Provident Litigation Finance, the only Tennessee-based provider of Consumer Legal Funding, announced today it is shutting down its services for Tennessee consumers as harsh state regulations take effect. Provident was started in 1999 by Nashville resident Dan Cleary, who personally ran the business ever since, serving more than 10,000 Tennesseans. Cleary was the largest provider of Consumer Legal Funding in Tennessee. He was forced to stop serving his Tennessee neighbors by the regulations of Public Chapter No. 819, which take effect July 1, 2015.
Consumer Legal Funding provides financial assistance to consumers who have suffered injury, economic loss and have a pending legal claim, typically an insurance claim from a car accident another driver caused. It is used to pay rent, mortgages, and other immediate family and household needs while the claim is processed by the insurance company, which often takes years.
The full ramifications of Public Chapter No. 819 went into effect today. The law, which was passed by the state legislature in 2014, mandates price restrictions that are below the break-even point for offering the service to the large number of people seeking it. “It is impossible for me to operate at the government-mandated rates” Cleary, President of Provident Litigation Funding, said.
A total of about three dozen Consumer Legal Funding companies, comprising the vast majority of the industry, have now pulled out of the Tennessee market. Most pulled out in the summer of 2014, shortly after the law was passed. Now that the law is taking effect, the one local business in the industry has also been forced out. Before Public Chapter No. 819, the industry had been serving an estimated 1,700 Tennesseans each year, providing consumers with an estimated $3 million per year to keep paying life-essential bills during tough times.
The fundings helped Tennesseans pay for rent, mortgages, electricity, car payments, health insurance, auto insurance and groceries. They meant $3 million per year was paid to Tennessee businesses instead of becoming uncollectable accounts or money that taxpayers would be asked to provide. Consumer Legal Funding empowered Tennessee consumers to meet their responsibilities and provide for themselves.
Public Chapter No. 819 was driven by the national trillion-dollar insurance industry and was actively advocated for by the Washington D.C based U.S. Chamber of Commerce. Executives from the insurance companies Allstate, State Farm and Travelers are on the U.S. Chamber of Commerce’s board of directors and were the driving force behind this legislation.
Eric Schuller, President of ARC states, “They lobby against businesses like Cleary’s because he helps empower people who are injured through no fault of their own to get fair settlements. Dan helped people keep paying their bills and meet their obligations during the long claims process.” Schuller added, “The funds that Dan and others in the industry provided in Tennessee gave consumers the ability to avoid foreclosures, evictions, car repossessions, and having their lights turned off. He helped them put food on the table during hard times.”
The Alliance for Responsible Consumer Legal Funding (ARC) represents a coalition of consumer legal funding companies, service providers, academics, and other industry supporters. It works at the state and federal levels to ensure the proper regulation of the legal funding industry in the United States. ARC aims to accomplish this mission by advocating at the state level for rules containing appropriate pricing and a high degree of consumer protection—including adequate licensing and disclosure requirements, and suitable limitations on fees—and at the federal level by working with policymakers to help ensure the alignment of federal and state regulatory efforts affecting the legal funding industry. For more information, visit www.ARCLegalFunding.org.
