The perils of lawsuit loan sharks

But does a good lawyer need a lawsuit loan shark?

My state representative, Lou Lang (D-Skokie), sponsored a bill that would legalize what is called the "legal loan shark" industry in Illinois. It passed in the state Senate, but the House voted it down.

The Sarasota Herald-Tribune tells us why lawsuit loan sharks are a bad idea:

Larry Long, debilitated by a stroke while using the pain medicine Vioxx, was facing eviction from his Georgia home in 2008. He could not wait for the impending settlement of a class-action lawsuit against the drug’s maker, so he borrowed $9,150 from Oasis Legal Finance, pledging to repay the Illinois company from his winnings.

By the time Mr. Long received an initial settlement payment of $27,000, just 18 months later, he owed Oasis almost the entire sum: $23,588. Ernesto Kho had pressing needs of his own. Medical bills had piled up after he was injured in a 2004 car accident. So he borrowed $10,500 from Cambridge Management Group, another company that lends money to plaintiffs in personal-injury lawsuits. Two years later, Mr. Kho, a New Jersey resident, got a $75,000 settlement — and a bill from Cambridge for $35,939.

The business of lending to plaintiffs arose over the last decade, part of a trend in which banks, hedge funds and private investors are putting money into other people’s lawsuits. But the industry, which now lends plaintiffs more than $100 million a year, remains unregulated in most states, free to ignore laws that protect people who borrow from most other kinds of lenders.

Unrestrained by laws that cap interest rates, the rates charged by lawsuit lenders often exceed 100 percent a year, according to a review by The New York Times and the Center for Public Integrity. Furthermore, companies are not required to provide clear and complete pricing information — and the details they do give are often misleading.

Welcome to a Judicial Hellhole



Travis Akin, the executive director of Illinois Lawsuit Abuse Watch, told the Madison Record, "The lawsuit loan shark legislation would have only added to Illinois' already growing reputation as a magnet for lawsuit abuse."

And what a reputation it has. The American Tort Reform rankings lists Cook County, Illinois as one of its six Judicial Hellholes. Madison and St. Clair counties in southern Illinois are Judicial Hellhole watchlist jurisdictions.

High taxes, corrupt politicians, and lawsuit abuse.

Start the engine on your U-Haul vans, my fellow Illinoisans.

UPDATE: 3:35PM Rep. Lang commented in my post that such loans are legal, he wants to add regulations. True on the first one, but I believe the practice should be banned and included in top-down tort reform legislation in the state.  

Related posts:

Thank you, state Senator Ira Silverstein; Lou Lang disappoints
Lawsuit loan sharks might bite Illinois
Illinois' lawsuit climate among worst in the country
Lawsuit loan sharks might take a big bite out of Illinois

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