State Legislatures Consider Oversight of Lawsuit-Lending Firms


The legal equivalent of the payday loan is coming under political pressure, says the Wall Street Journal. Lawmakers in a number of states are debating whether to put new limits on the burgeoning business of lending money to people involved in lawsuits and collecting when the suits pay out. Their targets are lawsuit-lending outfits like Cash4Cases Inc., LawCash and Atlas Legal Funding. The firms, which began springing up 15 years ago, bill themselves as lifelines, providing money to down-and-out plaintiffs while their lawsuits move forward.

But critics argue that the loans—often in the low four figures—encourage unnecessary litigation that bottles up the legal system. They also say that fees amounting to as much as 100% a year are unfair to borrowers. At the heart of many of the bills are proposals to subject the lawsuit-funding industry to existing state laws that regulate the interest rates banks and other lenders can charge.

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