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Poozer Politics: The Loan behind the Lawsuit

Lawsuit Reform Alliance of New York Executive Director Tom Stebbins joined Poozer Politics to highlight the problems with lawsuit lenders and outline a legislative fix to the situation. He also explained how lenders are piggybacking on the #MeToo movement and was awarded 90 seconds to argue for Scaffold Law reform.

To listen to the full episode of Poozer Politics, click here.

Response to Sheldon Silver’s Latest Indictment

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April 24, 2015

Response to Sheldon Silver’s Latest Indictment

“While the latest charges against former Assembly Speaker Sheldon Silver should outrage New Yorkers, what is more outrageous is not what is illegal, but what is legal. According to press reports, Silver’s dealings with the lawsuit lending firm Counsel Financial are under investigation, but activities of the industry itself are what should be investigated and regulated.

Lawsuit lenders in New York often charge predatory rates far above what is considered legal for any other type of loan, sometimes in excess of 100% annually. By claiming their products are ‘investments,’ they are able to dodge New York’s strict consumer protection laws. Sheldon Silver’s newest indictment shows how profitable that model can be. Tragically, consumers who take these loans often see much or all of their final settlement or award consumed by interest charges and attorneys’ fees.

This latest charge against Sheldon Silver is a wake-up call that predatory lending is alive and well in New York. We urge lawmakers, the Attorney General, and the Department of Financial Services to come together to put an end to predatory lawsuit lending.”

-Tom Stebbins, Executive Director, Lawsuit Reform Alliance of New York

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Contact: Phoebe Stonbely | PStonbely@lrany.org | 518.512.5265 

The Lawsuit Reform Alliance of New York (LRANY) is a nonpartisan not-for-profit association of businesses, professionals, healthcare providers, membership organizations, taxpayers, and concerned citizens committed to changing New York’s legal system to help create jobs and energize our economy.

See PDF of Statement

Crain’s New York Business: Litigation Finance Needs Regulation

This weekend Crain’s New York Business published a letter to the editor from LRANY’s Manager of Government Affairs, Scott Hobson focusing on the over due reform and regulation of the litigation finance industry.

An Excerpt:

“Litigation-finance firms bet on the little guy” (Feb. 9), highlighting the litigation finance industry’s involvement with small business, serves as a timely reminder of the rapid growth of this questionable industry.

New York is at the epicenter of lawsuit lending, and the practice of lending directly to individual plaintiffs is on the rise. Troublingly, we have virtually no regulations in place to protect consumers from predatory lawsuit-lending practices.

The practice of lawsuit lending, referred to as third-party litigation financing, is illegal in the vast majority of Western nations. Lawsuit lenders seek out consumers who have filed lawsuits and offer cash advances on their claim in exchange for a percentage of whatever award they may later receive.”

Read Full Letter

The Journal News: A.G. Must Tackle ‘Lawsuit Lending’

human hands holding bundle of us dollarThe Journal News published a piece today written by LRANY’s Phoebe Stonbely applauding the AG for assisting a New York woman who was struggling with deceptive loan practices from out of state lenders and encouraging him to look to lawsuit loans under the same light.

An Excerpt:

“Kudos to Attorney General Eric T. Schneiderman for getting justice for the victims of usurious medical loans from four out-of-state companies. Now is the time for Mr. Schneiderman and our elected officials to take action and stop the similarly predatory practice of “lawsuit lending.”

Lawsuit lenders offer cash advances on pending lawsuits, often at rates in excess of 100 percent annually. Any interest rate higher than 16 percent in New York is considered usury and any rate higher than 25 percent is a criminal violation, so how do they do it? They avoid consumer protection laws by claiming their loans are investments, since the consumer only repays if the lawsuit is won.”

Read Full Letter

 

Next Up, Lawsuit Loan Sharks

By: Phoebe Stonbely

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The Times Union recently reported that Attorney General Eric Schneiderman has reached an agreement with Western Sky for charging interest rates up to 355% (“Schneiderman settles with ‘sky’ high lenders”).  Now is the time for Mr. Schneiderman and our elected officials to aim to stop the similarly predatory practice of ‘lawsuit lending.’

Lawsuit lenders offer cash advances on pending lawsuits, often at rates in excess of 100% annually. Any interest rate higher than 16% in New York is considered usury and any rate higher than 25% is a criminal violation, so how do they do it?  They avoid consumer protection laws by claiming their loans are investments, since the consumer only repays if the lawsuit is won. However, once the case is won the consumer can end up owing the entire judgment, or even upside-down in debt to the lender.

Lawsuit lending compromises the integrity of the civil justice system, takes advantage of those most vulnerable, and incentivizes frivolous lawsuits. For these reasons, lawsuit lending is illegal in most nations.  As the Attorney General and regulators shine a light on the corrupt practices of payday loans, they need to subject lawsuit loans to New York’s strong consumer protection laws.  It is the commonsense next step to improve justice and fairness for all New Yorkers.

Letter: Lawsuit lending a form of legal loan sharking

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.

An excerpt:

“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”.

Read More

New York Daily News: Shark Patrol

The New York Daily News recently ran a piece written by LRANY Executive Director, Thomas B. Stebbins on the dangers of lawsuit lending.  The piece recognizes the Daily News for writing about this topic then calls for further action to prevent this predatory practice.

An excerpt:

“Kudos to the Daily News Editorial Board for rightly identifying payday loans as usury (“Lowest of the loans,” April 30). However, there is another form of predatory loan that Gov. Cuomo & Co. should address if they want to crack down on usury. That is the practice of lawsuit lending. Lawsuit lenders mischaracterize their loans as investments, allowing them to duck usury laws and charge consumers annualized interest rates in excess of 100%”. 

Read More

Hurricane Sandy Litigation Round-Up

Our hearts and prayers go out to all of those impacted by the horrible events of Hurricane Sandy. To all the first responders, members of the armed forces, and good Samaritans across the state, we express our deepest appreciation for your courage and sacrifice.

Unfortunately, in the aftermath of Hurricane Sandy, it is only a matter of time before the storm of litigation begins. With damages expected to exceed $50 billion, state and city taxpayers are certain to bear additional costs as local governments brace for a surge of storm-related lawsuits.

During the course of the storm, a construction crane attached to a luxury high rise building snapped under the severe winds and remains suspended precariously a thousand feet above the streets of Manhattan; Business Insider predicts lawsuits over lost business by nearby businesses which were evacuated. A CNBC video shows footage of the crane collapse and asks when the “blame game” will start foreseeing an “avalanche” of lawsuits following this disaster. Another video from Fox news asks what crazy multi-million dollar lawsuits will come from this tragedy.

Fortunately, those in need of an outrageously high-interest loan to finance a jackpot lawsuit are in luck: at least one lawsuit lender is still up and running, and was quick to put out an “alert” that their services were not interrupted.

Sharks Strike Brooklyn Yet Again

After netting a paltry $111 from his $150,000 settlement, Elwin Francis of Brooklyn has filed a lawsuit against his lawyers seeking compensation for not looking after his interests, the New York Law Journal reports (subscription required).  His attorneys took to 33% of the settlement for their contingency fee, while an astonishing $98,415 went to litigation finance companies; Francis had borrowed an estimated $27,000 from two companies since his injury in 2007. Over the 5 year course of the litigation process, the interest costs on the loans grew to over 260% of the amount borrowed.

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.  Lawsuit lending companies claim that because the borrowers are not required to repay if they do not win their case, their product is not considered a loan but an investment;  creating a loophole to avoid consumer protection laws and to lure in vulnerable New Yorker’s who otherwise cannot survive financially.

“Advancing money against future lawsuit winnings is a murky and largely unregulated business”, the NY Post noted in December 2011 when another Brooklyn man was left owing $116,000 for a $4,000 lawsuit loan.

With little regulation and the ability to entice consumers into high interest contracts, Francis feels he was misled and his lawyers should have made him aware of the implications of his funding agreements in conjunction with his settlement.  He also claims he was never made aware that he had nothing to lose by going to trial – and that if he lost, he would not have to pay back the litigation funding.

“Lawyers need to be held to a reasonable standard of care when it comes to these funding agreements. They need to put their clients’ interest first,” Francis’s Lawyer was quoted.

Lawsuit lending compromises the integrity of the civil justice system, takes advantage of those most vulnerable, and incentivizes frivolous lawsuits. Recently, Colorado Attorney General John Suthers ordered lawsuit lenders in to comply with the state’s consumer protection laws. Nebraska, Maine, and Ohio have enacted legislation to limit the practice;  Maryland fined Oasis Legal Finance $105,000 and threatened to sue the company for violating usury laws. So far, New York lawmakers have failed to address the issue – our legislators must take action and pass legislation to restrict or prohibit lawsuit lending to protect our citizens from this growing threat.

Denver Lawsuit to Make Decision on Lawsuit Lending

A recent article in The Denver Post highlights a lawsuit which will soon determine if firms advancing money to plaintiffs must register as lenders.    The manipulative lawsuit lending industry, also known as non-recourse civil litigation advance contracts, provides a way for plaintiffs to borrow off their potential settlements, prior to and judgment actually being made – but at a steep cost.

“It skews the legal process,” said Bryan Quigley, a spokesman for the U.S. Chamber of Commerce’s Institute for Legal Reform, is quoted in the article. “It skews the whole decision-making process in lawsuits about the value of cases, when to settle a case.”

New York is target to these deceptive practices, a Brooklyn man came forward recently owing $116,000 on a $4,000 loan.

LRANY is fighting to spread awareness about lawsuit lending and stop these lawsuit loan sharks before they prey on more New Yorker’s.