Lawsuit Lending Companies embark on a Massive Campaign in state capitals
Companies that advance money to the plaintiffs that are involved in personal injury lawsuits are lobbying in state capitals for legislation that makes it clear they are not subject to usury restrictions on interest rates or other state laws that protect borrowers.
The lawsuit lending companies instead wanted to adopt a separate and less thorough set of protections. Since the month of February, they were able to persuade legislators in at least 5 states, including the state of New York, to introduce bills that are based on the industry’s proposals.
Their campaign is drawing tough opposition from insurance companies, chambers of commerce, and others who are concerned that that lawsuit loans promote litigation by emboldening plaintiffs. The critics also say that the bills would strip the protection accorded to borrowers.
Lisa A. Rickard, the president of the Institute for Legal Reform, an arm of the United States Chamber of Commerce, said, “They are coming in under the guise of accepting regulation when in fact what they are trying to do is to legalize lawsuit lending and to explicitly exempt themselves for consumer lending requirements.”
These arguments reflect the lawsuit lending industry’s uncertain legal status and the looming debate over its social value. The main focus of the debate is whether third-party investments in lawsuits be encouraged, or tightly restricted, or banned altogether.
Advancing money to plaintiffs is part of a wider trend in recent years where banks, hedge funds, as well as private investors, have been pumping cash into other people’s lawsuits.
According to Gary Chodes, the chief executive of Oasis Legal Finance based in Illinois, “Our approach is much more sensible and consumer friendly than curtailing the industry.” Oasis Legal Finance is one of the biggest lawsuit lenders and the driving force in the legislative campaign.