The New York Post recently published an article highlighting a case in which a Brooklyn man, Joseph Gill, was the victim of an attack by lawsuit loan sharks. Gill borrowed $4,000 from lawsuit lenders to pay for medical expenses and surgeries in 2006 after a false arrest left him with serious back injuries. Now five years later, the verdict came in Gill’s favor and the lenders are looking for $116,000 to pay back the $4,000 in loans; The interest of the two loans being 58% and an outrageous 70%. While such numbers may seem unreal or illegal, they are common in lawsuit loans. Firms will insist on a rundown of the case from the plaintiff’s attorney, and only lend to those who have the highest chance of winning. Not only does this violate the client’s right to confidentiality, but the potential for cooperation between attorneys and lawsuit lenders could lead to serious conflicts of interest.
“Advancing money against future lawsuit winnings is a murky and largely unregulated business”, the NY Post states.
Lawsuit lenders insist that because borrowers are not required to repay if they lose their case, their products are not loans, but rather, investments. In this way, they currently sidestep New York’s consumer protection laws. There are no regulations that govern the rate of interest that lawsuit lenders may charge, which can exceed 100% annually. In New York, an annual rate higher than 16% is considered usury.
Such financing companies essentially engage in payday lending for litigation. They seek out consumers who have filed lawsuits and offer to pay them up-front money in exchange for a percentage of whatever award they may later receive in their lawsuit – a percentage which increases over time. Litigation companies prey on vulnerable consumers – people who are often injured and unable to work, with no financial support, and desperate for cash. These companies force the consumer to agree to unfair terms that ultimately result in the consumers giving up a big piece, if not all, of any award they may receive for their injuries.
LRANY is committed to fighting against this deceptive practice to protect consumers, businesses, and taxpayers and prevent the corruption of our civil justice!