New law causes legal funding companies to exit Tennessee
A new law regulating lawsuit lending in Tennessee became effective July 1, 2014. The law, the first in the nation, restricts the industry by imposing a 46 percent cap on interest. In addition, the legislation included two other provisions designed to drive the industry from the state.
Lawsuit lending, also known as a litigation advance or pre-settlement funding, provides individuals involved in a lawsuit with an advance on their future settlement so that they can pay bills and other expenses while they’re waiting for their lawsuit to settle. The money isn’t used for legal expenses and is only repaid if the lawsuit is successful.
Proponents of the legislation believe they’re protecting the poor during a vulnerable time. However other legislators disagree.
“Intent of this bill is not to help poor people. The intent is to hurt poor people,” said Rep. Vance Dennis, R-Savannah, arguing against SB-1360. “I despise it.”
Rep. Dennis further stated that the intent of this legislation is to put an industry out of business and keep money in the pockets of insurance companies because the poor desperate people will be forced to settle their lawsuit for less money.
Harvey Hirschfeld, Chairman of the American Legal Finance Association stated, “The enactment of this industry killing bill means the end to the consumer legal funding industry in Tennessee. As many of our members who operate businesses in Tennessee have indicated to us, they have begun the process of notifying consumers and employees that they will be winding down their Tennessee operations at the beginning of this summer.”
According to consumer legal funding industry sources, the law would effectively force the industry to operate at a loss.
The legislation, sponsored by House Speaker Pro Tempore Curtis Johnson, R-Clarksville and Sen. Jack Johnson R-Franklin, was signed into law by Gov. Bill Haslam in April.
Sources:
http://knoxblogs.com/humphreyhill/2014/04/03/lawsuit-lending-bill-approved-debate-exploiting-desperate-vulnerable-citizens/
http://knoxblogs.com/humphreyhill/2014/07/01/new-law-prompts-lawsuit-lending-business-leave-tn/