Georgia Appeals Court Rules Legal Funding Not a Loan

The Georgia Appeals Court ruled on June 27, 2017 that Legal Funding is not a loan under the Georgia Industrial Loan Act (GILA)

The Court stated Unlike loans, the funding agreements do not always require repayment. Any repayment, under the funding agreements, is contingent upon the direction and time frame of the Plaintiffs’ personal injury litigation, which may be resolved through a myriad of possible outcomes, such as settlement, dismissal, summary judgment, or trial.

 

This is a win for consumers in Georgia and across the country.

The Long, Troubled History of Insurance

The concept of insurance has existed for thousands of years, dating back to early societies like the Babylonians, Greeks, and Romans. Modern insurance developed over the last few centuries, and began to reveal some of the pitfalls facing consumers. Those troubles have persisted over the last few decades, as the insurance industry has changed drastically, arguably becoming less consumer friendly.

Modern insurance began to take shape in 17th century Europe, in the form of property, business, and life insurance, mainly protecting against fire damage. But this first foray into comprehensive coverage wasn’t without its flaws. Insurance carriers would supply the insured with branded cards indicating they would be protected. However, during this period insurance carriers actually employed their own private fire departments, which would often ignore burning buildings if the owners couldn’t immediately verify they maintained a policy with the company.

In the 19th century, railways paved the way for accident insurance to address an increase in passenger fatalities. According to these policies, passengers would receive basic accident insurance along with their tickets. Still, second- and third-class passengers were required to pay higher insurance premiums because insurers considered them high liability.

Fast forward once more to the 1990s and the sea change that took place when private companies went public. These new big insurance companies became trillion-dollar entrenched defendants, making it difficult for consumers to fight for fair settlements. Data shows how insurers took a systematic approach to delaying and denying claims settlements in an effort to turn claims, once viewed as cost centers, into profit centers. According to A.M. Best data, in 1987 insurance companies paid out 71 cents of every premium dollar paid, but by 2014 payouts had dwindled to 57 cents of every dollar. Insurance companies figured out they could often get away with lowball, early-settlement offers when customers needed quick cash.

The historic timeline of insurance shows how insurers have maintained a big advantage over individual consumers. Even today, many Americans live paycheck to paycheck, and studies like this Harris Poll-Oasis Financial survey show many don’t have enough saved to cover an emergency.

That’s why consumer legal funding continues play a vital role for consumers across the country. Funding provides consumers the wherewithal to hold out for a fair offer from an insurance company. It also provides a lifeline to cover living expenses, medical bills, and other costs that lowball early-settlement offers often don’t. Consumer legal funding remains one of the best tools to fight for what’s fair and to level the playing field with insurers, who have historically held the upper hand.

Advantage of Consumer Legal Funding, your credit doesn’t matter.

A recent report stated that 45 million Americans are living without a credit score. This can make it virtually impossible for those Americans to get the financial assistance they may need when they are a financial bind due to an accident that was not their fault.
That is where consumer legal funding comes into place. A credit score never comes into play when determining if you will receive consumer legal funding from a company. What the consumer legal funding companies look at is if you have a valid legal claim and are represented by an attorney. The fact that you may or may not have a credit score or what that score is does not matter.

consumer legal funding

ARC Advisory Council Member Writes LAW 360 Article on the Importance of Free Markets

Jeremy Kidd, a law and economics scholar at Mercer University’s Walter F. George School of Law, recently scribed an article for the legal publication Law 360 discussing how anti-market, pro-business protectionism is threatening American democracy.  In the article, he describes the difference between supporting pro-market ideologies established by free market theorist Adam Smtih and supporting pro-business initiatives that forward the interests of specific businesses and hurt consumers in the process.

In the article, he describes the difference between supporting pro-market ideologies established by free market theorist Adam Smtih and supporting pro-business initiatives that forward the interests of specific businesses and hurt consumers in the process.

Kidd calls out the U.S. Chamber of Commerce for pushing the business interests of their top donors–many massive insurance company backers–to the detriment of consumers.

In recent years, the Chamber has advocated for a ban on the use of consumer legal funding in states across the country, which could leave many personal injury victims without financial options when trying to pursue a fair claim. Consumer legal funding helps families replace lost income now, after an accident, so that they can meet basic household needs until their case settles.

From the article:

It is difficult, if not impossible, for victims to hold insurance companies accountable when victims must accept an insufficient settlement offer in order to avoid starvation, eviction or inability to obtain medical care. As in so many other areas of our lives, financial intermediaries have arisen to correct this market imperfection.

Kidd, who is a member of the ARC Advisory Council, is also one of the nation’s leading experts on the topic of consumer legal funding. His latest paper on the topic, Modeling the Likely Effect of Litigation Financingwhich was published last year.

Check out the article on Law 360’s site HERE.

Read the full text HERE.

financially fit

Taking It To the Next Level—ARC Launches Financial Literacy Tool to Mark Financial Literacy Month

The Alliance for Responsible Consumer Legal Funding (ARC) is proud to announce the launch of a new website called Financially Fit in honor of National Financial Literacy Month, which is observed in April every year. Financially Fit a user-friendly financial resource site for people who are facing a financial crisis after an accident or injury, or who simply want to move toward long-term financial wellness.

To develop the site, we partnered with our ARC member companies and Money Management International (MMI), a well-respected 501 (c)(3) non-profit credit counseling service that has been serving consumers since 1958. Members of our Advisory Council were also integral to the site’s development.

ARC is committed to promoting practices and regulations that lead to consumer’s informed decisions about their finances.

We believe that informed decisions start with financial education.

The site entered beta testing on December 1, 2016. Since then it’s garnered over 3,000 visits and more than 650 people have called MMI for free 1-on-1 budget counseling through the site.

We are excited to share this resource, to take our engagement with consumers to the next level. We hope that it will provide the tools necessary to get visitors on the path to financial health.

consumer legal funding

Rob Johnson’s Biting Response to U.S. Chamber’s Lisa Rickard

The hypocrisy of the U.S. Chamber of Commerce’s stance on regulation can sometimes be hard to stomach.

The organization is known for their firm opposition to regulations on businesses, lobbying for de-regulation at every turn, citing harm to the market and the economy. However, they are happy to push to impose regulations on small business if it’s in the interest of their members—huge insurance companies like State Farm and Allstate—unconcerned that it would hurt everyday people in the process.

In a recent op-ed out of Alabama, U.S. Chamber Institute for Legal Reform president, Lisa Rickard, derides consumer legal funding (which she intentionally mischaracterizes as “lawsuit loans”) by spouting glaring falsehoods (too many to even address properly in one blog), slinging mud, and pushing a bill that would hurt consumers in that state.

ARC Executive Director Rob Johnson just wrote a measured but biting response in The Gadsden Times titled “More bureaucracy, less choice? What is U.S. Chamber thinking?” calling out the Chamber for being so out of touch with the people of Alabama—and people across the country:

The November election revealed an overwhelming tide of people who felt left behind by the system and invisible to policymakers. These are people who go to work every day and just want to forge the best lives they can for their families. The voice of Alabamans rang loud and clear — they want less government, not more bureaucracy. They want more choices for their families, not fewer… Overregulation is not consumer protection. It’s just out of touch with the voices of voters and leaves people behind.

It’s recommended reading for President Rickard.

The legislation she is pushing for her industry backers is not only a wolf in sheep’s clothing, but goes against the sentiments just expressed by Alabama voters in November. It’s a good thing legislators have been good shepherds the last few times she’s tried to hurt their Alabama constituents.

Check out Rob Johnson’s response HERE.

Gorsuch consumer legal funding

Supreme Court Nominee Brings National Attention to the Cost of Delay in Judicial System

On day 2 of U.S. Supreme Court nominee Judge Neil Gorsuch’s Senate confirmation hearings, Judge Gorsuch did something important—he laid out the cost of delay in the judicial system on a national stage.

The costs are high. Delay puts justice out of reach for many Americans that can’t afford to sustain themselves during extended litigation.

Gorsuch consumer legal funding

Judge Gorsuch brought attention to this fact during Sen. Mike Crapo’s (R-Iowa) line of questioning (see 9:48:50). He talked about Americans’ Seventh Amendment right to trial and the access to justice issues that plague the system, lamenting that it can be difficult litigants to get a jury trial because so much time is spent in discovery. “Lawyers become poets of nastygrams…I’m not sure that’s a good thing” said Gorsuch.

“When it gets so expensive and takes so long to get to a jury, to get to a trial… defendants sometimes you feel like you have to settle, not because the case has merit, but the cost and the delay to the client are so significant in getting to a decision, that you can’t afford to do it. You’ve got to get on” he said, adding that it’s a major issue needs to be addressed.

Our legal system operates on a timetable that isn’t friendly to everyday citizens, which undermines equity. Delay weakens the justice system.

scales of justice consumer legal funding

Fifteen years ago, consumer legal funding emerged as a solution. In most jurisdictions, regular people can use consumer legal funding to pay for daily household needs as their valid legal claim makes its way through the system. Funding doesn’t go toward the cost of litigation—retaining an attorney, court costs and fees, etc.—only for personal expenses, ensuring that funding increases equity while avoiding additional burden on the system. It gives people a chance to seek a fair resolution.

Professor Jeremy Kidd wrote in a recent Law 360 article that “when legitimate claims are brought and justice served, it can actually benefit the economy by deterring bad and inefficient behavior.”

Judge Gorsuch shined a bright light on the issue, showing the negative effect delay can have on meritorious claims, to the detriment of our democracy. Ensuring equity in the system is of significant importance.

The Danger of Using Credit Cards During a Legal Claim

Cycle of debt—three little words that strike fear in the hearts of every financially independent adult. It’s something that we all work hard to avoid. We all want to be Beyoncé when it comes to money.

Beyonce

 

But with 73% of us living paycheck-to-paycheck, it’s something that is oh so easy slip into.

Cycle of Debt

And a cycle of debt can be crippling, not only because of the continued bite it takes out of your paycheck, but because it can put you one illness, accident, or job loss away from badly damaged credit, collections, and even bankruptcy.

That’s why using a credit card can be so dangerous if you don’t have a guaranteed, steady, and robust income.

Here’s an example:

Say you take out a credit card with 26% interest and charge $2,000. If you make the standard 4% minimum payment—$80 every month—it will take you 10 years and 6 months to pay off in full.

Credit card payoff 1

Another example:

You have credit card with 36% interest and charge $2,000. If you make the standard 4% minimum payment—$80 every month—it will take you a whopping 17 years and 9 months to pay off in full.

Credit card payoff 2

Now, that’s IF you can make the monthly payments in full EVERY MONTH. Sometimes that is a hard thing to guarantee.

Accidents, for example, can cause injuries that can threaten a person’s ability to go to work and earn a living as they usually do. Some people just need time to recover, others need surgery. Still others are injured permanently and need to either change careers or are unable to work at all.

And being compensated after an accident can take time. The more severe the injuries, the longer an insurance or legal claim is likely to take to reach a settlement.

That leaves people in a bind, and unable to make ends meet.

Grumpy-Cat

According to a recent Harris Poll survey, 62% of Americans would struggle to meet BASIC HOUSEHOLD NEEDS without 3 months of income.

So what do you do? Put it on a credit card?

Maybe, but that can be very dangerous if you’ve been in an accident, are pursuing a legal claim, and don’t have regular income. One missed payment and can damage your credit and put you on the road to bankruptcy. People often take out loans to pay off other loans, creating a cycle of debt.

Bankruptcy

That’s why maintaining access to consumer legal funding is so important.

Consumer legal funding gives people a choice to replace lost income now by selling a small part of their future anticipated recovery. Because it’s a purchase, it doesn’t create debt, isn’t connected to consumer credit, and can never put someone in collections or bankruptcy.

There’s no monthly payment, which is great when there is no other income coming in. And all costs are spelled out in dollars and cents—no interest calculations. All payments come from the settlement, so if something goes wrong with a case, nothing has to be paid back—even the funding. Nothing.

It’s a product specifically designed to help people in this situation, and something that is much safer for consumers than putting expenses on credit cards.

People should have options to avoid cycles of debt. Consumer legal funding is one of those necessary options.

 

Source: Credit card payoff calculations made with Bankrate.com’s online calculator.

consumer legal funding

The Austin Lawyer: Hulk Hogan and Gawker Expose Many to Litigation Finance

In this can’t miss article, Texas attorney Eric Woomer talks about the highlights of a headline-grabbing year for litigation finance and breaks down the differences between litigation finance and consumer legal funding.

The big difference? “…the money goes to everyday people to meet basic living expenses, not to fund any litigation or pay legal bills.”

More from the article:

Funding is provided on a contingent basis, like with litigation finance, and can help plaintiffs see their day in court even if they don’t have oil money.

Most people who use it are pursuing a fair claim settlement from an insurance company after a car accident, and are out of work due to their injuries.  With 76% of Americans living paycheck to paycheck, many have found it hard make ends meet while letting the legal process work.

Professor Jeremy Kidd from Mercer University, one of the ARC Advisory Council members is referenced:

Some critics will rail against all legal finance resources alleging that funding of cases will increase litigation, encourage frivolous lawsuits, and hurt the economy. Yet, these assertions conflict heavily with Kidd’s 2015 research.  Regarding consumer legal funding, Kidd concluded that “when legitimate claims are brought and justice served, it can actually benefit the economy by deterring bad and inefficient behavior.”

Read the article HERE (page 21).

consumer legal funding

Big-Time Litigation Funding vs. Consumer Legal Funding—Advisory Council Member Writes on Hulk Hogan, Gawker, and Peter Thiel

Last month, ARC Advisory Council member Jeremy Kidd was published in Law 360 with an article that illuminates the differences between litigation funding—like was recently seen Hulk Hogan’s case against Gawker—and consumer legal funding. The piece talks about the Gawker case’s implications for on journalism and free speech, and also shows why public policy makers need to separate litigation funding and consumer legal funding when determining proper regulatory schema.

He references his own October 2015 research in the article, noting:

“With consumer legal funding… when legitimate claims are brought and justice served, it can actually benefit the economy by deterring bad and inefficient behavior.”

Kidd is Associate Professor of Law at Mercer University’s Walter F. George School of Law and holds both a Ph.D. in Economics from Utah State University and a J.D. from George Mason University School of Law. He is a preeminent thought leader on consumer legal funding, and has testified on the topic before state legislative bodies.

Read the full text Kidd’s article HERE.

Photo Credit: Flickr