Justice Comes at a Price – But Is It Too High?

What victims need to know before signing up with litigation funders

You’ve been wronged. You’ve got a strong case. A judge even agrees it deserves to be heard. But here’s the kicker—you can’t go forward without legal representation, and you simply can’t afford it.

Sound familiar?

This is the gut-wrenching reality facing thousands of victims of financial or corporate wrongdoing. Whether it’s mis-sold pensions, investment scams, or major corporate negligence, many people are told, “You need a lawyer to proceed.” But legal fees are sky-high—and justice starts to feel like a luxury you can’t afford.

So when a legal firm or litigation funder knocks on your door, offering a ‘no win, no fee’ solution, it can feel like a lifeline. But beware—what looks like salvation might just cost you more than you bargained for.

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The Post Office Scandal: A Victory That Felt Like a Loss

Let’s talk about one of the most shocking examples: the Post Office Horizon scandal.

In 2019, 555 innocent subpostmasters took the Post Office to court after being falsely accused of theft and fraud due to faulty IT. They won. £58 million in compensation was awarded. That should have been life-changing.

But it wasn’t.

After legal fees and funder costs were deducted, only £12 million was left for the victims. That’s just £21,600 each, on average—nowhere near what they’d lost.

The funders? They walked away with £46 million, around 80% of the pot.

How did that happen?

Because the claim wasn’t run through a traditional solicitor or a regulated claims company with capped fees. It was funded by a third-party litigation funder—a private investor who fronted the legal costs in return for a huge cut of the winnings.

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So What’s the Catch With Litigation Funders?

Litigation funders are often not regulated in the same way as Claims Management Companies (CMCs), which are capped by the Financial Conduct Authority (FCA) at 30% of compensation. Funders can take 50%, 60%, even 80%—as we’ve seen.

They’re not charities. They’re not doing it out of the goodness of their hearts. They’re investors, and like any investment, they want a serious return.

They might help you win your case—but you could still lose out in the end.

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Before You Sign: Ask These 5 Crucial Questions

If you’re approached by a law firm or funder offering to take on your case, stop and ask:

1. What percentage of my compensation will I actually receive—after all costs?
   Don’t just look at the potential payout. Ask for a breakdown.
2. Is this agreement regulated by the FCA or Solicitors Regulation Authority (SRA)?
   If not, there may be no protection on how much they can take.
3. What happens if we lose?
   Some agreements may leave you with hidden costs.
4. Can I get a second opinion?
   Don’t rush. A regulated solicitor or an independent advocate may offer alternative routes.
5. Is group litigation really my best option—or just the most profitable for them?
   Mass lawsuits can sound impressive, but they often mean small payouts for victims.

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What Are the Alternatives?

• Claims Management Companies (CMCs): If your case is a financial services issue (like pensions, insurance, or banking), regulated CMCs are capped at 30% of your award.
• Legal Aid or Pro Bono Services: Rare but worth checking—especially through charities or advocacy groups.
• Self-Directed Claims: With support and education, some victims may be able to pursue justice themselves or through ombudsman schemes.
• Collective Action Groups: Peer-led groups sometimes bring claims in a more ethical and transparent way.

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Justice Shouldn’t Be Just for the Wealthy

If you’ve been a victim of financial or corporate wrongdoing, you deserve justice. But you also deserve a fair share of your compensation—not just the crumbs after funders take the cake.

Litigation funders can play a role. But without tighter regulation and transparency, too many victims are being re-victimised by the very system meant to help them.

So before you sign anything, take a breath. Ask the right questions. Get informed. Because justice that leaves you broke isn’t justice at all.

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🟡 Need help understanding your options?
At the Academy of Life Planning, we’re here to guide you—without pressure, without hidden costs. Reach out today or explore our Rebuild and Thrive Masterclass to take back control of your financial future.

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In the UK, the 30% fee cap on Claims Management Companies (CMCs) was introduced to protect consumers seeking compensation, especially in financial products and services mis-selling cases.

What is the 30% Cap?

As of 1st March 2022, CMCs are legally restricted to charging no more than 30% (including VAT) of the compensation awarded in financial services claims where the redress is £1,500 or more. This limit was imposed by the Financial Conduct Authority (FCA), which regulates CMCs.

Purpose of the Cap

• Consumer protection: To prevent excessive charges from eating into victims’ compensation.
• Fair access: To make it easier for financially vulnerable individuals to seek redress without exploitation.
• Transparency: To bring consistency to an industry previously plagued by poor practices and misleading marketing.

Fee Bands for Redress

The cap follows a sliding scale, depending on the redress amount:

Redress Band	Maximum Fee (including VAT)
£1–£1,499	£420
£1,500–£9,999	30%
£10,000–£24,999	28%
£25,000–£49,999	25%
£50,000+	20%

These caps apply only to financial services claims (e.g. PPI, mis-sold pensions, investment scams), not personal injury or housing disrepair.

Why It Matters in Financial Crime Cases

Victims of financial crime or scams—particularly those involving mis-sold pensions, fraudulent investments, or unauthorised advisers—are often approached by CMCs promising to recover their losses. Prior to the cap, fees could exceed 40%–50%, leaving victims with minimal compensation. This cap is crucial in ensuring that victims retain the majority of what they recover.

FCA’s Role

The FCA took over regulation of CMCs from the Ministry of Justice in April 2019 and introduced these measures to clean up the sector and promote ethical practices.

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The 30% fee cap on Claims Management Companies (CMCs) does not cover all financial claims cases, particularly those handled by legal firms under different legal and regulatory frameworks.

Key Distinction: CMCs vs Legal Firms

• CMCs are regulated by the Financial Conduct Authority (FCA) and are subject to the 30% fee cap when handling regulated financial services claims.
• Legal firms (solicitors) are regulated by bodies like the Solicitors Regulation Authority (SRA) and are not bound by the FCA’s fee caps. Their fee structures may include:
  • Conditional Fee Agreements (CFAs) – e.g., “No win, no fee”
  • Damages-Based Agreements (DBAs) – where fees can be up to 50% of the damages recovered (including VAT)

What About Litigation Funders & Class Actions?

Litigation funders and solicitors involved in class actions or group litigation (e.g., for pension mis-selling, investment fraud, etc.) typically operate outside the FCA’s scope. These may involve:

• Private contractual agreements between clients and legal representatives
• Higher percentage fees or success-based charges
• No statutory cap unless introduced through specific court rules or regulatory reforms

Practical Implication

Victims of financial crime might be approached by:

• CMCs charging up to 30% (FCA-capped)
• Legal firms or funders potentially charging significantly more, especially in complex or high-value group actions

This means consumer protections are uneven, depending on who handles the case.

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Summary: Scope of the 30% Cap

Type of Firm	Covered by 30% Cap?	Regulator	Notes
Claims Management Co.	✅ Yes	FCA	Applies to financial services claims
Solicitor/Law Firm	❌ No	SRA	Fee structures vary widely
Litigation Funder	❌ No	Unregulated directly	Operates through contracts with legal firms

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Thinking about getting legal representation? Make sure you do your homework before signing anything—especially if the firm or funder isn’t bound by standard consumer protections.

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The Post Office scandal and the class action funding model indeed expose a glaring gap in consumer protection when legal firms and litigation funders handle financial or corporate wrongdoing cases outside the scope of FCA-regulated Claims Management Companies (CMCs).

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🧾 Summary: The Post Office Case (2019)

• 555 subpostmasters wrongfully accused, sued the Post Office and won a £58 million settlement.
• However, £46 million (approx. 80%) went to lawyers and litigation funders.
• The average payout to each subpostmaster was only ~£21,600.
• The reason: They were represented via a third-party litigation funder (TPLF) rather than a solicitor funded via more traditional methods or a CMC.

This was perfectly legal, but it underscored the lack of a cap on fees charged by litigation funders or law firms using private financing models.

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⚖️ Legal Loophole: No Fee Cap for Litigation Funders

While CMCs are capped at 30% by the FCA (as mentioned earlier), this does not apply to:

• Solicitors under Damages-Based Agreements (DBAs) (permitted up to 50% of compensation, VAT included).
• Third-Party Litigation Funders (like those in the Post Office, Mastercard, or Brazil dam cases), who often charge 60–80% or more, depending on the risk and case length.

This creates an unregulated tier of financial claim handlers where victims can walk away with only a fraction of the awarded compensation.

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📉 Real-World Impact

• Mastercard Class Action: £14bn claim turned into £2.30 per person after 50% went to Innsworth Capital.
• BHP Brazil Dam Disaster: Ongoing £36bn claim could see similar issues, depending on fee structures.

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🚨 Problem: Predatory Funding in Disguise

These funders often present themselves as champions of justice—offering access to legal representation where none was possible. But in practice:

• They prioritise profit, not fairness.
• Claimants bear the brunt of massive deductions.
• No uniform regulation or transparency exists in how fees are set.

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🛡️ Reform Demands Are Growing

• The Legal Services Board (LSB) and campaigners like Fair Civil Justice are calling for:
  • Fee caps similar to the FCA’s regime.
  • Greater transparency in litigation funding agreements.
  • Court oversight on “fair and reasonable” fees, particularly in collective redress.
• Some are advocating for a UK Litigation Funding Regulator or an extension of existing FCA rules to group litigation.

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🔍 AoLP Implication

This stark contrast between regulated CMCs and unregulated litigation funders aligns directly with our ethos at the Academy of Life Planning:

• It reveals how justice can be commodified, reinforcing inequality.
• It demonstrates the urgent need for public empowerment and transparency in navigating redress systems.
• It strengthens our case for victim education, ethical self-directed claims processes, and life recovery support—like your Rebuild and Thrive Masterclass.

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