Why informed consent in CFA cases matters more than ever
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Conditional Fee Agreements (CFAs), commonly known as “no win, no fee” agreements, remain one of the most important mechanisms for enabling access to justice in England and Wales.
For claimant firms, however, the regulatory and professional risks surrounding CFAs are increasing. Recent scrutiny from the Solicitors Regulation Authority (SRA), combined with growing public misunderstanding about litigation funding, means firms must now focus not only on obtaining signed CFA documentation, but on demonstrating genuine informed consent.
The case of retired teacher Peter Hodgson highlights why this issue matters.
When “No Win, No Fee” Is Misunderstood
Mr Hodgson instructed solicitors to pursue a claim against Greater Manchester Police after he was acquitted of a public order offence arising from a neighbour dispute.
Like many consumers, he reportedly believed that a “no win, no fee” agreement meant he faced no financial risk if the claim failed.
After losing at trial, however, he became liable for more than £52,000 in adverse legal costs.
Although the costs liability was later defeated due to procedural failings by the defendant’s solicitors identified by specialist costs lawyer Victoria Morrison-Hughes of Integral Legal Costs, the case nevertheless illustrates a recurring issue within claimant litigation: many clients do not fully understand the distinction between their own solicitor’s fees and potential liability for the opponent’s costs.
Increasing Regulatory Scrutiny
The SRA has recently raised concerns about whether some firms are adequately explaining CFA arrangements and litigation risk to clients.
Areas attracting particular scrutiny include:
- informed consent,
- transparency around adverse costs exposure,
- explanation of insurance arrangements,
- and whether firms are acting in clients’ best interests.
The Legal Services Board is also reviewing how “no win, no fee” agreements operate across the sector, with potential reforms expected.
For claimant firms, the message is clear: a signed CFA may not, on its own, demonstrate that a client genuinely understood the financial risks involved.
The Key Risk Area: Adverse Costs
One of the most common client misunderstandings is the belief that “no win, no fee” means “no financial liability whatsoever”.
In reality, unless protected by Qualified One-Way Costs Shifting (QOCS), Before The Event (BTE) insurance, or After The Event (ATE) insurance, a claimant may still face liability for:
- the defendant’s legal costs,
- court fees,
- expert fees,
- and enforcement costs.
The issue for firms is not simply whether this information appears within the retainer, but whether the client truly understood it.
Technical wording contained in lengthy CFA documentation may provide limited protection if a client later alleges that the risks were never properly explained.
Demonstrating Genuine Informed Consent
In the current regulatory climate, firms increasingly benefit from treating CFA advice as a documented process rather than a form-signing exercise.
Good practice may include:
- explaining adverse costs exposure in plain English,
- discussing realistic litigation risks,
- clearly outlining any insurance protection and exclusions,
- providing written examples of potential costs consequences,
- and recording attendance notes confirming those discussions took place.
Firms should also avoid marketing language that could unintentionally minimise risk. Terms such as “risk-free” or “you won’t pay anything” can create expectations that may later become problematic.
Particular care may be required where clients are elderly, inexperienced in litigation, or otherwise vulnerable.
Protecting Both Clients and Firms
CFAs remain an essential funding tool and most claimant firms work hard to explain them responsibly and ethically.
However, cases such as Peter Hodgson’s demonstrate how easily misunderstandings can arise when clients equate “no win, no fee” with complete financial protection.
As scrutiny of litigation funding continues to increase, firms that prioritise transparency, clear communication, and robust informed consent procedures are likely to be best placed to protect both their clients and themselves.
How The Legal Lexi can help
The Legal Lexi transforms client onboarding by delivering clear, accessible cost explanations that clients genuinely understand. By simplifying complex information into consistent, plain-English guidance, it strengthens compliance, secures informed consent and protects your fees—reducing disputes, improving transparency and building lasting client trust from the very first interaction.
Contact us to find out more and to book your free demonstration.
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