are expected to be confirmed in the autumn.
The SRA said its response must be ‘proportionate and targeted’ to reduce the risk of excessive fees but not affect access to justice or competition in the market.
Only a small number of law firms carry out this work and the SRA will issue a discussion paper to build knowledge and information about those practices working in this field. At this stage there is no intention to invoke discretionary powers to make rules that would restrict fees in other claims management areas – for example personal injury – as there is not evidence of consumers being charged excessive fees.