Loans for Lawsuits
There has been a significant rise in the lending to plaintiffs over the past few years, but unfortunately this industry is largely unregulated and able to ignore laws that protect people who borrow like most other kinds of lenders.
Larry Long was debilitated by a stroke while on the pain medication Vioxx. He was also facing eviction from his home in Georgia in 2008. With stacking medical bills, Long borrowed $9,159 from Oasis Legal Financial. He pledged that he would pay back what he had borrowed from whatever he recovered of the lawsuit he had against the manufacturer of Vioxx. Once Long had eventually settled and received his first check for $27,000, he owed Oasis $23,588, just under the entire sum.
This loaning industry is unrestrained by the laws that cap interest rates. Most frequently the rates they charge are above 100 percent a year, according to The New York Times and Center for Public Integrity. Many people are misled by what they see and the numbers are often not clear enough for the desperate men and women who are in need.
Because the lenders are not required to repay the money if they lose their case, the lenders claim that it is not a loan. They call these loans for lawsuits transactions investments, advances, financing, or funding. In December a suit was filed against Oasis and LawCash from Colorado. Now Oasis and LawCash are filing suits against Colorado in an effort to prevent the state from using lending laws to regulate their industry. Their claim is that lawsuits can be very risky to invest in and they must charge high prices to compensate.
There are many other stories where plaintiffs in very stressful financial cases have been wired money almost immediately unaware of the high cost and interest associated with them, leaving them more hopeless than they were before. Unfortunately, many states have nothing in place to protect these people. In some states such as Michigan, New York, and North Carolina they have had rulings that the borrowers did not need to repay the loans because the apparent risk did not justify the outside prices, but still in many states it has been describe predatory lending as legal.
The best thing to do is to whatever it takes to stay away from these lawsuit loan companies. Even though it seems that there is no other place to turn, it could leave you in a worse place than you were before.
Source: The New York Times, “Lawsuit Loans Add new Risk for the Injured,” Binyamin Appelbaum, January 16, 2011.