JEFFERSON CITY – The state’s oldest business organization has expressed its support for reigning in the litigation finance industry.
Ray McCarty, president and CEO of Associated Industries of Missouri, said that litigation financing, which involves third parties issuing loans to plaintiffs in exchange for a percentage of the jury award, has not created a problem in the state yet but a number of issues that negatively impact consumers should be addressed.
“It is very important to realize there are different types of organizations that may [cause confusion] when talking about 'litigation funding,'" McCarty said. “On one hand, you have attorneys or other firms that provide funding to a plaintiff for legal expenses, pending the outcome of the case. I don't know that is a huge problem in Missouri yet, and we would support addressing that problem as we do not want to encourage people to file more lawsuits with little or no risk.”
Associated Industries of Missouri President and CEO Ray McCarty | Photo courtesy of Associated Industries of Missouri
He further explained that “there are other types of firms that are sometimes confused with such litigation-funding firms.
“This second type of firm may provide a loan to a person that is involved in a lawsuit to help with personal expenses – not legal expenses,” McCarty said. “The loans provided incur interest. In some of these loans, I understand they may not need to be repaid if the settlement never materializes, making them more attractive for an individual that may have had a car accident or similar type of claim and is needing help with their personal expenses that continue while they recover: rent, car payments, etc. This second type of firm is not involved in funding class action litigation or making loans for legal expenses in other lawsuits.”
Missouri is among the handful of states that have attempted to regulate third-party litigation lenders. Earlier this year, lawmakers on Capitol Hill introduced the Litigation Funding Transparency Act in an attempt to get complainants to disclose that they have obtained third-party funding.