We continue our series of hot topics in family law in a COVID-19 climate. Manders Law Managing Partner, Mary-Ann Wright, speaks to Louise Hall, Commercial Director at Ampla Finance on the pressing questions that clients want answered in relation to litigation funding options for family law proceedings in the current crisis. If you are currently engaged in proceedings, or are contemplating proceedings at this challenging time, the information below will be of relevance to you.
About the Interviewee
Louise Hall is one of the founders of Ampla Finance, which was established in January 2020, and is responsible for building the Ampla proposition and ensuring that they deliver the best possible experience for Clients.
How can litigation funders like Ampla assist family law clients in light of the COVID-19 outbreak?
The option to borrow money from a Commercial lender to help pay fees and other costs associated with family law matters is not something that most people seeking legal advice from a family lawyer would be aware of as an option, but in the COVID-19 environment as much as ever, it could be a good option if you don’t have the cash to fund your case readily available.
What might prompt a client to consider this type of funding in the COVID-19 climate?
In this current and exceptional situation of a pandemic, there is understandably a lot of uncertainty about how far resources might need to stretch. Anyone who has been furloughed or even made redundant will naturally be wondering how to make ends meet and how to fund their wider financial obligations and needs, including a need for legal advice. When clients may once have relied on their savings, or the ‘bank of Mum and Dad’ to fund legal advice, they may now feel that this is an unacceptable ask and worry that they have no options left. That really isn’t the case and consideration should be given to specialist lenders and their products. In the right case and for the right client, the availability of appropriate litigation funding is one way to put some certainty back into the equation and eliminate some worry, whilst making sure you can get on with your legal proceedings and access the advice you need.
What is the “right” case for litigation funding to be considered?
At Ampla, we have developed a lending product which is specifically designed to pay the fees and other costs you are likely to incur when going through a divorce or financial remedy proceedings and in some cases children and cohabitation disputes. In some circumstances, we are also able to provide funds to plug short-term gaps in maintenance payments, for everyday costs. Again, this may be a reality that some going through separation during the COVID-19 outbreak that some clients might be facing.
For example, we recently funded a client’s financial proceedings. She was then granted an interim maintenance order, to help cover the costs of living for her and two children. Due to COVID-19, her husband had been furloughed, and his salary was now capped at £2,500 per month meaning that he is now unable to meet his obligations under the order, leaving a maintenance shortfall. Whilst this is all being sorted out and a longer-term solution found, Ampla have been able to step in and cover the shortfall in funding, so that our client can continue to meet the day-to-day needs of her family. As with the loan for legal fees, the loan and interest rolls up and is only payable once a settlement has been reached, so that she is relieved of the need to source funds to meet regular interest payments. Our ability to offer this, does depend on our lending criteria and we do also need to be funding your legal case, but it’s certainly an option worth exploring for many clients if they need it, especially in the COVID-19 climate.
Who is the “right” client and how do you assess this?
We have 50+ years of lending experience, so we are pragmatic when assessing a case. We recognise, for example, that someone going through a divorce might not have a stellar credit rating, especially if they haven’t managed their personal finances for some time. We assess each case individually, with credit history, for example, being only one aspect of our assessment.
Our primary assessment is made based on the assets in the “marital pot”, which are due to be divided. If there is a matrimonial home, for example, is it going to be sold, what is the equity and how is that value likely to be split? Are there other non-property assets to consider, such as investments or pensions? You and your solicitor would have discussed the likely final settlement value you are seeking and this, alongside how much you need to borrow to realise this outcome, will form the basis of what we can lend. Alongside that we also look at how complex the case is, the number of dependents and if there are any other factors which might affect you realising the settlement value you are seeking.
This assessment is made in the same way, whether we are funding straightforward financial proceedings or more complex cases with multiple ancillary issues. In some case we can fund children disputes, but these need to be running in parallel to financial proceedings, as we need to be able to see that there is a route to repaying your loan, through a financial settlement. Similarly, we can fund solicitors to seek other remedies such as occupation orders or non-molestation orders to protect clients against abuse, provided that any such applications are made in conjunction with financial proceedings. Sadly, we know that this is increasingly pertinent area for some during lockdown.
In the COVID-19 climate, we, like all businesses, have had to look at our model and see what, if anything, we need to do to adapt in this new environment. The great news is that because of the responsible approach we naturally take as a business, we are happy that our policy, as it stands, allows enough headroom to cope with the challenges we currently face and we’re confident that we can keep lending to those who need financial assistance. We will of course continue to review the situation as it develops and we aren’t ruling out any changes to our approach, but we’re here to help.
Can you give our readers some more detail around how litigation funding actually works?
It’s a simple process really, your Solicitor makes an application on your behalf (only with your consent of course), providing details of the case and the likely settlement being sought, as well as the amount of funding required. At Ampla, we have built lots of close relationships with our solicitor partners, so we can very quickly understand all aspects of the case and how we can help. With the information provided, we assess the case based on our own lending criteria, making sure that we lend fairly and responsibly and only an amount that you will be able to afford to repay, after you have covered other costs such as re-housing.
If we approve your loan, we then ask you to seek independent legal advice on the loan documents and the agreement you are entering. We are dedicated to being a responsible lender and as such, we want to ensure that you have all the information you need and are 100% sure that we are the right option for you, before you sign the agreement.
In terms of our fees, we have a headline rate of 1.5% per month, 18% per annum, so it’s lower than many credit cards. We charge a one-time administration fee of 1% of the loan, and this gets added to the final balance. Beyond that, there are no additional fees and we certainly don’t charge for early repayment.
The really great thing about the loan is that you only pay interest on what you actually use, so if your case settles or the fees don’t reach your solicitor’s estimate, you aren’t left having to foot the bill for a loan you didn’t need.
The other benefit is that nothing is repayable until your case is settled, and you have received the funds you are entitled to under your final Order, whether this is made by consent or imposed by the court. This means no regular repayments are required and you don’t need to worry about finding the money each month to pay fees or charges, so it’s a weight off the mind. Ampla also helps fund arbitration and other forms of alternative dispute resolution, which are gaining real popularity in the COVID-19 climate, due to court closures and backlogs occasioned by the pandemic.
If a client’s circumstances have changed as a result of COVID-19 how will you deal with this as a litigation funder? Is the outlook entirely bleak for obtaining litigation funding for those clients where asset values have fluctuated and/or decreased?
As a lender we have taken a reasonable but cautious view in terms of our lending policy, so we’re confident that we will continue to be able to lend to clients within our existing parameters, even if there is fluctuation in asset values. That being said, we will keep our policy under review as the situation develops. It may mean that we assess various asset classes differently during this period – for example, if most assets are stocks and shares, then we will likely be more cautious in our assessment of their long-term value, than we might be with a property. It’s also important to realise that our loan term is generally around 24 months to allow time for the proceedings to be concluded and the assets to be realised. Our outlook at this stage is more optimistic than some and we expect that we’ll be through the worst of it in 2 years from now, when many of our customers are likely to settle their loans – let’s hope so anyway!
So, what conclusions can we draw?
Whilst this is an extraordinarily challenging moment in time for many, ultimately life still goes on and people who have started proceedings or wish to begin them shouldn’t be prevented from doing so because of the uncertainty. Like Manders Law, we’re here to help if we can – litigation funding is still an option for many, in spite of the rapidly changing situation and the most responsible lenders will have taken the necessary precautions to ensure that their lending is fair and continues to be affordable for their clients.
For an initial FREE consultation on any aspect of family law, call Manders Law on 01245 895 105 or email us here
Note: this blog is intended to give an overview (rather than comprehensive guidance and advice) on your legal position or potential litigation funding options. It is not an endorsement of any lender or product and is provided for information only.