Very welcome news today from the SRA, who have announced a consultation into new proposed regulations for law firms using third party litigation funding in consumer claims.
The SRA has warned that funding arrangements can “create risks to firm stability and lead to poor outcomes for consumers,” and proposes the following requirements to limit these harms:
- Law firms must maintain independence from a funder, and act in the client’s best interest, including only disclosing information to the funder with the client’s consent.
- Firms will have to provide clients with a ‘prominent funding information document’, which would explain the availability of other options for funding, including redress schemes and insurance.
- Firms will have to notify the SRA when using or arranging funding.
- Law firms will have to prepare and make available to the SRA, a ‘third-party litigation funding risk assessment’.
- Firms will have to make available to the SRA a plan setting out how the firm would make an orderly closure if necessary.
The deadline for submission to the consultation is 17 September 2026.
Seema Kennedy, Fair Civil Justice Executive Director, commented:
Fair Civil Justice welcomes today’s announcement from the SRA.
This is a significant and necessary step towards improving consumer protection in the mass claims market. The SRA has rightly recognised that third-party litigation funding can create risks to firm stability and lead to poor outcomes for consumers, particularly where claims are financed through complex arrangements that are not properly explained or supervised.
We particularly welcome the proposals requiring law firms to notify the SRA when they use or arrange third-party litigation funding, to carry out and retain a risk assessment, and to provide consumers with clear information before they enter into a funding agreement. These are sensible and targeted safeguards.
However, this should be seen as part of a wider regulatory picture, not the end of it. The SRA can and should regulate the conduct of solicitors and law firms. But it cannot, on its own, address the wider risks created by an increasingly large and complex litigation funding market in which the funders themselves remain outside meaningful statutory oversight.
Today’s announcement is therefore an important step forward, but it also underlines the need for broader reform to ensure that third-party litigation funding operates transparently and with proper protections for consumers. Fair Civil Justice looks forward to contributing to the consultation.
Please see more information about the consultation here: https://www.sra.org.uk/news/news/press/consults-new-proposals-consumer-claims/
