Paper: Lawsuit Loans Risky
We’d like to bring a January 17, 2011 article from the New York Times to your attention, as often our clients ask us about companies that loan money to accident victims.
The piece explores several plaintiffs who borrowed money from legal finance corporation, and ended up owing extremely large sums back to those companies after their lawsuits were resolved.
More than $100 million industry, these loans are unregulated in most states and borrowers are not protected by the same laws that oversee other lenders, according to the piece.
Often, interest rates can exceed 100%!! And, says the Center for Public Integrity, when companies give borrowers details they are often misleading.
A growing number of lawyers, judges and regulators say these lenders are taking too much money from the plaintiffs, says the Times.
In Colorado, the state’s Attorney General filed suit against two of the largest companies for loans they have made. In Michigan, courts have ruled that individual borrowers did not need to repay lawsuit loans, finding that the apparent risks did not justify outsize prices.
Nebraska legislators passed a bill sponsored by State Senator Steve Lathrop, a trial lawyer that prohibits lawsuit lending.
“My own personal view of these groups is that I discourage clients from using them,” Mr. Lathrop said during the final debate. “I tell them, go borrow from anybody you can before you have to use them.”
“But,” he concluded, “the reality is, sometimes there’s no other place to turn.”
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