Attorney-General Christian Porter will refer the litigation funding of class actions and their regulation to a Federal Parliamentary committee inquiry.

The terms of reference will include the financial services regulatory regime and its application to litigation funding, levels of fees costs and commissions, and factors driving the increasing prevalence of class actions in Australia.

Mr Porter says that while funders have an important role in improving access to justice, they are also reducing returns class action members receive.

“There is something clearly wrong with this situation because the mums and dads who are members of class actions are ultimately the ones who are missing out,” he said.

The inquiry, which will report to Parliament on November 9, will also look at the potential impact of a Victorian move to abolish a ban on lawyers being paid contingency fees, allowing them to claim costs as a percentage of damages.

The Victorian proposal, which is before the state parliament, has raised fears that more class actions will be filed and has added to concerns in insurance markets about soaring directors' and officers' premiums.

Mr Porter says the work of the Parliamentary Joint Committee on Corporations and Financial Services will complement an Australian Law Reform Commission (ALRC) report tabled early last year.

The Government will soon release its response to the report, which made 24 recommendations.

The Association of Litigation Funders of Australia says the ALRC, the Productivity Commission and the Victorian Law Reform Commission have undertaken extensive and comprehensive reviews of class actions.

“In circumstances where we are not aware of any new evidence or practices which would justify a further inquiry, it is difficult to see how there will be any new or ground-breaking submissions or information presented that wasn’t previously considered,” CEO Pip Murphy told insuranceNEWS.com.au.

The Australian Industry Group (Ai Group) said the Victorian Parliament should not rush through its legislation until after the Parliamentary inquiry is completed.