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Pre-settlement lenders say rate cap could doom industry

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Representatives of businesses that provide pre-settlement funding to plaintiffs said they would be forced out of Indiana by a proposal to cap their returns at 25 percent, after which a House committee advanced a bill that would do just that.

The House Insurance Committee on a 10-2 vote advanced House Bill 1205 that for the first time would regulate cash advances for plaintiffs who have cases pending. The bill defines the business as “civil proceeding advance payment transactions.”

Supporters of HB 1205, including bill author and Insurance Committee Chairman Rep. Matt Lehman, said the bill is aimed at curbing abuses of an unregulated industry in which some plaintiffs have been charged fees equal to annual interest rates of 150 percent or more.

Industry representatives said they back regulation, but that the bill’s proposed maximum return of 25 percent more than an advance – for instance, a $12,500 payback on a $10,000 advance – would put them out of business in Indiana.

Representatives of Oasis Legal Finance and others testified that the industry provides needed cash for plaintiffs facing financial hardship ahead of settlement of their cases. They said the transactions aren’t loans because nothing is owed if a plaintiff doesn’t win a case or receive a settlement. Fees charged reflect the risks of a business in which 10 to 20 percent of advances are losses, they said.

An Oasis representative said the legislation was “an insurance protection bill, not a consumer protection bill.”

But insurance and business groups said the bill is needed to rein in what they said is a predatory business that can deprive litigants of their settlements and prolong litigation.

A State Farm Insurance representative acknowledged the need, but said nothing justified triple-digit interest rates. He also said litigation should “not be turned into a stock market for investors.”

Lehman said after the bill advanced that the 25 percent cap was negotiable.   






 

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  1. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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