Frequently Asked Questions For Solicitors in Scotland

Transcription

1 Frequently Asked Questions For Solicitors in Scotland

2 At Novitas, we provide a loan facility to help pay the legal costs of people going through divorce.0we also fund, collaborative, mediation and arbitration. Since our launch in March 2011, Novitas has become the leading provider of such loans. The loan is provided as a facility so the client just draws down what they need, providing fast and efficient lending. There is a single agreement that we put in place between the solicitor and Novitas. This covers all loans that Novitas provides to your clients. Key characteristics of this scheme: NO financial undertaking from the solicitor - all the lending risk sits with Novitas. Improve cash-flow - loan proceeds paid to the solicitor upfront improving your cash-flow. Pre-approval of funding - loan approved all the way to final hearing, but interest only paid on what is drawn-down. Immediate lending decisions - clearly defined, simple lending criteria. Flexible timing - use the loan at any point during the proceedings. No cash outlay for your client - the interest and set-up fee are rolled into the loan. No need to manage assets - we lend without any consideration of assets to manage post settlement.

3 Frequently Asked Questions If I am interested, what do I do next? Once you have read this FAQ, if you are interested in the scheme then please contact Novitas for an initial discussion and to arrange a meeting. Contact details are on What do we sign with Novitas? Before you can use the scheme you need to sign a practice level agreement between your firm and Novitas. This is predominantly agreeing to follow the process we lay out for our loan but there are certain non-financial undertakings that you give. What undertakings does the solicitor give? There are a number of key undertakings, specifically to: Repay the loan from any proceeds of settlement that you receive before passing onto the client. The client gives you permission for this by signing an irrevocable letter of instruction with Novitas (a Sears Tooth agreement). Keep Novitas informed of any material changes in the case. Material changes are defined in the agreement. The client signs an irrevocable letter of instruction to allow you to do this. Have one Partner approve each loan sent to Novitas. Do we have to give a financial undertaking? No; there is no requirement for a financial undertaking from the solicitor.

4 Where do you explain what the loan process is? We provide you with a documented loan procedure and will come to your office to explain and walk you through the loan process. Can I recommend your loan service? No; we should be presented as one of the options a client has rather than one that you recommend above any other funding route. We will provide an information piece for the client explaining how the scheme works and clearly stating that you do not recommend it. Firms also amend their client care letter to explain that they have access to the scheme. How does the loan process start? If the client meets the documented lending criteria, there is a short application form to complete. This is accessed by your own dedicated website, the code to which is provided once the practice level agreement has been signed. How long does the process take to get the loan in place? Once we have received and approved the loan application we will run a credit check on the client, if all is okay we will issue the draft loan agreement to the client. There is then a 7 day cooling-off period before we send the actual legal agreement to sign (to be compliant under the consumer credit act). The whole process can be as quick as two weeks, but more likely takes approximately 4 weeks. Do we have to prepare the legal agreements? No; Novitas is responsible for all the loan contracts and legal agreements with the client. Once they are approved, Novitas deals directly with the client.

5 How much will you lend? Novitas will provide a facility pre-approved, to cover all stages of the divorce process. You define what you require as the facility, and the first draw down against this facility, in the loan application form. This facility is custom made for each client and the maximum total is agreed on a case by case basis. Is your loan a draw down facility? Yes; but rather than on a bill by bill basis, the money is paid into your client account as a tranche, the client requests these tranches as required. Where does the money get sent to? Each tranche gets paid directly into your client account. Does the client have control over how we use the money? Yes; you can only draw the money from your client account against invoices the client has approved (typically taking the form of if they have not objected within X days to your bill ). You can also clear off any outstanding bills using our loan. How much does the loan cost? The Novitas offering has been designed to be as fair and reasonable as possible: Clients only pay interest at 1.5% per month on the money that is actually drawn down Interest rolls-up on a simple basis, so nothing to pay until the loan is settled. This helps clients with little or no income A simple 500 set-up fee (or 1% of the facility higher). This is added to the loan No minimum loan period, no exit charges, no minimum interest charge We ask the client to take independent legal advice on the loan, a firm may charge for this.

6 How is the interest calculated? Interest is calculated on a simple basis, i.e. there is no compounding of interest. We just take the annual interest rate of 18% APR (1.5% per month), multiple by the amount of the facility they have drawn down and divide by the number of days that the money has been drawn down for. For example, if the client draw down 10,000 for 6 months, they will pay back interest on the 10,000 of 900 The client will also receive regular statements so they know exactly what is owed as their case progresses. Does the client pay interest as they go along? No; all the interest is rolled-up so there is nothing to pay until the loan is settled. Because we do not compound there is no cost penalty for waiting until settlement. Can the client pay the loan off in installments? No; the loan needs to be settled in a single payment. How long do they have to repay the loan? We agree a time period for each loan. In practice, this is often linked to an event such as the sale of the property or a settlement. So whilst we will put a timeperiod of say 6 or 12 months in the loan contract, we understand that this will need to be flexible to take account of their situation. Can the client repay the loan the early? Yes; there are no penalties for paying the loan off early. We calculate interest daily so the shorter time they have the loan, the less they will pay in interest.

7 Can they extend the loan? The loan will have an agreed term. We understand that it can be hard to predict when, for example, a house will sell to repay the loan. We aim to be flexible in understanding their specific situation and taking a practical approach to when the loan can be repaid. Does the client need to take out life insurance? No. Who will you lend to? A client with an acceptable credit history (we are unlikely to lend if the borrower has a CCJ or IVA, or has been sequestrated or declared bankrupt in the previous 3 years so contact us in the first instance). A lump sum available to repay the loan e.g. from the disposal of a property. The client needs to have sufficient assets in their name (can include ownership of a property where their name is on the title - can be in joint names). Do you need security for your loan? Typically we take a standard security over a property in Scotland where the borrower is the owner. We may also consider a third party guarantor. What if a client can t provide security for the loan? In selected cases, Novitas may choose to take on the client on an unsecured basis. In this case there are two differences: 1. Insurance -the client takes insurance that Novitas has in place with a leading A rated insurer (clients are automatically underwritten by Novitas). The insurance will re-pay Novitas the amount of the borrowing, should the client default; The debt will then be passed to the insurer for recovery. The cost of the insurance is 10% of what is drawn down, keeping costs to a minimum.

8 2. 10% held back - to ensure commercial alignment of all parties, we pay the solicitor 90% of what they bill. This 10% is released by Novitas to the solicitor once the loan is repaid by the client. If the loan is not repaid, this 10% is retained and used to meet the first loss on the policy Is Novitas to be repaid from the proceeds of the divorce? Yes; the client agrees that any sums paid to your client account in respect of the client s financial settlement on the divorce are to be used first to repay the sums used to Novitas. The client will enter into an undertaking in favour of Novitas and will issue to you an irrevocable letter of instruction to arrange this. For example, any lump sum payments or proceeds from a property sale are used to pay the Novitas loan before being passed to the client. Is the loan regulated? Yes; the loan is regulated under the consumer credit act and the clients rights are fully documented in the loan agreement. Does the spouse need to know about the loan? No, unless we issue a standard security over a property which is a matrimonial home. Is the loan just to pay for solicitor s fees? The loan is used solely to pay the solicitors fees and any disbursements. What credit checks do you do? We will undertake a credit check on the loan applicant. What happens if the client changes solicitor?

9 If they wish to change solicitor, the new solicitor would have to be approved to be on the Novitas scheme before allowing the loan to be transferred. Otherwise the loan will need to be repaid. At what stage can my client apply for a loan? We will look at loans at any stage. Does the client have to take independent legal advice? Yes; once they have the loan documents we ask that they take independent legal advice. This ensures that they understand the loan and the implications if they do not repay it.

10 If you would like to discuss any aspect of our services, please contact: Jason Reeve Managing Director Mobile: +44 (0) Tel: +44 (0) Website: Novitas Loans PO Box 610 Nether Wallop SO23 3JN Novitas Loans Ltd. Registered in England No Registered Office: 78 Duke Street, London, W1K 6JQ.