Advocating for accident victims and promoting access to justice
November 17, 2014
BridgePoint Financial was recently invited by the Ontario Trial Lawyers Association (OTLA) Board of Directors to present and discuss its services at their most recent meeting on October 20, 2014 in Toronto. The purpose of the meeting was to assist OTLA in considering its position on the litigation lending industry in light of the BC Trial Lawyers Association’s decision to restrict litigation finance companies from marketing through their organization.
The following is taken from the presentation made by Stephen Pauwels, Principal of BridgePoint Financial.
OTLA’s Mandate: "To fearlessly champion, through the pursuit of the highest standards of advocacy, the cause of those who have suffered injury or injustice... to promote access to justice for all Ontarians, preserve and improve the civil justice system, and advocate for the rights of those who have suffered injury."
BridgePoint’s Mandate: To offer responsible financing and risk management solutions to meet the specialized needs of personal injury plaintiffs, their lawyers, and experts... protecting the rights to full and fair access to justice.
In essence, everything BridgePoint does is intended to help lawyers in advocating for accident victims and promoting access to justice.
In our presentation package you will find an overview of the various services we offer which are applicable to personal injury litigation.
I would first like to discuss what is easily the most contentious of these services – settlement loans. These are the loans that address your clients’ personal financial needs pending the resolution of their claims. They have a bad reputation in the legal community, and for the most part deservedly so. This is a market that needs cleaning up. Every injury lawyer in the country by this point has a horror story of a client who borrowed too much money, too early in the litigation, at too high an interest rate which snowballed into a disaster by the time of settlement.
But please understand this simple fact, if nothing else I say here today – not all litigation lenders are the same. Just as there are good and bad lawyers practicing out there, and good and bad rehab providers, there are, not surprisingly, good and bad litigation lending companies. And any lawyer who presumes to paint us with the same brush is either exceptionally lazy or exceptionally naïve, and unfortunately that ignorance is being paid for by their clients.
I won’t spend my little time here citing and comparing our specific loan terms relative to our competitors – that information is easily available in your materials and certainly on our website. I simply want to stress this point: Lawyers need to educate themselves on the differences between the lenders who are out there because your clients will not. Once they are online googling “lawsuit loan” or “personal injury advance” at two in the morning they are too vulnerable to make responsible decisions. Who can blame an accident victim whose income replacement benefits have been terminated and who is struggling to put food on the table from taking the bait of “fast and easy” money just a mouse click away?
They need your guidance.
It amazes me how many lawyers still feel that their clients’ financial issues aren’t their problem or “not what they are being paid for”. I sincerely don’t understand that mentality. Your clients’ financial predicament can be as attributable to their accident as their physical and psychological impairments. And if it is part of your mandate to guide them to the resources to cope with those issues, why is it not be to assist them in addressing the inevitable financial hurdles most will face throughout the litigation?
I am not holding up BridgePoint as a poster child. We aren’t inexpensive relative to bank financing that most of us take for granted. Though we are relative to other litigation lending companies out there which are often the last line of defence for your clients before capitulating to a low ball settlement offer.
Like you do, we advise your clients to examine all alternatives before borrowing against their future settlement. Where a settlement loan is the only option available, here are a few of the standard best business practices you should know we abide by:
- Full and transparent disclosure of our loan terms. We offer full and clear disclosure of our loan terms up front and throughout the entire loan process. We aren’t believers in “the big reveal” at the last minute knowing a prospective borrower will be too desperate to back out. Our terms are front and centre on our website, in our FAQs and in all of our promotional materials.
- Lawyers kept informed from outset. We involve the lawyers from the outset about their clients borrowing intentions. For the most part our referrals come from the lawyers themselves, but otherwise or where a client approaches us directly or for follow-on funding, we notify the lawyer right away and heed their input where volunteered. You will never be surprised by a client showing up with a signed loan agreement from us as seems to be common practice with some of our competitors.
- Promotion of loan staging and other cost reduction options. We will always steer your clients towards the lowest cost borrowing options. We were the first to promote the concept of staging loan advances monthly so your clients can have the peace of mind of a regular source of funds without the higher interest cost (or temptation to spend) a large lump sum up front. We routinely convince your clients to borrow less by examining what their needs are and structure our loans to best meet them at the minimum cost.
- Experienced legal assessment team. We employ an in house team of half a dozen exceptionally experienced Legal Assessment Specialists who can efficiently assess the underlying claims. We do not rely on the lawyer to give us an opinion and are astounded that others lenders expect and rely upon that for their due diligence. And when a lawyer quite appropriately declines to offer an opinion, what then? Ask the plaintiff how much their case is worth? Hope that since a lawyer is on a contingency fee there must be money enough down the road to repay the loan? That is exactly the reckless behavior that is behind many of the horror stories I alluded to earlier.
- 10% loan to claim value rule. Since we do our own due diligence, we can abide by a rule of thumb not to lend over 10% of our estimate of claim value, even less if it’s early in the litigation, slightly more if in the late stages. Thereby ensuring that our loans should never grow to problematic size relative to the settlement value of the claim.
- Semi-Annual vs Monthly Compounding. We compound the interest on our loans semi-annually vs monthly as other lenders do. It may seem like a small distinction, but anyone with a basic understanding of finance will recognize how big an impact more frequent compounding can have when loans aren’t serviced for years as is often the case for litigation loans. Many lawyers don’t know what interest compounding is, and certainly most plaintiffs are entirely ignorant of its implications (until it’s too late). In our view the debt spiral effect of monthly compounding should have no place in litigation finance.
Our loans are first and foremost intended as a lifeline to keep a plaintiff’s head above water during the critical final stage of their litigation when their benefits have been exhausted, their savings wiped out and where they are most vulnerable to opportunistic lowball settlement offers. That’s what this business should be about. Not about excessive interest rates, confusing surcharges and fees, taking advantage of the desperate and vulnerable or encouraging plaintiffs to treat their litigation like an ATM machine throughout the litigation.
OTLA can’t regulate the rates that plaintiffs are going to pay in this market. However, that doesn’t mean there isn’t a strong role for you to play in cleaning it up. Why not promote a code of conduct to be agreed upon by any lender seeking access to your association? Require lenders to be up front and transparent about the actual cost of their money. Discourage teaser interest rates that step up over time, or hidden charges only disclosed in fine print. Make US earn YOUR stamp of approval or endorsement that we can display on our website as a vote of confidence. It would be telling of those who don’t have it or who don’t care to try.
Please DO NOT follow the BCTLA example because that model has failed miserably. Plaintiffs certainly do not borrow less in that market. Quite the opposite in fact. They just borrow in the dark now where the predatory lenders prefer to operate. The lawyers and plaintiffs in that market are easily the least informed in the country as far as third party litigation funding solutions that can play a strategic role in financing vital medical and rehab services for example, or leveraging advances from tort insurers. Not so coincidentally it is also a common practice in BC (as nowhere else in Canada) for lawyers to lend money to their own clients for disbursements (at rates that exceed ours in many instances). The BC Ethics Committee also recently gave a green light for law firms in BC to offer personal loans to their own clients’, raising some concerning conflict of interest considerations.
OTLA has the opportunity to make a much more enlightened decision that befits your mission statement and we hope and trust you will do so.
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