Sunday, January 23, 2011

Lawsuit Loans

Interesting article from the New York Times on services that offer loans to litigants and the high interest rates typically charged: Lawsuit Loans Add New Risk for the Injured, by Binyamin Appelbaum.  The article discusses the movement to subject such loans, and their high interest rates, to regulation.  Of course, if the interest rates able to be charged are limited by state law, the effect may be to destroy the lawsuit loan market, because the default risk for such loans may be high enough that only a high-interest rate lending model may be profitable over the long term.  Losing such loans would be unfortunate, because litigants with meritorious cases may need access to funds while the the justice system processes the case.  Instead of regulatory capping of interest rates, why not instead rely on clear disclosure of rates in contracts, and market forces of vying lenders competing over interest rates?

BGS 

http://lawprofessors.typepad.com/mass_tort_litigation/2011/01/lawsuit-loans.html

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Comments

"Of course, if the interest rates able to be charged are limited by state law, the effect may be to destroy the lawsuit loan market, because the default risk for such loans may be high enough that only a high-interest rate lending model may be profitable over the long term" - indeed, good comments - it is important that further options remain open for funding of litigation, whether civil or in criminal defence (although it appreciated that the above example refers to high value civil litigation e.g. patent disputes).

Best,
Beltrami Criminal Solicitors Glasgow

Posted by: Glasgow Criminal Law | Feb 4, 2011 2:47:11 AM

It's refreshing to read a reasonable suggestion about the topic. ALFA (the American Legal Finance Association) already asks its members to include clear pricing schedules. What is interesting about the New York Times article is that the author does not seem to have learned about ALFA and does not seem to have reviewed any actual legal financing contracts to see whether fee schedules are clear.

Posted by: The Legal Finance Journal | Feb 24, 2011 9:24:06 PM

The applicant has offered various injury finance solutions and loans continued trial. The most popular services are ready before colonization, pre-settlement advances, non-recourse advances, personal loans, compensation fund for victims cash payments in advance and secured and unsecured structured settlements.

Posted by: Lawsuit Loans | Nov 14, 2011 4:51:25 AM

Legal funding comes with very high interest rates but at times it may be the only resource a person has to avoid foreclosure and evictions.

Posted by: legal funding | Nov 14, 2011 6:47:15 PM

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