Litigation Loan and Divorce

BrokeyMcBrokeface

I've been a victim of one of these litigation loans for divorce, and have been contacted by a number of other people who are also victims.
The MO is you go to a solicitor for advice on marriage breakdown, and they pressure sell a loan with a loan company you will never have heard of, these loans charge up to 25% interest, and they are secured on your home, this means they are mortgages, but a number of the companies selling them are not authorised for mortgage lending.  The loan has several negative impacts, if you look at the T&Cs you will see that once you have signed up to one of these loans you will lose your right enshrined under the Human Rights Act (article 7) to free choice of representation - you will not be able to sack your solicitors or change solicitors unless the loan company agrees.  Many solicitors actually have partnership agreements with the loan companies, but they don't tell clients that at the outset.  Set up of the loan is carried out at great expense, by the solicitors, they will charge their standard hourly rate for form filling, but again, you don't get told this at the outset - over the lifetime of the loan you could end up finding that £10k or more of your legal fees are entirely resulting from the administration of the loan the solicitors wanted you to take.  Divorce is, like bereavement an acknowledged situational vulnerability - people going to family solicitors for advice on divorce should not be sold a loan.  In some cases the other party to the divorce has no idea their asset (for example their home) is being eroded by a loan secured on it by the other side - they don't have to get permission from you to secure a loan on against your home - .  A recent survey by AVIVA indicates that the cost of divorce (and sadly it hits one in three of us) has doubled, and time taken increased - SINCE THESE LOANS CAME ONTO THE SCENE IN 2014.  

Do you have experience of this type of loan? Have you been a victim of predatory lending pressure sold by your solicitors?  What action are you taking, and how are you dealing with this?

[Deleted User]

 The time for reading the T&C was prior to signing on the dotted line not after. 

 A loan secured against your property doesn't make it a mortgage 

Thrugelmir

Secured loans are not mortgages. From your post one can assume that you have a personal gripe. A family solicitor will always recommend the use of mediation services as far as is possible to minimise the cost of their legal fees. 

mcpitman

BrokeyMcBrokeface said:

I've been a victim of one of ......

Not reading the T&C's before signing..

tacpot12

While I tend to agree that people should not be sold loans by their solicitors, if you look at if from a solicitor's point of view, they want to be sure that they will be paid for their legal work. Most people would take out a loan if they needed to pay for something before getting the money from a house sale or divorce, so it is not unreasonable to suggest taking out a loan, and even to have a relationship with a financial services firm that offers loans. However, I am sure that some solicitors and some loan companies overstep the mark, but they have regulators to stop them doing so. Have you complained to the regulators and where did it get you?  

In particular, I would expect that loan administration charges from the solicitors to be quashed by their regulator, unless you agreed to them making the charges. In which case you are going to have to find a different basis on which to argue that the solicitor acted improperly. If you agreed to the finance rate, you can't really argue about it. 

I think you will have a hard time arguing that not being able to bind the loan company to pay a different solicitor is infringing on your right to choice of representation. You can change representative, but the contract means you can't bind the loan company to make payments to a new  solicitor. There is nothing in the agreement that stops your taking out another loan to pay your new solicitor. 

I would assume the dodgy loan was effectively a line of credit, and that you only became liable to pay interest when the solicitor billed the loan company. Once you instruct the solicitor to do no further work, the amount of the loan is then fixed. If this was not the case, then the loan was clearly a bad deal (and a very bad deal when the interest rate was considered). 

People only pay absurd rates of interest when they can't get credit else where. Lenders are allowed to charge these rates of interest because of the risk of bad debt - they generally have evidence that some of the people they lend to are not going to repay.

[Deleted User]

If you are unhappy with how a solicitor has dealt with you I would advise you contact the Law society, google is your friend.

BrokeyMcBrokeface

Apologies, I haven't been active on the site, and have only just caught up with the comments above.

In the intervening time I HAVE complained to both the Financial Ombudsman Service in respect of the Litigation Loan with Novitas Loans, my solicitors advised me to take, along with a number of other victims of this form of lending.

And YES, we can call ourselves victims, because the Financial Ombudsman found that the loans were on the face of the contracts UNFAIR AND UNAFFORDABLE.

So much for Solicitors and their duty of care.  Novitas Loans Contracts (Novitas was, at this time 50% owned by Therium) had standard terms, which were not open for negotiation between the borrower and Novitas.  

While the over the years the contracts used did change, there was no renegotiation by Novitas or by the solicitors who benefitted from these loans in terms of fees, and it has emerged, in terms of payment, from Novitas for referring clients to their firm.  For the avoidance of doubt, these payments from Novitas to the solicitors were made on the date the client signed the contract, they were IN ADDITION TO the payments the solicitors billed clients for, at their usual hourly rate, for 'administrating' the contract. In my case, the law firm billed me close to £10k for 'administrating' the Novitas loan, using senior partners hourly rates, for these administrative tasks.  In addition, the firm in my case received a payment of £575.00 on the date I signed the contract this payment was not disclosed to me in any of the contracts or in any correspondence between the firm and me, I had no direct contact with the lender.  I only discovered it because the law firm accidentally disclosed it in a Data Subject Access Request Response.  It was clear, from the contents of that DSAR that this particular firm was paid £575.00 FOUR times in that month, for getting their clients to sign Novitas loan contracts, on the date the client signed the contract.

There's a lot of noise in the responses to this thread, saying "READ THE TERMS AND CONDITIONS". So here's how this went, in my case, and in other cases I am aware of.  We were frogmarched from the first law firms office, the one that would receive the £575.00 if we signed the contract, to a second law firms office, right next door.  The contracts were handed to the second law firm, red tabbed, where our signature was required.  In my case a lawyer at the second law firm stood over me, while I signed at each red tab - he then RETAINED THE CONTRACT and sent it back to the lender, and the first law firm... the one that would now receive the £575 - I DID NOT RECEIVE A COPY OF THE CONTRACT UNTIL YEARS LATER, FROM THE LENDER VIA A DATA SUBJECT ACCESS REQUEST.

I COULD NOT, THEREFORE, READ THE TERMS AND CONDITIONS.

In addition, the second lawyer (who had a reciprocal arrangement with he first lawyer to send clients to each other to sign the contracts, and presumably collect their £575 from Novitas) then wrote to the lender, purporting to have given 'independent legal advice' on what he referred to as a "Sump Lump Dump Sum Agreement" Whatever that is.  

I did not receive a copy of this letter, I did not instruct the second firm, I did not see the content of this letter until... you guessed it, years later in a Data Subject Access Request to the second law firm.

In any event, the Financial Ombudsman were satisfied that no independent legal advice had been given, and that even if it had been, it would only - based on the contract - be advice that the loan was unfair and unaffordable, and that I should not sign it.

At its height Novitas boasted that they had over 900 family law firms under contract with them to refer people in the situational (under FCA and SRA definitions) vulnerability of divorce/relationship breakdown.  Many family lawyers tweeted out on social media enthusiastic endorsements of Novitas, many family law firms set up a page on their websites endorsing Novitas.

Until Novitas closed in 2019, with a £90m hole, family lawyers continued to refer their clients to sign their contracts, CONTRACTS WHICH WERE ON THEIR FACE UNFAIR AND UNAFFORDABLE.

sourcrates

BrokeyMcBrokeface said:

There's a lot of noise in the responses to this thread, saying "READ THE TERMS AND CONDITIONS". So here's how this went, in my case, and in other cases I am aware of.  We were frogmarched from the first law firms office, the one that would receive the £575.00 if we signed the contract, to a second law firms office, right next door.  The contracts were handed to the second law firm, red tabbed, where our signature was required.  In my case a lawyer at the second law firm stood over me, while I signed at each red tab - he then RETAINED THE CONTRACT and sent it back to the lender, and the first law firm... the one that would now receive the £575 - I DID NOT RECEIVE A COPY OF THE CONTRACT UNTIL YEARS LATER, FROM THE LENDER VIA A DATA SUBJECT ACCESS REQUEST.

I COULD NOT, THEREFORE, READ THE TERMS AND CONDITIONS.

In which case I would have stood up, and walked out of the door, no one, especially a solicitor would compel me to sign up for a secured loan I had not had the chance to read up on.

I understand your frustration, but you should have just walked away at this point.