NSW is a step closer to banning compensation claims farming after the state parliament passed legislation criminalising the “predatory practice”.

The Claim Farming Practices Prohibition Bill 2025 cleared both houses last week and is awaiting assent.

Under the laws, contacting someone to solicit a compensation claim and buying or selling claims is prohibited. Offenders face fines of up to $55,000 and lawyers are barred from charging or retaining fees associated with a farmed claim.

The bill covers claims arising under the Civil Liability Act 2002, including serious injury, medical negligence, and public and product liability. 

Existing offences such as fraud will still apply in addition to the claims farming prohibition.

“The NSW government has legislated to put a stop to the insidious practice of claim farming that exploits the trauma of vulnerable people,” state Attorney-General Michael Daley said.

“The predatory practices can worsen the trauma and distress experienced by victim-survivors.

“No one should be harassed or intimidated into making a civil compensation claim which may not be in their best interests.”

A NSW government background paper, citing anecdotal reports from stakeholders, says claims can be sold to law practices for $800 to $10,000, and intermediary “claims managements services” may pay individual referrers $50 to $100 for every new claimant.

Lawyers may pass on these costs to claimants through disbursement fees upon the settlement of a claim, which may not be understood by claimants, according to the paper.

“Some stakeholders also raised concerns that claim farming may increase the potential for fraudulent and illegitimate claims, which poses risks to actual victim-survivors by jeopardising the integrity of legitimate claims,” the paper says.