Don’t be Hoodwinked by Claims of Lawsuit Lending Reform
It has been said that imitation is the sincerest form of flattery. But it is the height of hypocrisy for supporters of the Consumer Litigation Funding Act, S4146B/A7655B, to adopt the language of reform when touting this bill when the truth is that it does not go nearly far enough to protect vulnerable borrowers from bad actors in the lawsuit lending industry.
On this much it appears that everyone involved in the debate agrees: Reform is desperately needed to curb the out-of-control practice of lawsuit lending, which, absent any regulations, currently enables lenders and their hedge fund backers to profit handsomely on the backs of injured and mistreated New Yorkers.
But true reform must include not only an interest rate cap that is ideally less than the 25 percent rate of criminal usury, but also disclosure of lawsuit loans – also known as third-party litigation financing – in the litigation process.
Only through this level of transparency will conflicts of interest be exposed and the integrity of the justice system preserved.
State lawmakers should not accept legislation that continues to allow – and even encourage – the status quo. To do so will come at the expense of 9/11 victims, the wrongfully incarcerated, permanently injured professional athletes with no retirement income, and thousands of everyday New Yorkers who borrow against expected legal settlements or judgements to cover everyday expenses and medical bills.
There is a middle ground where a much-needed funding stream is preserved for unbanked and underbanked borrowers while protecting them from those who are intent on loan sharking the most vulnerable and defenseless among us.
Those on the side of true reform are deeply disappointed that the Senate has passed this bill. We call on the Assembly to stand firm and refuse to be hoodwinked.
Rev. Kirsten John Foy is president and CEO of The Arc of Justice, spokesman for Consumers for Fair Legal Funding, and the convener of Faith Leaders Against Predatory Lending.
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