The Legal Services Board will not introduce specific guidance for damages-based agreements - despite conceding there is risk of a new mis-selling scandal.

Instead, the super-regulator has called on individual regulators to introduce sufficient safeguards to protect clients who sign up to a DBA.

The new funding mechanism was enabled by the Jackson reforms that came into force on 1 April, but has yet to be widely taken up by law firms as a viable option.

LSB strategy director Crispin Passmore (pictured) said in a letter this week that his organisation will remain ‘cognisant of the risks’ posed by the agreements and the potential for such funding arrangements to increase.

The letter noted that the LSB board was concerned about the cost, service quality and price transparency involved in DBAs, the combination of which could lead to the type of mis-selling that traditional legal regulators have never had to contend with.

Passmore called on regulators to monitor the transparency of funding arrangements to ensure good outcomes for consumers.

‘We would expect you to gather information on which practitioners were using such arrangements and reflect this information in your supervision,’ he added.

The letter said the LSB board was ‘disappointed’ by the time it took to respond to its consultation on DBAs and hoped this did not reflect that the arrangements were not taken seriously.

Each regulator gave assurances that risks associated with DBAs would be tackled through existing regulatory frameworks.

The Ministry of Justice confirmed it is considering suggestions for ways to improve the DBA system. These will be set out in due course, with any changes requiring amendments to the existing rules and/or regulations.