St. Louis Record

Friday, December 6, 2019

Competing litigation lending bills sets apart industry interests from consumer protection

By Ann Maher | Mar 5, 2018

Law money 05

JEFFERSON CITY - Competing bills under consideration in the Missouri Senate propose different ways of overseeing a growing practice in the legal profession - litigation lending to people who want upfront payment while their cases play out in court.

One of the nation’s leading lenders, Oasis Legal Finance, pitches it this way to those visiting the homepage of their website:

"Injured in an accident that wasn't your fault? Behind on bills waiting for your case to settle?

Make Ends Meet: Get cash today - if you don't win your case, you don't pay us back.

Apply in Seconds. It's Free!"

Former two-term state senator Kurt Schaefer, now a lobbyist for Lathrop Gage in Jefferson City, seeks to advance SB967 - a bill crafted for the interests of consumers.

Schaefer, who's also a lawyer, said the measure would regulate the relatively new "wild west” to eliminate predatory lending. Among other provisions of the bill, it would cap interest rates at 17 percent and regulate them like any other kind of consumer loan.

"We see this in the context of tort reform...the playing field is uneven" for the plaintiff-consumer, Schaefer said.

Critics of the industry also say third party funding has the potential to treat defendants named in litigation unfairly because plaintiffs with weak cases might continue pressing forward as they could be on the hook for the amount that was loaned to them – plus high interest rates.

Schaefer said that it's a pressing issue that has come up in the past, but the fact that the industry is sponsoring its own bill - SB957 - indicates litigation lenders are wanting to pre-empt any attempt at regulation.

The litigation lender bill, supported by lenders such as Oasis, wants the industry to be treated like cash advance-type businesses.

Schaefer said that under SB957 lenders would have to register with the state Department of Insurance – which has little or no regulatory teeth.

He also said the industry bill places no limits on interest rates charged or assignments initiated, and that loans can be bundled and sold.

It further provides that lenders get paid quickly:

“Once the consumer legal funding company confirms in writing the amount due under the contract, the consumer's attorney shall pay, from the proceeds of the resolution of the legal claim, the consumer legal funding company the amount due within ten business days,” SB957 states.

Schaefer said the trial bar “has not truly weighed in on” litigation funding.

“Many have differences of opinion,” he said. “Most lawyers are not really engaged in this issue. It creates ethical issues. When you are a lawyer you have an absolute obligation to the client, but when you introduce a financier they want information about the case. Do they get to intrude at such a level?”

“Now you have a third party that has to get a certain amount…there might be a conflict.”

Schaefer said eventually a compromise between the two bills could be reached.  

“I think the legislature takes consumer protection seriously,” he said.

Oasis and other litigation lenders have had their share of push back.  

In January, Oasis and LawCash were ordered to pay in excess of $2 million to settle claims they charged Colorado consumers excessive interest rates.

Colorado Attorney General Cynthia Coffman announced the settlement saying it was reached in the form of a consent judgment out of Denver District Court which required the lenders to collectively pay a total of $2,328,511 in redress.

The legal action began with a suit that Oasis and LawCash initiated against Coffman claiming that their transactions with consumers were not loans as defined by Colorado law.

But an earlier decision by the Colorado Supreme Court had established that transactions between litigation lenders and litigants were in fact loans, and that those loans were subject to Colorado’s interest rate limits and other consumer protections.

Want to get notified whenever we write about any of these organizations ?

Sign-up Next time we write about any of these organizations, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

Lathrop & Gage LLPOasis Legal Finance, LLC