It’s no secret that the words “champerty” and “usury” are frequently used in legal ethics opinions regarding the non-recourse lending industry. The New York Attorney General and others have probed this section of the litigation finance industry time and again, and the debate continues on whether legislatures should cap non-recourse lending agreements. Still, little has been done to protect plaintiffs when they have exhausted their funds during litigation and need financial help.
A 2017 case is taking a closer look at the line that many for-profit, non-recourse lenders walk when they fund plaintiffs. In a U.S. District Court in New York, the Consumer Financial Protection Bureau is alleging company RD Legal Funding, LLC misrepresented its practices and cost borrowers millions of dollars.
According to the complaint, RD provided advances to first responders to the 9/11 World Trade Center attack as well as former NFL players suffering from brain injuries. Although these individuals are recipients of funds resulting from lawsuits or victim compensation funds, not all the money was immediately available to them after their claims concluded. In the meantime, RD offered a “deal”: RD would provide upfront financial assistance. Once their awards came in, the plaintiffs would pay it back.
Sounds too good to be true? There was a catch. The complaint says that the total amount to be repaid to RD was staggering compared to the original advance — sometimes twice as much or more. RD falsely marketed the transactions as “assignments” and falsely claimed that it could “cut through red tape” and expedite funds to the plaintiffs. The complaint also claims that RD was either collecting on contracts that are void under state laws or offering loans with interest rates that exceed state-law usury limits.
This situation, like many others, puts plaintiffs on the hook for a lot of money when it’s time to pay it back; in many cases, more money than the plaintiff may even receive from their lawsuit. It’s exactly why we founded the Bairs Foundation and launched our “What is Just” campaign this year — to be an example of fair litigation funding. Our pre-settlement advances at 7% simple interest help individuals and families cover daily living expenses without financially ruining them after litigation.
Our foundation’s mission is to develop a sustainable model of fundraising and non-recourse lending as a nonprofit in order to serve to the civil justice community. To learn more about the Bairs Foundation and find out how you can help, please visit: www.bairsfoundation.org.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).