Warning notice

Payment Protection Insurance (PPI) claims

Issued on 29 August 2017 | Updated 25 November 2019


This warning notice is to help you understand your obligations and how to comply with them. We may have regard to it when exercising our regulatory functions. The deadline for (most) PPI cases past on 29 August 2019 and we shall therefore have regard to this notice for conduct prior to that date and to any follow up work since that date. We shall also have regard to our previous warning notice on PPI where relevant.

Who is this warning notice relevant to?

This warning notice is relevant to all those we regulate acting in claims for mis-sold payment protection insurance (PPI).

The SRA Standards and Regulations

The principles and codes of conduct are underpinned by our Enforcement Strategy, which explains in more detail our approach to taking regulatory action in the public interest. The following principles are most relevant to this warning notice, however other principles and parts of the Standards and Regulations may apply:

  • Principle 1: You act In a way that upholds the constitutional principle of the rule of law, and the proper administration of justice.

    You have obligations not only to clients but also to the court and to third parties with whom you have dealings on your clients' behalf.

  • Principle 2: You act in a way that upholds public trust and confidence in the solicitors' profession and in legal services provided by authorised persons.

    You must behave in a way that maintains the trust the public places in you and in the provision of legal services. Members of the public should be able to place their trust in you. Any behaviour either within or outside your professional practice which undermines this trust damages not only you, but also the reputation of the legal profession and its ability to serve society.

  • Principle 4: You act with honesty.

    Acting honestly in all your dealings is fundamental.

  • Principle 5: You act with integrity.

    Personal integrity is central to your role as the client's trusted adviser and should characterise all your professional dealings with clients, the court, other lawyers.

  • Principle 7: You act in the best interests of each client.

    You should always act in good faith and do your best for each of your clients.

In addition to the principles above the following obligations are relevant: code of conduct for solicitors, RELs and RFLs and code of conduct for firms, making sure in particular:

  • paragraphs 1.2 of both codes state that you must not abuse your position by taking unfair advantage of clients or others;
  • paragraph 5.1(a) of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1(b) of the code of conduct for firms provide obligations on you to make sure clients are informed of any financial or other interest which you or your business or employer has in referring the client to another person or which an introducer has in referring the client to you;
  • paragraph 8.6 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1( c) of the code of conduct for firms state that clients must be given information in a way they can understand and , are in a position to make informed decisions about the services they need as well as knowing how their matter will be handled and the options available to them.

Further obligations in the codes are set out below.

Our concerns

Following our previously issued guidance and engagement with Government departments, lenders and others involved in the handling of PPI, we are concerned that some of those we regulate are failing in their duties to act in compliance with the Standards and Regulations by:

  • acting in matters without first investigating whether there is a valid claim
  • making claims without knowledge of the policyholder/consumer
  • failing to properly identify clients and confirm client instructions
  • submitting false claims in the hope of a settlement without further investigation by the defendant
  • charging unreasonable costs for a limited amount of work contrary to their fiduciary and regulatory duties.

Those we regulate who conduct cases demonstrating one or more of these features may face regulatory action.

Our expectations

Client interests and charges

Your retainer is with your client and you are responsible to your client both in law and as a matter of conduct. To make sure you can act in your clients' interests and deliver the required quality of service you must have clear instructions from them and an agreed course of action. Your client should have all the necessary information to make an informed decision on how their matter will be dealt with (see paragraph 8.6 of the code of conduct for solicitors, RELs and RFLs and 7.1(b) of the code of conduct for firms). Unless you have regular contact with your client, you are at risk of failing to comply with the Standards and Regulations. This means clarifying and confirming instructions throughout the life cycle of the case including whether to accept an offer to settle a claim.

When agreeing your fees with a client you should make sure they are fair and reasonable having regard to all the circumstances of the case (see paragraph 8.6 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1(c) of the code of conduct for firms).

You should also be aware that The Financial Guidance and Claims Act 2018 ("the Act") prohibits fees of more than 20 percent, excluding VAT, being charged for PPI claims and prevents you from charging a client where no award has been recovered. The cap is effective from 10 July 2018 and continues until permanent rules are made by us. We expect you to have informed your clients about the fee cap and its effect.

Read further information about the fee cap and expectations.

Although legislation sets a fee cap of 20 percent, this does not allow for all clients to be charged at this rate. Our view is that any fees charged that are greater than 15 percent of a client's damages are unreasonable, unless the work is extensive and the risk to the firm clearly demands a greater percentage of the damages.

Legal proceedings should not be issued to try to avoid or limit the impact of the fee cap. Proceedings should only be issued when it is in the client's interests. Attempts to avoid or limit the impact of the fee cap by issuing proceedings are likely to breach the Standards and Regulations. It is unlikely you would be acting in your clients' interests or treating them fairly if you have agreed to be paid a percentage of the client's damages that exceed fees that would have been payable had your usual hourly rate been charged.

In all cases, any fees you charge should be reasonable and proportionate to the work undertaken. This is particularly so where the work carried out is limited, for example, to submitting a notice of claim and agreeing settlement. It is important that you do not exaggerate the time or effort involved in submitting a claim.

All licensed bodies must comply with the Standards and Regulations and will be subject to regulatory action if issues of professional misconduct are identified. Claims Management Companies looking to engage with you and form a licensed body will not avoid regulation as fees they charge will also be subject to the interim fee cap and any permanent rules we make.

Cold calling

You must make sure that clients do not come to you as a consequence of cold calling by you or a third party. Some third parties obtain client details illegally by the unauthorised handling of personal data.

The Standards and Regulations provide that you must not make unsolicited approaches to members of the public, save for approaches to current client or former clients (paragraph 8.9 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1 (c) of the code of conduct for firms).

Referral arrangements

Our codes of conduct are clear that, in addition to the regulatory requirements set by us in the Standards and Regulations, we directly monitor and enforce the requirements relating to referral fees set out in section 56 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).

Where arrangements are permitted by law you must comply with paragraphs 5.1 to 5.3 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1 (b) of the code of conduct for firms.

You are required to inform your clients about any fee-sharing agreements you have and to have those agreements in writing. Clients must be informed where you have a financial or other interest either in referrals made to you or by you to others.

You must be satisfied and be able to evidence the fact that an arrangement with a referrer does not adversely affect your independence and your ability to advise your client.

You have a duty to ensure that contracts or other arrangements between your client and a referrer are fair. You must stop dealing with a referrer whose contractual terms or whose behaviours are contrary to your clients' interests or to the rule of law (paragraph 5 (e) of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1(b) of the code of conduct for firms). For this reason, you should review your referral arrangements regularly.

You should be aware that the onus is on you to show that a payment is not a referral fee if it appears to us that it is (paragraph 5.2 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1 of the code of conduct for firms.

You must also make sure clients give informed consent if you refer, recommend or introduce them to a separate business or divide a client's matter between you and a separate business (paragraph 5.3 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1(b) of the code of conduct for firms).

Fraudulent claims and taking unfair advantage

You should not take unfair advantage of third parties (paragraphs 1.2 of the codes of conduct) or demand anything for yourself or on behalf of your client, such as compensation for mis-selling that is not legally recoverable (paragraph 2.4 of the code of conduct for solicitors, RELs and RFLs and paragraph 7.1(a) of the code of conduct for firms).

When taking instructions from a client, you should make sure you have correct details of the client's identity and claim. No claim should be made on behalf of a client unless you can evidence there is a sound basis for the claim, and you have valid instructions.

If you have issued a claim knowing it is not a valid one or have not investigated the validity of the claim, you leave yourself open to disciplinary action for breach of the Standards and Regulations.

You may also leave yourself and your clients open to criminal action for fraudulent claims.

Previously issued guidance relating to PPI claims is still relevant and should be read alongside this notice.

Further help

Previously issued guidance on acting in PPI matters.

If you require further assistance, please contact the Professional Ethics helpline.