From 10 July, firms cannot charge fees of more than 20 per cent of the amount recovered for handling claims for mis-sold Payment Protection Insurance (PPI).
The 20 per cent fee cap does not include VAT, and applies to all SRA authorised firms and regulated individuals, claims management companies and other legal practitioners. The Financial Guidance and Claims Act 2018 created this change, and also banned any charges being made if no compensation is recovered.
The cap applies to fee agreements entered into from 10 July, and also applies if a firm uses hourly rates for clients.
The SRA has warned firms that while a fee cap has been set, even charges below this threshold may be considered unreasonable if they cannot be justified.
The SRA has also produced an online Q&A to help solicitors understand the new legislation, and updated its PPI Warning Notice first published in August 2017.