The recent Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry (‘the Royal Commission) has impacted upon many people across a broad range of industries and sectors. Unfortunately, family law is one of these sectors. So, what are some of the recommendations from the Royal Commission which have impacted upon family law? And what are the options for family law clients seeking funding to assist their legal affairs? 

Recommendations from the Royal Commission

The Final Report from the Royal Commission was presented in Parliament on 4 February 2019. This Report consisted of 76 recommendations, each addressing the purported misconduct within the Banking and Financial Services industry. Certain recommendations will directly impact upon people going through family law Court proceedings; including the following:

  • One recommendation is that the finance lending criteria does not need to change, given that banks and other financing institutions are already under a strict obligation to assess loan suitability. This means that banks will continue to apply a strict, conservative approach to lending finance. If you are applying for a loan, banks are now likely to make further enquiries regarding your living expenses and household expenditure to determine your ability to make loan repayments. 
  • Another relevant recommendation is that land valuations will be closely scrutinised by banks, specifically when the land in question is provided as security for the loan. 
  • It is also recommended that valuations of land should be undertaken independently from the bank responsible for lending the money. This will avoid any potential conflicts of interest. 

What does this mean for Family Law proceedings? 

It is potentially going to be difficult for a person to obtain financing from banks and finance institutions. This may delay a property settlement if, for example, a person needs to refinance a mortgage, or buy out their former partner’s share in a property.

It is important to keep in mind that a Court Order providing that one person obtain financing to refinance/buy out property does not legally require a bank to approve borrowing for the purpose of the settlement. A Bank is not bound by Orders of the Court unless they are joined as a third party, but that is an expensive process and not advisable in most circumstances. This may prevent a person from drawing further equity on their home to obtain financing in order to finalise a property settlement. As a result, negotiations may be prolonged as the person wishing to refinance the property seeks different avenues for funding (for example, loans from family members or a friend). 

Having land valuations conducted independently of lending facilities may result in more conservative valuations. Naturally, the outcome of conservative land valuations would be a decreased asset pool. A notable unintended repercussion of the Royal Commission has been a drop in the property market, due to diminishing buying rates. Therefore, it is now even more difficult to obtain funds to finalise a property settlement. 

Alternatives for clients to obtain legal funding – RateSetter

Despite the implications on obtaining funding triggered by the Royal Commission, there is an alternative solution. Enter RateSetter! RateSetter is a legal loan institution which provides financial assistance to clients who are experiencing the costly realities of family law Court proceedings. RateSetter works in collaboration with lawyers, to help finance a person’s property settlement. Conveniently, the loan from RateSetter is paid out of the property settlement once the matter has been finalised. This means that there are no requirements for repayments by way of instalments. 

The benefits of RateSetter legal loans are twofold:

  1. The law firm is able to perform work on behalf of the client; and
  2. A person who is experiencing financial difficulty may be able to fund their legal proceedings so that their property settlements can be resolved as soon as possible. This alleviates the financial burden for many people going through separation.

In a climate where bank loans are becoming increasingly difficult to obtain due to the Royal Commission, RateSetter is a legal loan facility which is certainly worth considering. 

“This is intended as general information only. For more information about your property settlement, please contact our Family Law team on (03) 9435 9044.”