Q&As

Do I need a consumer credit licence to help a client apply to a third party for litigation finance under a loan agreement?

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Published on LexisPSL on 18/06/2014

The following Practice Compliance Q&A provides comprehensive and up to date legal information covering:

  • Do I need a consumer credit licence to help a client apply to a third party for litigation finance under a loan agreement?
  • Background
  • Deferring payment of your fees
  • Ancillary consumer credit business
  • What is the EPF regime?
  • Can I rely on the EPF regime in this case?
  • The last word

Do I need a consumer credit licence to help a client apply to a third party for litigation finance under a loan agreement?

In certain parts of the market, eg family law, it is becoming increasingly common for clients to finance their legal costs by way of a loan from a specialist legal finance provider—this is often called litigation finance. Generally, the law firm introduces the client to a finance company that has 'granted a facility' to the firm. Whilst the finance application can usually only be made via the law firm, the client enters into a loan agreement with the finance company (not the law firm). In the case of consumer clients, the loan agreement is likely to be a regulated consumer credit agreement.

This Q&A answers the question: Do I need a consumer credit licence to help a client apply to a third party for litigation finance under a loan agreement. It does not deal with wider professional and conduct issues such as whether:

  1. it is appropriate to recommend a particular third party provider (some providers specifically say that the firm should not make a recommendation)

  2. you can receive commission from the finance provider for the introduction

  3. you should provide any undertakings to the finance provider in relation to repayment of the loan, or

  4. the client should be advised to take independent legal advice

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