Most of us learn at a young age that you can’t fit a square peg in a round hole. But some people still try.

In this case, the square peg is consumer legal funding, a vital tool that helps working-class people who have likely been in auto accidents that are not their fault pay their everyday bills—car loans, rent, mortgages, utilities—while awaiting fair settlements with insurance companies. The round hole is tort reform.

Tort reform efforts in the U.S. have always focused on issues like outsized awards and unreliable evidence. Now, however, with the backing of the multibillion dollar insurance lobby, the U.S. Chamber of Commerce is using tort reform as a smokescreen to advance an agenda that has nothing to do with justice or the U.S. business climate.

In every corner of the country—from Arizona, Indiana, Missouri, to New Jersey, and Arkansas—the Chamber and Big Insurance are lobbying to regulate consumer legal funding so harshly it would eliminate the product and leave thousands of people without a crucial option—sometimes their last good option—for keeping their heads above water during tough financial times.

These efforts are in the name of tort reform, but legal funding has nothing to do with tort reform. Why?

First, legal funding involves only preexisting cases. Second, the vast majority of consumer legal funding cases are about auto accidents. They are light years away from the multi-million dollar, multiple-plaintiff class action suits that have sparked calls for tort reform. The average funding amount given to customers of the largest consumer legal funding company is $1,700. And none of the funding ever goes to attorney fees, court costs, or any other costs of litigation. People use the funds to keep their lives afloat until a fair settlement is reached.

Legal funding has been proven time and again to actually serve justice and the court system. In Arizona, for example, personal injury claims have decreased since legal funding companies began doing business there. And a study from Vanderbilt University found that, if anything, legal funding speeds up fair settlements.

Finally, the last thing legal funders want to do is provide funding to people with frivolous lawsuits. Legal funding companies are paid only when cases are successfully settled. They have an economic incentive to steer clear of frivolous lawsuits.

So if it’s clear legal funding has nothing to do with tort reform, then why is Big Insurance claiming it does? Because big insurance companies have an economic incentive to pay as little as possible on claims. Their profits go up when cash-strapped accident victims settle quickly for far less than the fair value of their claims.

The U.S. Chamber of Commerce and Big Insurance can keep trying, but this square peg of consumer legal funding will never fit in the round hole of tort reform. Tort reform has absolutely nothing to do depriving working class Americans the ability to pay their home, grocery, car, and light bills when they’ve been injured.

By Eric Schuller President, Alliance for Responsible Consumer Legal Funding

NCOIL members reject model legislation that would deny free market choice for consumers seeking legal funding assistance

After three and a half years of exhaustive deliberations and vigorous debate, state legislators convening for the 2014 Annual Meeting of the National Conference of Insurance Legislators (NCOIL) in San Francisco determined not to endorse any model legislation pertaining to consumer legal funding.

The Alliance for Responsible Consumer Legal Funding (ARC) applauds the outcome, as it would have been an unprecedented effort to recommend government-mandated pricing restrictions that would directly interfere with a consumer’s right to determine the best type of transaction for him or her.

“We are pleased that NCOIL rejected legislative models that would have encouraged states to limit the economic liberties of their citizens and interfere with their right to contract. Fortunately, the overt lobbying efforts of the insurance industry to deny access to this funding option for working-class consumers were rejected,” said Eric Schuller, President of ARC. “Regulators have seen through this thinly veiled attempt to tilt the playing field of claims payments away from consumers and in favor of defendants liable for damages. These are encouraging steps away from the desire of giant insurance companies who want to monopolize the valuation of consumers’ claims, and towards competitive market solutions that ensure anyone with a claim can access legal funding.”

Effective market-based regulation of the Consumer Legal Funding industry already exists in Maine, Ohio, Nebraska and Oklahoma. Similarly, New York’s attorney general has entered into an agreement to properly regulate the industry—recognizing that this product is an asset purchase, not a loan.

Despite these important precedents, the Tennessee legislature enacted a law earlier this year with onerous rate caps. Backed by the multibillion-dollar insurance lobby—who themselves adamantly oppose government-mandated price caps on their own products—the law forced legal funding companies out of the state and left Tennessee consumers without the option for Consumer Legal Funding.

“As legislators continue to examine how to best serve their constituents who seek consumer legal funding, they have two clear paths: One seeks economic security for families and communities in need of financing options; the other seeks to secure the status quo for insurance companies looking to maximize their profits,” said Dan Cleary of Provident Litigation Funding, Inc., a Tennessee-based Consumer Legal Funding company. “The wrong path was taken in Tennessee and the impact was immediate.”
“For the sake of tens of thousands of hardworking Americans who face the painful choice between paying rent, buying groceries, getting medical care or settling a claim for pennies on the dollar because insurance companies can wait them out, let’s hope our elected leaders – like those represented in NCOIL – will have the wisdom to put consumers first and maintain Consumer Legal Funding as an option for those who need it,” said Ralph Shayne, CEO of Oasis Legal Finance.

About the Alliance for Responsible Consumer Legal Funding (ARC)
The Alliance for Responsible Consumer Legal Funding (ARC) advocates on behalf of a coalition of legal funding providers that include the national and state level market leaders to ensure the proper regulation of the legal funding industry in the United States. ARC aims to accomplish this mission by promoting industry best practices and working at the state and federal levels with legislators and regulators to develop a framework that provides a high degree of consumer protection—including robust licensing and disclosure requirements – and protects the rights of consumers to access this economic option by embracing free market principles. www.arclegalfunding.org

In a recet article posted in the Waco Tribune,  Jill Shackelford, Chairwoman of the special interest-funded outfit called “ Citizens Against Lawsuit Abuse of Central Texas” authored a misleading column about the consumer legal funding industry.

This should be a warning to the thousands of consumers in Texas that the U.S. Chamber of Commere and the mega insurance companies they represent are preparing to eliminate, through anti-business legislation, a service that has become so vital to so many in Texas.

In a tactic that has failed in so many other states, they will try and misinform legislators in Austin about what the consumer legal funding industry is and does. By disguising their initiatives as consumer friendly and claiming to help protect the everyday citizen of Texas, it would be easy for members in Austin to jump on board such a cause.  If you look closer, however, you will see a powerful insurance industry trying to legislate its way to more power.   As members in the Texas legislature gearing up for the 84^th session in 2015, look carefully at who is behind this push and consider the impact this type of anti-business message would have  on the consumers who rely on this product everyday.

Consumer legal funding allows citizens like Harold from Waco, Texas who was injured in an automobile accident, unable to work due to the accident, to have a financial lifeline.

After exploring other financial options, Harold made the decision that consumer legal funding was the best fit for his situation.  Where other financial options carried the possibility of future debt, consumer legal funding was the option that did not create any further debt and was a fully disclosed agreement Harold trusted.

“Because of consumer legal funding, I was able to pay off all my past-due bills.”

Unfortunately for the thousands of citizens of Texas, the U.S. Chamber of Commerce and the handful of mega insurance corporations they represent have been traveling around the country spending millions of dollars to try and get rid of the consumer legal funding industry.

Luckily for Harold and the many others who rely on the services of consumer legal funding in Texas, legislators in other states have stood up to the U.S. Chamber and large Insurance corporations and have recognized the important role this industry has played in helping those who need it most.

In 2015, it will be Austin’s turn to stand up to these billion-dollar entities, choosing the Texas consumer over big insurance.

As the debate begins on HB-925, an anti-business bill that aims to heavily regulate the consumer legal funding industry, members should consider the impact this bill would have not only on the industry but on the many consumers who rely on this product.  HB-925 is laced with toxic and devastating anti-free-market price controls.  Taking with it stranding the thousands of working class consumers who have come to rely on its services every day.

For years, the services of consumer legal funding has helped families from all across Louisiana cope with debilitating injuries, caused at no fault of their own, usually from an auto accident.  These accidents often leave hardworking citizens out of a job, without a full paycheck, and unable to pay for everyday necessities such as rent, utilities, medical bills and food.  The ability of consumer legal funding to provide, debt-free, non-recourse, fully disclosed funding agreements is vital for these injured consumers to get back onto their feet, and to continue to pursue a full and fair settlement with their insurance company.

Consumer legal funding allowed citizens like Carla from Ponchatoula, Louisiana and Genora from Eunice, Louisiana to finally stand up to large pocketed insurance companies and fight for what they deserved, a fair settlement on their injury claims.  They no longer had to worry about their daily living expenses.

Carla from Ponchatoula said it best after her accident, and after use of a consumer legal funding company. “[Consumer legal funding] helped me survive until my life straightened out, thank you.”

Genora from Eunice was also thankful for the services consumer legal funding provided to her and her family. “[Consumer legal funding] has been very helpful during my time of financial need.”

Who is behind the push to pass such legislation in the Louisiana General Assembly to eliminate an entire industry from existence affecting so many consumers who rely on this vital service?

Out-of-state insurance conglomerates, and the Washington, D.C. based advocacy group, the U.S. Chamber of Commerce, of course.  Large Insurance corporations view the consumer legal funding industry as a direct threat to maximizing their already enormous bottoms lines, and look to gain greatly from this legislation.  Traditionally an insurance company would use a consumer’s accident and lack of financial security to force less-than-market-rate settlements.  Consumer legal funding bridges the financial gap from the time an accident occurs until a consumer has a chance to fairly settle their injury claim. Consumer legal funding gives consumers the strength to hang on in court proceedings or settlement negotiations despite having limited bargaining power against large insurance interests.

Although these bills will be sold as consumer-friendly and pro-business by the Insurance industry and the U.S. Chamber of Commerce, we ask members in the House of Representatives to recognize HB-925 for what it really is, an anti-free market, anti-consumer, pro-insurance, power grab bill.

For an industry, like insurance, which consistently marks their products up at a 200% – 400% profit margin, it is hard to take them serious when they say they are trying to protect the consumer in the legislation they are pushing.

Most hard working Americans spend more time at work than they do at home.  The pressures of working and earning a paycheck increase as items such as food, housing and transportation costs are on the rise.  The fight to earn a decent living to help finance daily necessities has never been more important.

LaShawn, from Chicago Ridge, Illinois, is one of those hardworking American’s who does his job well and wants what is best for his family.  He is the type of person who clocks in everyday knowing that the money he earns will help provide for his family.  LaShawn is also a person who is responsible enough to put money aside for emergency situations but knows its only enough to hold the boat for a short amount of time if something were to happen.

Unfortunately for LaShawn, that day came, as he was involved in an accident, at no fault of his own that left him injured and unable to work.  After waiting months with no success of finalizing his insurance claim, with no income, his saving s account exhausted and bills piling up, LaShawn needed help.

After researching several different financial options, LaShawn decided to go with consumer legal funding.  With consumer legal funding, LaShawn liked the idea that he would not incur any further debt from this option, the terms were clearly presented to him upon signing and he would receive just enough funds to help pay for the bills that had piled up over the past couple months.

“Consumer legal funding has really helped me in a stressful time, by providing me funds to help pay my bills,” Said LaShawn.”

Unfortunately for folks who will be in similar situations like LaShawn, The U.S. Chamber of Commerce is on a mission to eliminate the industry of consumer legal funding in Illinois.  They have begun a misinformation campaign that vilifies the industry as a predatory practice that needs to be heavily regulated by price control legislation and other measures that would send the industry to its death.

This of course couldn’t be further from the truth.  As you start to peel back the layers of why the U.S. Chamber of Commerce would even care about this industry, all roads lead back to a handful of mega corporations they represent and the financial windfall they would receive under a scenario where the consumer legal funding industry ceased to exist in Illinois.

This of course would increase the bottom lines of those few mega corporations at the expensive of the consumer legal funding industry, the hundreds of jobs associated with the industry and the thousands of consumers who rely of their vital services.