Today: 17.08.2018
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Time to kill NY’s predatory-lending loophole.

Lawsuit-cash-advance companies currently operate in New York without rules that would protect consumers from predatory lending. Thankfully, the state Senate is looking to change that. Inspired by a series of exposés in The Post and The New York Times, the Senate Consumer Protection Committee on Wednesday is holding a public hearing to scrutinize the lawsuit-lending...
Time: 18:56     Date: 15.05.2018
Last US News - Opinion: Time to kill NY’s predatory-lending loophole. NY Post 24 - US News

Inspired by a series of exposés in The Post and The New York Times, the Senate Consumer Protection Committee on Wednesday is holding a public hearing to scrutinize the lawsuit-lending industry’s more grotesque tactics.

Lawsuit funders sniff out tragedy to cash in on misfortune. They spend heavily on advertising that targets the disadvantaged and desperate.

Companies offer money up front for pending lawsuits and claims. Funders promise “cash now,” with some offering no-credit-check approval in just one day.

But the truth is the industry is rife with unscrupulous actors looking to exploit the legal system.

Buried in the contracts, consumers find that interest is often compounded monthly, with annual rates that exceed 100 percent. People who sign these lending agreements may ultimately win their lawsuit only to take home a tiny fraction of their award — a majority of the money ends up in the pocket of the lender, and all of this comes as the victim’s attorney also gets to take a third of the winnings.

Lenders claim that because repayment is contingent on the borrower winning the case, the product they offer is especially risky and shouldn’t be classified as a loan. This allows them to charge outrageous interest rates, well beyond those allowed under New York’s consumer-protection law.

But just how risky is it? A study published last year by Vanderbilt Law found that 84 percent of claims filed in New York’s state courts are settled. Another report revealed that lenders are choosy about their targets, with one funder furnishing just 10 percent of the loan requests it received. And as the Times revealed in devastating detail, lenders and lawyers often work together to negotiate the payout.

The result is a business model that takes advantage of consumers and turns the civil-justice system into a profit center.

The Post’s Julia Marsh recently reported that two lenders are circling the estate of now-deceased Brooklyn resident Theresa Guss. LawBuck$ and MFL Case Funding allegedly demanded $2.1 million to repay loans of just $21,300, according to a lawsuit.

Meanwhile, New York’s attorney general’s office is also going after RD Legal Funding, a lawsuit-cash-advance firm accused of exploiting 9/11 first responders and brain-injured NFL players by ensnaring them in high-interest contracts with rates that court papers say reached up to 250 percent. RD has filed a motion to dismiss the claims.

The court filing alleges an unnamed 9/11 first responder was advanced $18,000 while awaiting a payout from the Ground Zero compensation fund. After six months, she allegedly owed $33,000 — an 83 percent increase in less than a year.

Sadly, as media reports have revealed, the abuse may be more widespread than just the claims mentioned here. The litigation-lending industry has stooped to pitching directly to victims of mass shootings and women with claims in the #MeToo movement. Still, consumers aren’t adequately protected under New York law.

Fortunately, state Sen. Rob Ortt (R-Lockport) and Assemblyman William Magnarelli (D-Syracuse) have introduced a bill that would protect New Yorkers from usurious interest rates by requiring the industry to comply with existing lending laws. The bill also prohibits lawyers from having arrangements to collect lucrative referral fees from lenders, which encourage frivolous filings and prolong litigation that should’ve been settled sooner.

These reports should serve as a wake-up call for Gov. Cuomo and Speaker Carl Heastie, too. Lawmakers must work together and finally subject these abusive contracts to the same consumer protections as all other lenders. This needs to happen before more New Yorkers are exploited by these legal loan sharks and become victims — again.

Adam Morey is public affairs manager at the Lawsuit Reform Alliance of New York.

Opinion

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Opinion

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Living

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Business

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Metro

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Sport

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