Consumer protection review
What are we trying to do
In February 2024, we launched a review of our overall approach to protecting consumers who place their trust in regulated law firms – our consumer protection review.
Who needs to know
Since then, we have heard from a range of consumers and their representatives, as well as solicitors and those in the legal sector, on their views as to what is the best approach to appropriately protecting consumers.
What's going on
In 2024/25 we ran a public consultation on the subject of Client money in legal services - safeguarding consumers and providing redress.
We received unprecedented levels of engagement with this consultation, which has helped inform our further discussions and plans regarding the issues covered. We've also considered feedback from a wide range of engagement events, an earlier discussion paper, and wider insights including from in-depth consumer research.
Building on what we heard, we have now opened a further consultation (LINK) looking at specific proposals for certain issues.
We have also outlined plans for how we will take forward discussions about wider issues and potential changes concerning how client money is handled and protected in the longer term.
Initial consultation 2024/2025
Our initial consultation considered steps we could take in the more immediate term to better protect client money. It also asked some big, fundamental questions about change over the longer term in two areas – the model of solicitors holding client money, and the model of funding the compensation fund, which the profession pays for and which protects clients in the event their money held by solicitors is misappropriated.
We heard a lot of views, with some appetite for change to address the root causes of risks to client money. However, we have always said these are complex issues, that cannot be solved with quick fixes.
We considered there to be a strong case to properly explore the long-term transformation of the model of holding client money and how the compensation fund is funded.
However, our immediate focus is on making changes to better protect and safeguard client money under the current system. This is also the focus of the strategic priorities outlined in our proposed 2025/26 Business Plan and Budget and relevant LSB Directions post-Axiom Ince.
In December 2025 we published a further consultation picking up some of these more immediate matters, and identifying other issues we would be addressing in the near future.
Further consultation: launched December 2025
We have launched a new consultation as part of our ongoing Consumer Protection Review. This phase focuses on practical improvements to strengthen safeguards for client money held by solicitors. These changes aim to reduce risk to consumers while ensuring regulation remains proportionate and workable for firms.
This consultation focuses on two priority areas:
- Improving the accountants' reports regime.
- Introducing stronger checks and balances within law firms.
Get involved
We want to hear your views on the issues, your feedback is crucial in helping us to refine our approach, identify unintended consequences, and to ensure our regulatory framework remains proportionate and targeted.
How to respond
- Complete the online questionnaire
- Deadline: Midday, Friday 20 February 2026
For reasonable adjustments or alternative formats, email us.
Research
As part of our review, and to help inform the proposals and ideas in the consultation, we commissioned a series of external research reports:
- Consumer insights – expectations and preferences
- Future market developments – risks to client money
- Different approaches to managing client money
- Compensation schemes in other regulatory bodies and jurisdictions
- Online polling of consumer views
- Compliance officers: A thematic review
- Growth strategies thematic review: Accumulator, Acquisition and Consultant models
Wider activity
The consultation launch is just one element of a wider programme of work emerging from the Consumer Protection Review. Other activity already completed, or underway includes:
- Publication, earlier this year, of warning notices to law firms on mergers and acquisitions and what to do when money is missing from the client account.
- Conducting a review, and implementing resulting improvements, regarding the our internal processes for how it handles investigations and interventions.
- Improving how we use data about law firms and complaints to spot patterns, including by increasing investment in technology and resource in this area.
Consultation
Client money in legal services - safeguarding consumers and providing redress
- Part 1: The model of solicitors holding client money.
- Part 2: Protecting the client money that solicitors hold.
- Part 3: Delivering and paying for a sustainable compensation fund.
Further consultation on client money in legal services: Protecting the client money that solicitors hold
Research
The compensation fund is a discretionary fund of last resort. It can make payments where money has been taken or not accounted for by someone we regulate. In some circumstances, it can also make payments where a loss should have been covered by a firm's indemnity insurance, but the firm did not have cover in place.
Law firms and solicitors pay into the compensation fund through an annual contribution. Each year, our Board carefully considers and sets the contribution to the compensation fund that the firms and individuals we regulate must pay. The contributions fund the payments made, reserves we set aside for future claims, and the costs of handling the claims themselves. This includes the cost of intervening into firms where client money and files are at risk.
Contributions
| Years | Individual solicitors | Firm contribution |
|---|---|---|
| 2013/14 | £56 | £836 |
| 2014/15 | £32 | £548 |
| 2015/16 | £32 | £548 |
| 2016/17 | £32 | £548 |
| 2017/18 | £40 | £778 |
| 2018/19 | £90 | £1,680 |
| 2019/20 | £60 | £1,150 |
| 2020/21 | £50 | £950 |
| 2021/22 | £40 | £760 |
| 2022/23 | £30 | £690 |
| 2023/24 | £30 | £660 |
Over the last decade, our approach to protecting consumers has generally worked well.
Yet the legal landscape looks like it's changing. Recently we have had to step in more often to deal with failing firms. This includes a recent increase in big firm failures, including Axiom Ince, where the scale of the impact on consumers is much greater.
Shifting risks could potentially lead to significant consumer detriment, so we are doing a comprehensive review of consumer protection.
Consumers are at the heart of this review and we are looking at two main areas:
- Managing risks: What we can do to reduce the risk that consumers suffer harm in the first place. For instance, can we improve our monitoring processes, or would there be benefits to tightening up our rules around firms holding client money?
- The safety net: Our Compensation Fund can make good consumers losses when money has gone missing. This could be, for instance, due to a solicitor's dishonesty or the collapse of a firm. How affordable will such protections be over the long term if risks are increasing?
In considering changes to our approach, we will need to get the balance right. For instance, bolstering or even maintaining the current level of consumer protection might not be in the public interest if it is unsustainable. It could lead to large increases in prices or reduced choice for consumers.