‘Lawsuit Funding’ Industry Regulation Faces Vague Future in Senate

‘Lawsuit Funding’ Industry Regulation Faces Vague Future in Senate

03/14/2011

The Kentucky Senate is putting into consideration a bill that seeks to regulate the emerging “lawsuit-funding industry.” This industry involves companies advancing money to cash-strapped plaintiffs to take care of their living expenses in the hope of sharing in their courtroom paydays.

Trotting through the House in just nine days, House Bill 412 won a 68-24 floor vote last February 18. At present, however, it faces an uncertain future in the Senate Judiciary Committee, where it might be subject to a vote Thursday.

Tom Jensen, the Senate Judiciary Chairman, on Tuesday said, “As an attorney, I don’t like the business itself. But I would rather see it regulated than unregulated.”

The Republican state Senator also said that the members of his committee are still debating the bill among themselves, as well as among the Senate leadership, and at present it is mixed.

“I don’t know whether or not this is something we’ll take up this session,” said Jensen.

The industry, which started during the late 1990s, says it helps plaintiffs pay their bills so that the defendants, which are usually insurance firms, cannot “starve them out” by stalling a case in order to force the plaintiffs to drop the lawsuit or settle.

If the plaintiff wins the case, the lawsuit-funding company gets its money back, along with one or more fees, collecting from the award.

The fees charged by these companies can equal an interest rate of 120% annually. In some cases, the fees consume most of the plaintiff’s award after the lawyers are paid. However, the company gets nothing if the case filed by the plaintiff loses.

WRITTEN BY:

blakeh@wellsdrew.com