A response written by LRANY Executive Director, Thomas B. Stebbins, was recently shared in the Albany times Union. This piece highlighted how lawsuit lending is a form of legal loan sharking. Under this deceptive practice, 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.
“Your May 2 editorial got it right when you called certain check-cashing operations “legal loan sharks.” But there is another form of loan sharking that is legal in New York: lawsuit lending. Proponents call such loans “non-recourse third party litigation financing.” Disguising loans as investments, lenders charge more than 100 percent interest”.