Law week’s Scaffold Law Reform Lobby Day was profiled in Habitat Magazine with Jason Schiciano, the president of a Westchester-based insurance brokerage telling the publication that he joined advocates at the capitol because he is determined to persuade the legislature to fix the law. “I feel like each time I’ve gone up, more of the legislators are aware of the situation and they have a better understanding of the issues,” he said. LRANY executive director Tom Stebbins was also interviewed by the publication noting that the reform we are looking for is to apply liability just as it is applied for all other types of injuries.
Senator Rob Ortt and LRANY’s Tom Stebbins joined Liz Benjamin on Capital Tonight last week following a public hearing regarding regulating the lawsuit lending industry:
There’s a lucrative industry in New York known as lawsuit lending, and state lawmakers want to crack down on it.
Lenders provide up-front cash to plaintiffs in lawsuits who promise to repay the money after winning a settlement or award in their case.
However, these lenders are charging sky-high interest rates, making it impossible to repay the loan.
The New York Post published an op-ed from LRANY’s Adam Morey ahead of a hearing held on Wednesday May 16th by the New York State Senate Standing Committee on the issue of lawsuit lending:
Lawsuit funders sniff out tragedy to cash in on misfortune. They spend heavily on advertising that targets the disadvantaged and desperate.
Companies offer money up front for pending lawsuits and claims. Funders promise “cash now,” with some offering no-credit-check approval in just one day.
But the truth is the industry is rife with unscrupulous actors looking to exploit the legal system.
Buried in the contracts, consumers find that interest is often compounded monthly, with annual rates that exceed 100 percent. People who sign these lending agreements may ultimately win their lawsuit only to take home a tiny fraction of their award — a majority of the money ends up in the pocket of the lender, and all of this comes as the victim’s attorney also gets to take a third of the winnings.
Lenders claim that because repayment is contingent on the borrower winning the case, the product they offer is especially risky and shouldn’t be classified as a loan. This allows them to charge outrageous interest rates, well beyond those allowed under New York’s consumer-protection law.
But just how risky is it? A study published last year by Vanderbilt Law found that 84 percent of claims filed in New York’s state courts are settled. Another report revealed that lenders are choosy about their targets, with one funder furnishing just 10 percent of the loan requests it received. And as the Times revealed in devastating detail, lenders and lawyers often work together to negotiate the payout.
The result is a business model that takes advantage of consumers and turns the civil-justice system into a profit center.
Read Adam’s full op-ed here.
According to a post on the Times Union’s Capitol Confidential blog, the New York State Senate will review the practice of lawsuit lending.
On May 16, the Senate Consumer Protection Committee, with new chair Chris Jacobs, will hold a hearing in Albany on lawsuit lending. Sen. Robert Ortt, a Buffalo area Republican, who sponsors legislation creating oversight for the industry, is listed as the “co-sponsor” for the hearing.
The practice of lawsuit lending has come under fire for the exorbitant interest rates that are charged when a plaintiff wins a case, which can result in the aggrieved party handing over their entire case victory to the financier. The industry has been able to avoid the regulations imposed on traditional lenders because a plaintiff isn’t obligated to repay their loan if they don’t win the case.
“All we’re looking at is to come up with uniform standards and some type of oversight for an industry that is really the wild west,” Ortt said. He added that reputable firms in the sector don’t need to be worried about regulations.
This issue is a hot topic for the Lawsuit Reform Alliance of New York, which is committed to curbing the amount of litigation in the state. They allege that lawsuit lenders help encourage frivolous lawsuits.
Read the full post here.