Solicitors Regulation Authority consults on consumer protection measures where litigation funding used for consumer claims

The Solicitors Regulation Authority (SRA) has launched a consultation on proposals to strengthen requirements for solicitors using or arranging third-party litigation funding in consumer claims, together with new guidance on complying with existing professional obligations when doing so. The consultation is open until 17 September 2026.

This forms part of the SRA's wider work to address risks in the high-volume consumer claims sector, on which it issued a discussion paper last September (considered in our previous blog post). The SRA describes third-party funding as "one of the areas of greatest harm and risk", and identifies a number of key risks including that solicitors: may fail to identify "own interest" conflicts when arranging litigation funding, which may result in agreements not being in the best interests of clients; and may not provide the information clients need to make informed decisions about funding arrangements, which can leave clients unsure of what has been agreed or the financial implications. 

The proposed new provisions comprise:

• New professional conduct requirements when solicitors and law firms use and/or arrange third-party funding for any type of claim, including requirements relating to independence, acting in the clients' best interests and dealing with confidential information. 
• A requirement to provide consumer clients with a prominent funding information document, in clear and plain language, to ensure they have the necessary information before signing a funding agreement. This would include information on free to use alternatives to pursue the claim (such as via an ombudsman or other redress scheme) and whether there may be other potential sources of funding (such as a legal expenses insurance policy), as well as information about the law firm's charges and the funding agreement itself.
• A requirement to notify the SRA when using or arranging third-party funding for consumer claims and to produce, and provide to the SRA on request, a third-party funding risk assessment.
• A requirement for law firms using or arranging third-party litigation funding for consumer claims, and meeting certain conditions, to produce and retain a plan setting out how they would achieve and resource an orderly closure of their business, if that were necessary.

Consumer claims are defined as where consumers bring claims against the same organisation, or in relation to the same issue. The examples listed include motor finance, unaffordable lending, data breach, diesel emissions and flight delays. However, the definition excludes personal injury and clinical negligence claims and collective proceedings brought in the Competition Appeal Tribunal.

The SRA's consultation paper also expresses concerns about the actions of some litigation funders, including that they may lack the appropriate expertise to assess the risks of financing consumer claims work, and that some appear to have made funding commitments without the necessary capital or liquidity to meet them. The SRA notes the Civil Justice Council's (CJC's) June 2025 report and recommendations on litigation funding (see our previous blog post) and says that it would welcome compulsory regulation. The government announced in December 2025 that it accepted the CJC's recommendation to introduce "proportionate regulation" of litigation funding agreements, to improve transparency and fairness for claimants, but no further detail has been forthcoming.

Separate to the consultation, the SRA's new 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.