Sackman: Aware of concerns
The government has told the Solicitors Regulation Authority (SRA) and Financial Conduct Authority (FCA) of the need for “tougher, more consistent regulation of conditional fee agreements”.
Justice minister Sarah Sackman said the government was aware of concerns that misleading ‘no win, no fee’ advertising “can expose consumers to unexpected financial risk, including through unclear information about fees, deductions, and related funding or insurance arrangements”.
Responding to a parliamentary question from Labour MP Bambos Charalambous about the impact of such advertising, Ms Sackman said: “The Ministry of Justice has been working closely with relevant regulators and partners across the system, including engagement with the SRA and FCA, to understand and support action to address risks to consumers in the high-volume consumer claims market.
“I met with both organisations recently and impressed upon the regulators the need for tougher, more consistent regulation of conditional fee agreements.”
She went on to highlight work the SRA is doing in the high-volume consumer claims sector – including action to improve how ‘no win, no fee’ arrangements were explained, including exploring standardised wording and templates to support clearer consumer communications – and said the regulator would shortly publish a warning notice on conditional fee work.
The FCA, meanwhile, has also intervened to require misleading claims management company (CMC) promotions to be amended or withdrawn, and “has recently written to CMCs active in motor finance claims to remind them to review their promotions and ensure compliance with FCA rules and the Consumer Duty”.
Separately, the Advertising Standards Authority (ASA) has highlighted how three rulings in September [1] on group action adverts identified “recurring pitfalls in the way these services are promoted and set out clear steps advertisers must take to fix them”.
It said [2]: “If your ad says ‘no win, no fee’, the ASA expects you to set out in the ads or at least on the landing pages, before any contracts are signed, how that works: how fees and charges are calculated in a successful claim, including the percentage fee deducted from compensation; and that clients may be liable for costs in some circumstances.”
Burying this in FAQs or later retainer documents breached the advertising code, it stressed.
Claims like ‘up to £10,000’ must not be misleading “and you must state that figures are before deductions (e.g. fees/ATE insurance) with an immediate explanation of how those work”.
The other two key messages were that if an advert asked users to e-sign, firms had to make it clear next to the signature that it formed a legally binding contract, while lead generators had to identify themselves as such prominently, early on the page or ad, and don’t imply you’re running the mass claim.
Further, “if you’re selling all leads to a single firm, make that clear and name that firm”.