SRA consults on new proposals to strengthen requirements for solicitors using or arranging third-party litigation funding in consumer claims
The SRA have launched a 10-week consultation on proposals to strengthen requirements for solicitors using or arranging third-party litigation funding in consumer claims.
At the same time, we have published new guidance for solicitors and law firms on complying with their existing professional obligations when using or arranging third-party litigation funding.
We recognise the important role litigation funding can play in increasing access to justice, its evidence shows that some arrangements can create risks to firm stability and lead to poor outcomes for consumers. The regulator is consulting on targeted and proportionate new requirements.
Specific proposals include requirements that law firms:
- notify the SRA when they use or arrange third-party litigation funding
- produce and retain a third-party litigation funding risk assessment
- provide clients with summary documents before they sign a third-party funding agreement.
The consultation forms part of the SRA's wider programme of work to address risks in the high-volume consumer claims sector, including where claims are pursued through 'no win, no fee' funding models. The proposals are informed by evidence of consumer harm identified through responses to the SRA's 2025 discussion paper, thematic review, firm declaration exercise, large-scale consumer research and ongoing investigations.
Separate to the consultation, we have issued guidance to support firms in meeting their current obligations when using or arranging third-party litigation funding. The guidance explains how solicitors and law firms should assess whether funding arrangements are in the clients' best interests, maintain their independence, manage conflicts of interests and ensure clients receive the information they need to make informed decisions. It also highlights firms' responsibilities in relation to financial crime and money laundering.
Alongside this work, the SRA is developing and testing a range of onboarding materials, including checklists and key facts documents. These resources are designed to improve how consumers receive and engage with key information at the start of a claim, and help them better understand costs, risks and available options before deciding whether to proceed.
Data gathered by the SRA found that while fewer than 1% of regulated firms are likely to use or arrange third-party litigation funding for high-volume consumer claims, those firms represent tens of millions of clients. The findings also revealed extensive reliance on third parties, including referrers, marketers and litigation funders, particularly in the car finance sector, and identified cases where firms' litigation funding debt exceeded annual turnover.
Aileen Armstrong, Executive Director of Strategy and Policy, said: 'We have seen clear evidence that third-party litigation funding can create risks to firm stability and lead to poor outcomes for consumers. That’s why we are issuing new guidance for law firms and solicitors, and consulting on targeted new requirements to ensure third party litigation funding is used responsibly and with safeguards in place.
'At the same time, we are taking steps to improve the information consumers receive at the start of a claim. We are testing new materials to help people better understand what they are signing up to and make informed choices.'
We have already taken enforcement action in the sector, including closing seven law firms. It has also established a supervision taskforce to identify and address risks earlier through enhanced engagement with some HVCC firms, with the aim of identifying and tackling problematic behaviour before it leads to poor outcomes for consumers.
As of the end of June 2026 we have 94 open investigations relating to 68 firms that manage high-volume consumer claims.
The consultation is open until 17 September 2026.
You can also join the webinar below for more info:
Third-party litigation funding: protecting consumers (webinar)
|
Date: Thursday 13 August 2026 Time: 13.30 - 14.15 |