Written by ‘No win, no fee’ legal agreements have long been marketed as a risk-free route to justice, offering a way for individuals to pursue claims without the burden of upfront legal fees. However, recent cases, including the high-profile collapse of SSB Law, have exposed serious flaws in the system, leaving some clients saddled with unexpected bills and financial ruin.
The Solicitors Regulation Authority (SRA) has issued fresh warnings to law firms about misleading advertising and recruitment practices, urging them to provide greater transparency about the true costs and risks involved. But for those considering such arrangements, vigilance is crucial.
The Promise vs Reality
‘No win, no fee’ agreements, also known as conditional fee agreements (CFAs), are intended to shield clients from financial risk. The solicitor only gets paid if the case is successful, and after-the-event (ATE) insurance is typically used to cover the losing side’s costs.
But the reality can be far from straightforward.
- Unexpected costs: Clients who abandon their claims mid-way could still be liable for substantial fees.
- Insurance loopholes: ATE insurance may not cover all costs, particularly if terms are not met, leaving clients exposed to five-figure bills.
- Compensation deductions: Success fees and insurance premiums can significantly reduce the compensation awarded, with some clients left with little to nothing.
One former client of SSB Law told BBC News: “I thought I was covered, but now I’m facing a £45,000 legal bill. It’s devastating. I had no idea this could happen.”
Others have reported being pursued directly by successful defendants for unpaid legal costs, a consequence of insurers refusing to honour policies.
Ethical Concerns Over Client Recruitment
The SRA has also highlighted dubious methods used by some law firms to attract clients.
- Cold calling and surveys: Third-party claims management companies often use misleading tactics, such as re-marketing opt-in survey data, to solicit clients.
- Lack of consent: In many cases, firms fail to ensure that potential clients have given informed consent to be contacted.
- Third-party accountability: Law firms are responsible for the actions of the third parties they work with, yet some turn a blind eye to aggressive marketing practices that would violate SRA rules.
Paul Philip, chief executive of the SRA, stated: “Firms must ensure their marketing is clear, honest, and in line with our professional standards. ‘No win, no fee’ arrangements can provide access to justice, but they must not mislead clients or expose them to unforeseen risks”.
What You Can Do
For individuals considering a ‘no win, no fee’ arrangement, it’s essential to proceed with caution:
- Read the small print: Carefully review the terms of your agreement, paying close attention to potential liabilities.
- Understand deductions: Ask your solicitor for a clear explanation of what will be deducted from any compensation awarded.
- Check the insurance: Verify that your ATE insurance policy covers all potential costs, and ensure you understand the conditions for coverage.
- Know your exit strategy: Be clear about what happens if you decide to discontinue your claim.
The SRA has published a consumer guide to help individuals navigate these agreements, offering advice on questions to ask and potential risks to consider.
A System in Need of Reform
Critics argue that ‘no win, no fee’ agreements, while well-intentioned, have become a double-edged sword. While they improve access to justice for many, the lack of transparency and regulation in some areas has left others in financial jeopardy.
Calls are growing for stricter oversight of third-party claims companies, caps on success fees, and mandatory plain-language explanations of terms and conditions. The SRA’s recent warning notice is a step in the right direction, but many believe more robust action is needed to protect clients from exploitation.
For now, consumers must tread carefully. ‘No win, no fee’ may seem like an open door to justice, but without proper scrutiny, it can leave clients with more problems than they started with.
This article was written by John Barwell, founder of Legal Lens, a UK-based advocacy initiative supporting Litigants in Person.
References
- BBC News (2024). Collapse of SSB Law leaves clients facing five-figure bills. [Online] Available at: https://www.bbc.co.uk/news/uk-england-lancashire-68215645 [Accessed 22 Dec. 2024].
- The Times (2024). Cavity wall insulation scandal exposes risks in ‘no win, no fee’ cases. [Online] Available at: https://www.thetimes.co.uk/article/cavity-wall-insulation-issues-problems-extraction-cost-nx56r36pz [Accessed 22 Dec. 2024].
- Solicitors Regulation Authority (2024). Warning notice: Marketing your services to members of the public. [Online] Available at: https://www.sra.org.uk/unsolicited-approaches [Accessed 22 Dec. 2024].
- Legal Futures (2024). SRA opens investigations into volume litigation firms. [Online] Available at: https://www.legalfutures.co.uk/compliance-and-regulation/sra-opens-dozens-of-investigations-into-volume-litigation-firms [Accessed 22 Dec. 2024].
- Solicitors Regulation Authority (2024). No win, no fee consumer guide. [Online] Available at: https://rules.sra.org.uk/consumers/choosing/no-win-no-fee/ [Accessed 22 Dec. 2024].