Advocates in New York are calling for changes to the lawsuit lending industry, pointing to high-interest rates that exceed usury laws and take advantage of loopholes in existing regulations meant to protect consumers.
The proposal is meant to address cash advances on lawsuits in which people in need of cash borrow against future legal settlements to cover expenses like medical bills. But the interest rates that come attached to repaying these loans can be financially damaging.
Business organizations and advocates this week are announcing the formation of a coalition called Consumers for Fair Legal Funding to push for changes.
Among those calling for changes is the Rev. Kirsten John Foy, who was a victim of lawsuit lending practices.
“As a victim of lawsuit lending, I know firsthand the financial and emotional toll this insidious practice can take,” Foy said. “We cannot achieve the governor’s goal of a ‘better, fairer, and more inclusive New York while some of the state’s most vulnerable residents are targeted by unscrupulous lenders who turn an outrageous profit on their pain and suffering.”
The coalition is focusing on regulating the lawsuit lending industry in which some borrowers have reported paying more than 100% in annual interest.
“I have not previously spoken publicly about this embarrassing and hurtful experience,” Foy said. “But I want others who have fallen prey to these unscrupulous lenders to know that they are not alone. It is time for Albany to regulate lawsuit lending and provide greater transparency and protection for those who need cash in the short-term and choose to go this route.”
The coalition backing changes has the support from organizations like the Bodega and Small Business Group, as well as UpState New York Black Chamber of Commerce and the Business Council of New York State.
“The UpState Black Chamber of Commerce sits at the intersection of racial equity and economic justice and is dedicated to advocating for policies that promote small business growth and addressing the challenges of Black business owners,” said Anthony Gaddy, the co-founder and president/CEO of the UpState New York Black Chamber of Commerce. “Lawsuit lending falls squarely in our wheelhouse, as it not only disproportionately hurts those without a financial safety net – often Black and brown New Yorkers who are under-banked and without the ability to access traditional loans - but also creates undue burdens on entrepreneurs who are often the targets of litigation."