The SRA and the FCA issued a joint warning to firms representing motor finance commission claims on 4/2/26, but it is a recommended read for law firms (and Claims Management Companies) dealing with any claims management activity work given the reference to the updated SRA Claims Management Activity Guidance.
The main focus of the joint warning is on how firms should deal with consumers who find themselves having instructed multiple representatives in relation to the same claim, and the termination fees firms charge them when they realise this and whittle their representation down to one.
Law firms are expected to ensure that prospective clients don’t already have representation as part of their onboarding processes. Relying on clients signing standard contracts which include a statement that they have no other representation, and/ or that this latest agreement will supersede any previous ones, will not go down well with the SRA, unless evidence can be provided that this point was explicitly discussed before they are asked to sign.
Prospective clients must be fully advised at the outset of any termination fees payable if they change their mind about instructing the firm (either because they have too many representatives or they want to go elsewhere/ pursue the claim themselves for free), otherwise such fees are likely to be deemed unreasonable. Reading between the lines, the SRA and FCA’s position is clear: termination fees are very much frowned upon. If you insist on charging them, make sure the fee is reasonable, relates to the (justifiable) work that has actually been carried out to that point, and is within the fee cap set out in the SRA’s Claims Management Fee Rules – if no work has been carried out, or your onboarding process could be blamed for the client now wishing to terminate, no fee should be charged.
What do the SRA (and FCA) expect to see?
- Have robust onboarding processes to ensure that clients have not already signed up with another firm (and remain alive to them engaging another representative mid-way through the case, inadvertently or otherwise!).
- Check that your advertising/ websites don’t mislead clients/ confuse them into inadvertently signing up with you when they already have a representative.
- If you discover a client has multiple representatives, act quickly. Remember your obligation to act in the client’s best interests and work with them to resolve duplicate claims asap, even if that means letting them (and their fees) go, and give careful consideration to whether a termination fee would be appropriate or justifiable in the circumstances.
- Make it clear that consumers don’t actually need a law firm to bring a claim – they can do so for free or via the proposed motor finance redress scheme (which doesn’t actually exist yet, but you must still tell them about it!).
- Be totally upfront about costs (especially termination fees) and the options available to prospective clients so they can make an informed decision about instructing you.
- If you identify additional claims the client could make during the matter, ensure you have their specific separate instructions to pursue them (this now gets a specific mention in the updated SRA guidance note).
- Keep records (an audit trail) that you have complied with the above and your reasoning for all decisions.
Updated SRA Guidance on Claims Management Activities
If you work in this space, now is a good time to re-read the SRA’s guidance note and remind yourself of the SRA’s expectations. The updated version now includes:
- a new section on ‘claims being progressed by multiple representatives’.
- a reminder to advise clients about referral arrangements.
- reference to the latest SRA Warning Notice on no win, no fee arrangements and being able to justify pricing structures, particularly success fees.
- the requirement to notify clients where there is a realistic prospect of being able to use a statutory redress scheme to pursue their claim.
- A reminder about the Warning Notice on marketing services to members of the public.
The SRA (and the FCA) are on the warpath when it comes to claims firms – they currently have 89 open investigations into 71 law firms – ignore the latest warnings at your peril!