Massachusetts Victims of Law Suit Lenders
Massachusetts plaintiffs need to beware that borrowing money during their personal injury lawsuits can be detrimental to their pocketbooks. Victims of Massachusetts personal injury cases need also to know if and when their lawyers borrow monies to pay for experts. The lending to plaintiff industry is generally unregulated and there are reports of interest rates up to 100%! The New York Times and Center for Public Integrity undertook a study informing that interest rates on these loans generally exceed 15% and that there are approximately $1 billion of outstanding lawsuit loans at the time!
This may or may not be high, however, when the lawyer takes out the loan, the issue become whether the lawyer has advised the client of the loan. An outstanding loan on a personal injury lawsuit may have an effect on the pressure to resolve the case; certainly the client should know all of the factors that go into settlement discussions. There are also confidentiality concerns as the lawyers must give the lenders a vast amount of information before money is lent.
The history of the contingent fee agreement and financing of lawsuits is instructive. The contingent fee is a wonderful recipe for clients with serious injuries and inadequate funds to get the best lawyers. Around since the American Bar Association partially endorsed it in 1908; contingent fees became legal in all states in 1965. In 1963, using civil rights related cases, the US Supreme Court ruled that civil lawsuits are a form of free speech. In 1985, inventor Charles Hall used investor money to sue manufacturers. This was the first time a strategy was used of getting third parties to invest in a lawsuit. Seven years later a Buffalo banker founded a litigation finance company for plaintiffs. In 1997, Massachusetts became the first state to allow lawsuit lending in a Supreme Judicial Court ruling. In 2000, the ABA finally fully approved of lawsuit financing. In 2004, New York Attorney General Eliot Spitzer forced lawsuit lenders to create a code of best practices and to form the American Legal Finance Association with a goal of uniformity and high standards. In 2007, the state of Maine began to regulate plaintiff lending.
The lenders mentioned by CPI include Oasis Legal Finance, the Cambridge Management Group, Counsel Financial, in Buffalo, financed by Citigroup, Ardec Funding, a New York firm that charged 24% interest per year, Law Finance Group, of San Francisco and the Esquire band and Oxbridge Financial Group, of New York. This not meant to be an exhaustive list, nor are any of these companies necessarily harmful; in fact, they may be exactly what is needed to gain monies to obtain experts to assist in resolving the case. Our position is simply: buyer beware of the total loan, the interest rates, the payback schedule, and the experience counsel has with whatever company is used.