May 7, 2013
Beware lawsuit loan sharks
Beware: a new breed of predator is lurking in Louisiana’s legal waters preying upon unsuspecting consumers and our courts for its own financial gain.
Much like a shark drawn to a feeding frenzy by the smell of blood, lawsuit lenders prey on people when they are at their weakest, such as someone who is injured in an accident and struggling to pay medical bills or put food on the table. Using powerful, aggressive advertising tactics targeting people who are out of work and most likely in desperate financial straits, they promise consumers access to quick cash before their lawsuit is settled with seemingly no commitment. But, as is often the case, the devil is in the details.
Lawsuit lenders often offer loans to consumers with hidden fees and sky-high interest rates that can reach 150 percent annually. To put that in perspective, the average annual percentage rate on a credit card is 13.3 percent. Because of these exorbitant fees and compounded monthly interest rates, a consumer may end up with nothing once his lawsuit is settled — or worse — he could end up owing the lender more than he is awarded in the lawsuit.
The New York Times recently exposed this dubious industry highlighting people like Carolyn Williams, who borrowed $5,000 from a lawsuit lender in 2007. Three years later, her case was unresolved and she owed the lender nearly $19,000.
The bottom line is that these loans hurt consumers. They allow lenders to leverage the taxpayer-funded judicial system to line their own pockets. That’s wrong.
Fortunately, Louisiana lawmakers are considering a proposal that will help protect Louisiana consumers and our courts from lawsuit loan sharks. Senate Bill 166 by Sen. Dan Claitor from Baton Rouge will impose a cap on the fees and interest rates that such lenders could charge.
With more than a dozen lending companies already operating in Louisiana, the time has come to regulate this questionable industry. That’s why SB 166 has garnered broad and diverse support from business and legal organizations and even many in the trial bar. In addition to the Louisiana State Bar Association, this common sense measure has been endorsed by the Louisiana Chapter of the National Federation of Independent Businesses, the Coalition for Common Sense, the U.S. Chamber Institute for Legal Reform and the American Tort Reform Association.
The bottom line is that Louisiana consumers deserve these protections, and lawmakers should vote “yes” on SB 166.
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