New report calls for measures to protect consumers from misleading legal advertising that leaves them responsible for legal costs without their knowledge
Fair Civil Justice (FCJ) commissioned international law firm CMS to conduct research into the way that claimant law firms advertise so-called “no-win/no-fee” claims. It found that:
- Consumers are increasingly exposed to widespread and targeted adverts, particularly from claimant law firms, which consistently understate and conceal the risks of litigation, while overstating potential.
- The number of specialist claimant law firms, sophistication of litigation funders, technological advances, lack of pre-contractual information, and increases in class action mechanisms are spiking a trend resulting in an increased number of claims.
- The UK’s regulatory framework has not kept pace with the latest trends and, as a result, there are gaps in the regulatory environment.
Case studies found that:
- 5,800 claimants thought they were litigating “risk free” in the case of Sharp v Blank – a claim on behalf of a large group of shareholders in Lloyds TSB against five former directors of Lloyds seeking damages of £385m concerning the role of those directors in Lloyds’ 2008 takeover of HBOS plc – but that was not the case. In fact, the court ruled that the claimants were in-principle liable for the defendants’ legal costs.
- Consumers received much lower compensation than was suggested in the aftermath of the 2018 cyberattack on British Airways when 400,000 customers’ data was compromised or stolen. Advertising by the claimant law firm suggested recoveries of up to £2,000 per consumer, but when a consumer expressed dissatisfaction online at receiving a much lower payout than was suggested (£130), the claimant law firm insisted that their client remove these comments because the settlement agreement was confidential.
- Claimants were left unrepresented and liable for defendants’ costs when the claimant law firm discontinued acting for them in 2022. The claimants pursuing these proceedings were initially brought in 1977 by women (and on behalf of children) who suffered injuries alleged as a result of taking a hormone-based pregnancy test, Primodos, which was widely used in the UK in the 1960s and ‘70s until it was withdrawn from the market in 1978.
- In a case against Uber over the employment status of their drivers, claimants were onboarded onto claims without their knowledge. The claimant law firm then approached Uber directly for compensation, in theory on behalf of the drivers, taking their fee in the process. When Uber sought to make direct contact with its drivers to settle in full, the law firm said it would apply a “termination fee” to a driver looking to disinstruct the firm.
In response, FCJ is making several recommendations to better protect consumers in this fast-changing legal landscape. These recommendations are cost-neutral, add minimal burden to businesses and preserve consumers’ ability to seek redress for wrongs.
- Consumers considering joining a group claim should receive a key information document outlining the risks associated with joining a claim, prior to entering a contract.
- Standardise regulation of legal advertising, so that law firms and claims management companies are subject to the same rules when advertising claims.
- Inform potential claimants of adverse costs risks through stricter regulation of the term “no-win/no-fee” when advertising claims, as is the case with claims management companies.
- Prohibit targeted social media adverts for claims driven by personal characteristics.
- Provide a 60-day “cooling off” period and the right to terminate the retainer without penalty for claimants onboarded to group claims.
- To promote transparency and open justice, ban confidentiality terms that prevent consumers from talking publicly about the conduct of the litigation and the level of compensation recovered.
