Lawsuit loans for your accident injury claim are costly. As a Cincinnati attorney practicing personal injury law, I have
had clients ask me about these Advance Lawsuit Funding loans. In a word they are costly, very costly. These are not your normal loans from a bank. Just what are they then?
Advanced Lawsuit Funding Loans Defined
Alternative litigation finance is providing money by non traditional sources to civil injury victims or others with lawsuits for money to pay living expences or support lawsuits. What I am particularly referring to here is where an injured person needs money for medical expenses or living expenses while their injury claim, settlement or lawsuit is pending. In Ohio the term is called non recourse civil litigation advance and is defined by statute. R.C. 1349.55 paraphrased defines a non recourse civil litigation advance as: a transaction...cash payment to a consumer with a civil claim in exchange for the right to get an amount out of the proceeds of the settlement.
Obscenely High Interst Rates For ALF
By these vehicles providers advance money to people who have pending claims, usually personal injury. The injured party agrees to pay back the money at a very high rate of interest. This is normally much higher than any bank interest rate or even credit card. The money is to be paid out of the proceeds of the accident injury claim. So if the injury claim fails and no money is recovered then the advance does not have to be paid back. An advisory opinion for the State of Ohio states that a lawyer may suggest this vehicle to a client that is in need of money. It says in pertinent part, "a lawyer who is aware that his client needs financial assistance due to the injuries sustained in the underlying accident should make the client aware of the options available." The problem is that these advances often call for 50% interest or more on the amount of the loan to be paid if repaid in the first six months and can go higher as time goes on. The Center for Public Integrity has published several articles on this practice.* They also commented on the background of these advances in Ohio. In fact these advances were illegal according to the Ohio Supreme Court until the legislature passed a law allowing it. The Center's article told the story of Larry Long a stroke victim facing eviction who borrowed $9150 against his Vioxx case. When he got his lawsuit money of $27,000 just 18 months later he owed $23,588.00. Then there was Ernst Kho that was "advanced" $10,500 and two years later owed $35, 939.00 So be careful . Be very careful. Explore other sources of funding before you even think about these lawsuit advances. Can you get a bank loan? Can you take out a second mortgage on your house. Would it be cheaper to get a cash advance on your credit card? Can you borrow the money from a family member. Can your attorney write a letter of protection for your bills or even your rent?
So Why Does Ohio Permit a Formerly Illegal Activity to be Sanctioned
It's funny how the law changes . Cynics would say follow the money. Why else would the legislature permit exorbitant non capped interest rates on lawsuit advances but allow caps on damages for personal injury claims. If this is the bone throne to injury victims by the Ohio state legislature I say don't do people negligently harmed by others any more favors. The Center For Public Integrity wrote about how the Ohio Supreme Court in Rancman v Interim Settlement funding found these loans to be illegal, but then the Ohio legislature legalized them. Lobbyists descended on the Ohio legislature but no one knows how much money was spent on them as no law in Ohio reqiures this disclosure. No one in the legislature opposed the bill. this is its sponsor's Lou blessing's justification that it must be a good thing.
This is just my opinion and no legal advice to anyone. If you are seriously injured get a free consult from an experienced injury lawyer about what you might want to do. It's not for me to say as your situation is unknown to me . Just my two cents is that these litigation advances normally come with super high paybacks. So high that by the time you resolve your claim you may owe everything to the provider. Sources and Resources: States are battleground in drive to regulate lawsuit funding http://www.supremecourt.ohio.gov/Boards/BOC/Advisory_Opinions/2012/Op_12-003.pdf American Bar Association informal Report on Lawsuit Lending