Mary-Louise Ramsdale, a prominent family law attorney in Mount Pleasant, was fighting for a woman in the midst of a highly contentious and equally complicated divorce case involving significant marital assets when the client’s bank account began to run dry.
The family court already had advanced litigation costs to the woman, whose soon-to-be ex-husband controlled the couple’s finances, but the case had dragged on longer than expected and that money was nearly gone.
Ramsdale and her client went back and asked the court for a second advance, but there was no guarantee that their request would be granted. And even it if it were, they would have to scrape by in the interim.
“We were coming up against a cash crunch,” Ramsdale said.
Then she remembered a news report about a company that loaned money to people like her client: asset-rich, cash-poor spouses who had to keep paying their attorneys or risk walking away from the divorce and leaving behind their fair share of the marital estate.
The company is called BBL Churchill, a Manhattan-based firm that is the brainchild of charismatic Australian lawyer and businessman Brendan Lyle. He dubs himself the “Robin Hood of Divorce,” though it’s doubtful that the prince of thieves ever collected an interest rate of 18 to 20 percent on his loans.
Lyle’s company ended up loaning money to Ramsdale’s client last fall, which allowed her to forge ahead and settle her divorce. She was among the first South Carolinians, if not the first, to receive a loan from the divorce financing company.
Lyle is betting that there will be many more like her, which is why he’s decided to set up shop in the Palmetto State. He’s looking at opening an office in Columbia or Charleston, though he said he was leaning toward the coastal locale. He plans on having a staff of between five and 10 people, including a couple of lawyers for underwriting.
“You’ve got the best accent in all 50 states, I tell you,” Lyle, who speaks with a thick Australian accent, said when asked why he picked South Carolina. “We’re also looking for jurisdictions that are business friendly.”
Start of an industry
In 2003 when the economy was humming, Lyle was at the helm of Impact Capital, a litigation finance company he founded in Sydney. Back then, he said, banks were throwing cash at finance companies faster than they could loan out the money.
“I was trying to come up with new and innovative ways to put it out,” he said. “We started thinking about matrimonial lending.”
He experimented with the idea by lending $20,000 to a woman to cover her living expenses during her divorce. But then her attorney contacted Lyle and asked if he’d add another $60,000 to her tab to cover his fees. Lyle approved the additional loan and was repaid with interest after the woman received a multimillion-dollar settlement.
His divorce financing business flourished in Australia, prompting him to establish Churchill in New York in 2009. He now operates in New Jersey and plans to establish a presence in Florida and California. He expects to issue somewhere between $15 and $20 million in loans over the next year.
“Divorce funding is really starting to get some wind beneath its sails at the moment,” he said.
Credit card for divorces
In order to receive a line of credit from Churchill, Ramsdale said, her client had to provide an outline of her assets and finances in her loan application. The company asked for additional financial information and when she refused it gave her half the money she requested, which turned out to be enough, according to Ramsdale. She would not disclose the loan amount or identify the client.
Ramsdale said her client agreed to pay 17.95 percent interest on the loan plus a 7 percent fee on the total loan amount for underwriting. The whole process took about a month.
“I didn’t’ find it to be terribly invasive,” Ramsdale said. She added that she folded the loan and interest amount in with the rest of her client’s litigation expenses during settlement negotiations.
“I have not had a need to recommend this to other clients,” she added, “but I’m certainly glad it’s out there.”
Lyle describes Churchill as a substitute for a credit card, one that comes with several benefits over plastic debt. For instance, he said, his borrowers do not have to begin repayment until their divorce is settled, and they only pay interest on the money they have used, not the total loan amount.
Also, Lyle said he’s not concerned about applicants’ credit histories and the amount of cash in their bank accounts. Instead, he’s focused on the marital assets, which must be significant – mansions, vacation homes, yachts, antique car collections – before Churchill’s team signs off on a loan.
“I don’t think a loan under $50,000 is suitable for this product,” he said. “If they need to borrow such a small amount they should be able to settle the case. We’re not in this to stir up litigation in any shape or form. We’re here to provide assistance to people who are being financially bullied in the divorce proceeding.”
According to Ramsdale, Churchill never made an attempt to influence the outcome of her client’s case. In fact, she said the company didn’t even ask to be updated regularly on the status of the litigation.
“I gave them updates because I felt that was the right thing to do,” she added. “They were completely uninvolved in our litigation strategy.”
‘Damsels in need’
Churchill might be leveling the playing field between spouses who control the cash and those who don’t, but the company’s interest rate turns off Charleston divorce lawyer Anne Bleecker. She said she would only recommend such a loan to her clients as a “last resort.”
“I’d go and beg my bank for a loan before I did something like that,” she said. “But if it opens opportunities for individuals who perhaps couldn’t get the money initially, I don’t object to it. Allowing people better access to the legal system is always a good thing.”
Ramsdale also acknowledged that the interest rate was “not ideal.” But, like Bleeker, she said the emerging industry of divorce financing gives equal opportunity to spouses who would be bullied during litigation because they lack cash.
Lyle’s clients tend to be the wives of wealthy men, or “damsels in need,” as he calls them, which has led to him being “cursed at by husbands at cocktail and dinner parties” after they realize who he is and what he does for a living.
“That,” he said, “is why we have a pin code on the front door of our office.”
Follow Phillip Bantz on Twitter @SCLWBantz