MoJ launches attack on “exploited” CFA system
The Ministry of Justice launched an attack on ‘no-win no-fee’ lawyers who it believes “exploit vulnerable clients by taking a large proportion of the damages they are awarded as payment for excessive legal fees”..jpg "Jack Straw launches attack on CFAs")
Damages-based arrangements, known as contingency fee agreements (CFAs) are most common in Employment Tribunal proceedings.
They are largely unregulated and concerns have been growing about claims that some solicitors have been exploiting these contingency fee agreements unreasonably.
The Government has announced it will introduce provisions in the Coroners and Justice Bill, currently before Parliament, to enable “proper regulation of damages-based agreements by putting in place protection for vulnerable claimants against unfair or unreasonable agreements”.
Jack Straw, Justice Secretary, said: “Unregulated contingency fee arrangements have been stretched to breaking point by some no-win no-fee lawyers who have exploited vulnerable clients by taking huge slices out of their damages, failed to provide them with proper information, and imposed unfair terms and conditions that have locked them into unreasonable deals.
“The time has come for these arrangements to be subject to proper regulation to protect the interests of consumers, and that is what the government will legislate to do.’
The MoJ will publish a consultation paper seeking views on the details of the regulatory requirements.
The regulations are set to include:
- A cap on the percentage of damages that can be recovered by the legal representative
- A requirement that legal representatives provide claimants with clear and transparent information on total costs
- A requirement that legal representatives clarify the deductions made from the claimant’s award which are to go to the representative as their fee for taking on the case
- A requirement that they provide explicit information on alternative methods of funding.
As well as regulating their existing use, the proposals will also allow the Justice Secretary to extend or restrict the use of these agreements in future should the need arise.