Lawsuit loan sharks might bite Illinois

Illinois' trial lawyer-friendly climate could get a lot warmer if my state representative, Rep. Lou Lang (D-Skokie), has his way. A special session of the General Assembly might allow the "lawsuit loan shark" industry to take off in the Land of Lincoln.

Illinois' anti-business workers compensation laws already discourage businesses from locating here--and of course it provides a reason for firms to pack up and leave--taking jobs with them.

Last week the Chicago Tribune denounced the lawsuit loan sharks in an op-ed:

The offense of "champerty" has a long history in the law, and don't let the Medieval-sounding name fool you: It's alive and well in 21st-century Illinois.

Champerty involves financing someone else's lawsuit in exchange for a cut of the payoff. The practice has expanded for more than a decade, thanks to weak laws, aggressive lobbying and an erosion in ethical standards. Nowadays, litigation money-lenders woo potential plaintiffs with TV ads inviting anyone who has been in a car accident to give a call. They make upfront loans at enormous interest rates, getting paid back only if the case succeeds.

To protect the public against predatory practices, those loans should be covered by the same laws that govern any other type of consumer lending. Instead, litigation lenders have been pushing a bill in Springfield that would give them carte blanche to pocket a huge share of judgments won by individual plaintiffs with only a pretense of regulation. The Illinois Senate has approved a version of it, and a House committee has reviewed it with an eye toward a vote in January.

The money-lenders behind this bill say they're providing a valuable service. In some cases, the victim in a personal-injury matter, for instance, might well benefit from a loan that enables him to cover medical bills or make mortgage payments before his court case concludes. But that convenience must be weighed against the high cost. Annual interest rates typically run up to 50 percent on these loans.

I have to wonder if lawsuits will be filed for a return on a loan--instead of the merits of the case.

Even in prosperous times, lawsuit loan sharks are something Illinois doesn't need.

Related posts:

Illinois' lawsuit climate among worst in the country

Lawsuit loan sharks might take a big bite out of Illinois

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