The Solicitors Regulation Authority has opened a 10-week consultation on stronger requirements for firms that use or arrange third-party litigation funding in consumer claims, while issuing guidance on the duties that already apply.
Published on 9 July 2026, the proposals would require regulated firms to notify the SRA when they use or arrange external funding, prepare and retain a funding risk assessment, and give clients a summary document before they enter an agreement. The consultation closes on 17 September 2026.
The regulator said fewer than 1% of regulated firms are likely to use or arrange third-party funding for high-volume consumer claims, yet those practices act for tens of millions of clients. Its work found extensive reliance on funders, referrers and marketers, particularly in motor finance claims, as well as cases where litigation-funding debt exceeded a firm’s annual turnover.
Aileen Armstrong, the SRA’s Executive Director of Strategy and Policy, said third-party litigation funding can create risks to firm stability and lead to poor outcomes for consumers. The regulator has closed seven firms in the sector and, at the end of June 2026, had 94 open investigations involving 68 firms managing high-volume consumer claims.
The accompanying guidance addresses independence, conflicts of interest, clients’ best interests, financial crime and money laundering. Solicitors must assess whether funding arrangements could influence professional judgment, whether clients understand the costs and risks, and whether relationships with funders or referrers create competing commercial interests.
The consultation forms part of a wider response to problems in high-volume claims. The SRA is working with the Financial Conduct Authority, Information Commissioner’s Office and Advertising Standards Authority through a joint motor finance taskforce. Research conducted for the regulator by YouGov found that 54% of consumers surveyed about completed claims had experienced problems, including delays, poor communication and unclear information.
The consultation comes after the Civil Justice Council published its final report on litigation funding on 2 June 2025. The review was co-chaired by Mr Justice Simon Picken and Dr John Sorabji. Sir Geoffrey Vos, Master of the Rolls, Head of Civil Justice and chair of the Civil Justice Council, welcomed its recommendations for legislative and regulatory reform.
Law firm management should now examine funding contracts, referral arrangements, client onboarding documents, debt exposure and supervision records.
Barristers working on funded consumer claims may need clearer information about the funding structure, control over strategic decisions and any potential conflicts. The consultation may change the final wording of the rules, but the guidance already sets out the SRA’s expectations for firms using or arranging third-party funding.