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Solicitors: Clinical negligence

About the loan

    Is the loan regulated?

    The loan is regulated under the Consumer Credit Act 1974.

    What can the loan be used for?

    The loan will cover costs such as court issue fees, medical reports and GP records.  

    Is the loan with the solicitor firm or the client?

    The funding loan is in the client's name. The loan contract is between the client and Novitas.

    Is this a recourse loan?

    Yes, this is a fully recourse loan and the client is always responsible for repayment of the loan. 

    If the loan is not repaid by the client, Novitas or the insurer may ultimately take legal action to recover the loan monies. 

    Is the loan a drawdown facility?

    Yes. You request the amount to be drawn down online against the facility.

    How does the loan work?

    This is a regulated loan between your client and Novitas which can be used to cover the costs of clinical negligence proceedings.  

    The money is drawn down from the loan as it is needed and paid directly to your client account to reimburse you for costs associated with the case.  

    An Insurance Policy is in place from the start to cover Novitas in the event that the case is not successful. The Insurance Policy will be arranged between yourself and the Insurer. 

    You will have a dedicated online loan management system to administer the facility, where you can add new cases and draw down funds.

    The scheme is only available to approved firms and Novitas will approve each individual client.

    Is the loan serviced?

    No. There is nothing for the client to pay until the case concludes as interest is rolled up on a simple basis. The client instructs the firm to repay the funding from the proceeds of the case or otherwise from the proceeds of the insurance policy.

    What is the duration of the loan?

    The funding must be repaid on conclusion of the claim to which it relates, but there is no fixed loan term.

    How much does the loan cost?

    There is no cost to the solicitor to join the scheme.

    If the client's case is unsuccessful, they do not have to pay anything.  If it is won, Novitas is repaid from the award. Costs include:

    • An administration fee of £75 for each of the first five amounts drawn down from the loan. This is taken directly by Novitas and added to the amount drawn down
    • An interest rate of 15% per annum on any amount drawn down. Interest is only charged on the money drawn down, not the whole loan, so costs are kept lower. 

    Recent legal precedent may make a proportion of the interest recoverable from the other side. This is not guaranteed however. You should assume that the interest is to be repaid from the settlement.

    • The non-recoverable element of the insurance policy.

    How is the interest calculated?

    Interest is fixed at 1.25% per month and calculated on a simple basis, i.e. there is no compounding of interest.

    We take the annual interest rate of 15% (1.25% per month), multiply 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 has drawn down £10,000 for 6 months, they will pay back interest on the £10,000 of £774.

    Does the client have to have insurance?

    Yes. The loan must be covered by an insurance policy from an insurer approved by Novitas. The policy proceeds will be used to repay Novitas if the case is not successful. The solicitor will arrange the insurance with our approved insurer.

    What does the insurance cost?

    The cost of the insurance depends on the claim type and the insurer chosen.

    How are the insurance costs paid?

    The cost of the insurance premium is deferred and contingent upon case success. It is only payable if the case is won. Where a case is lost, no premium is due to be paid.

    What security do you require from the client?

    The Novitas lending scheme requires the client to sign a ‘Deed of Assignment’. This gives Novitas an assignment over the proceeds of the claim, meaning Novitas is repaid first from any settlement monies received, before the balance is sent to the client. 

    Once approved is there a time limit for the first draw down to be requested?

    The first drawdown will need to be requested within one year after the cooling off period has been completed.

    What happens if the client agrees to the loan but never proceeds?

    Outside of the cooling off period, once your client has been accepted and confirmed that they wish to take out the loan, they will be charged the administration fee of £500, or 1% of the facility if higher than £50,000, if they do not then proceed.

    Is funding capped by firm or case?

    There is no lending cap per firm. The only cap is on an individual case and this is set by the insurer and documented in the insurance policy for each client. Typically this cap is £100,000.

    Can I recommend a Novitas loan?

    No, you cannot recommend Novitas.  A Novitas loan can be presented as an option for your client to consider.  We will provide information for you to provide to your client on how the loan works and clearly stating that you are not recommending it. We will also send our FAQs to your client when they apply for their loan.

    Typically the solicitor firm will add a section to the client care letter saying that they are an approved firm and direct them to the Novitas client.