By Matthew Best. Senior Underwriting Manager at Legal Futures Associate Temple Legal Protection
We’re all looking at ways to save money; law firms should be too. Interest rates are climbing and will continue to do so for some time yet. Therefore, it could well be timely to now consider what disbursement funding options are available for your clients to utilise.
1) On balance sheet lending
This is a bizarre concept when it comes to disbursement funding – if the whole point is to rid your balance sheet of any costs that can be passed on elsewhere. Surely If your ATE provider is offering your firm lending along these lines, then there is still a cost to pay? To me, this defeats the object. One provider offers this solution at an interest rate of 13%.
When it comes to adding layers of complication, I would class third party funder involvement as exactly that. You also have to ask yourself, is this model really sustainable?
2) Increased ATE insurance premiums
Here, effectively, clients are being offered disbursement funding in return for increased ATE premiums. It is important to question if another provider says their solution is free of interest. More than likely, ATE premiums are inflated to access that particular facility, often at a higher rate than current interest rates in the market. Inflated ATE premiums are simply ‘disguising’ interest and your client could actually be worse off. Additionally, with this type of arrangement, the amount of funds that are accessible are often not enough to fund the case to its conclusion.
3) Tapered Administration Fees
Other providers may charge tapered administration fees, payable by your law firm at the end of a case and only upon a successful outcome. Surely that also goes against the fundamental reason a law firm wants disbursement funding? This, to me is also ‘disguising’ interest. The point of disbursement funding is to get the balance of disbursements off your book of business; granted, this solution does that – but at whose cost?
With options 2) and 3), please also consider what other services your law firm is being tied into. It could be pagination services or medical agencies. There may also be the imposition of additional reporting requirements, which ironically, adds an additional extra layer of complication/ administration.
4) Consumer Credit Agreements (CCAs)
Could be the way forward? This is the solution Temple Funding offers. CCA’s are said to add an additional layer of complication to the discussions with clients. This is a myth. We work with many leading UK law firms who find the process both streamlined and straightforward. This is because Temple Funding is constantly reviewing the processes involved in order to simplify it even further.
CCA’s come with many benefits for a client. It allows them to access funds they may not have been able to access previously. They also allow the deferment of repayment over time – in this scenario, the end of the case, and only upon a successful outcome. What’s more, interest rates are rising, but the rates for Temple disbursement funding are not.
And finally, for clinical negligence lawyers –
5) Would a medical agency relationship work best for you? These often only allow deferment at an additional cost for an agreed term. If the case has not been settled within the deferment period, you still must fund the disbursements until conclusion of the case – a very costly exercise.
Do remember that medical agency fees are not recoverable as a disbursement in a fixed costs claim. Fixed costs are likely to be introduced but I doubt the reforms will stop there – certainly something to think about. I have also been made aware that various agencies are stopping their deferred terms agreements; meaning payments will need to be made a lot sooner.
