ARC Welcomes New Advisory Council Members

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We at ARC are delighted to announce new additions to our ARC Advisory Council: Reverend Charles Atkins, Jr., Professor Terrence Cain, and Becki Gray. These three individuals bring a diverse set of backgrounds in social justice and free market ideals to the council, but all share a passion for advocating on behalf of programs and regulations that provide consumers with more choices.

Here’s a little info on our new members:

  • Reverend Charles Atkins, Jr. is a community leader and social justice advocate in the New York metropolitan area, and serves as the pastor for the French-speaking congregation at the French Evangelical Church of New York. Atkins is dedicated to serving urban communities through advocating for access to justice. His interest in consumer legal funding stems from his commitment to providing counsel and developing programs to help individuals in need.

“The process is set up so that people can’t get what they deserve—what is fair,” Reverend Atkins said. “Legal funding gives people an option and improves equity in the system.”

  • Professor Terrence Cain is a legal scholar at the William H. Bowen School of Law at the University of Arkansas at Little Rock. He has taught classes on employment discrimination and civil liberties over the last decade, and is a published scholar on the topic of legal funding. He maintains a private practice where he specializes in criminal defense, employment discrimination and domestic relations.

“Legal funding serves the dual purposes of creating a culture in which justice is more readily accessible and does so while maximizing the efficiency of the litigation process,” said Professor Cain.

  • Becki Gray is a public policy leader who currently serves as the Vice President of Outreach for the John Locke Foundation inRaleigh, NC. In this role, she works closely with elected officials and government staff on public policy. Her background in lobbying and in the legal field have made her a go-to expert for commentary on legislative issues.

“There is a market for consumer legal funding because there is a need,” said Gray. “We need to let the free-market work.”

We look forward to working with these new Advisory Council members in the coming months.

Want to know more? Check out the full press release HERE.

Congratulations to Oasis Financial: An A+ BBB Accredited Business

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One of ARC’s provider members, Oasis Financial, recently received A+ accreditation from the Better Business Bureau of Chicago and Northern Illinois (BBB) in recognition of its commitment to its customers and customer service practices. Oasis has been providing consumer legal funding for over a decade, and has been a pioneer in the industry.

Congratulations to Oasis and their team on this accomplishment!

Check out their press release and web posting for more information.

legal funding

Counterpoint: Unintended Consequences Plague Ward’s Well-Intentioned Legislation in Alabama

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This week, our Executive Director, Rob Johnson, struck back at Alabama Sen. Cam Ward’s off base op-ed recently published in the Alabama Political Reporter. From Johnson’s response:

“As Thomas Edison said, “a good intention, with a bad approach, often leads to a poor result.” This week, Sen. Cam Ward is planning to propose legislation that would eliminate his constituents’ ability to access a lifeline when they’ve been injured in an accident —removing consumer choice and curtailing the free market…

Sen. Ward (Time to Lend the Poor a Hand by Shining a Light on Lawsuit Lending) said “…Oklahoma…passed common-sense regulations [of the legal funding industry] over the past few years.” We agree. A few years ago, as a legislator in the Oklahoma State Senate, I helped pass legislation that brought strong regulations to an industry that had operated without regulation for years.

We did it by making sure that consumers were protected, that they were empowered to make informed financial decisions, and that bad actors couldn’t operate. As a result, people have had access to a highly competitive marketplace so that people can find affordable legal funding if they need it. You should not eliminate choice for people that need more options.”

Read the full text HERE.

legal funding

Where’s the U.S. in the U.S. Chamber of Commerce these days?

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Can you put a price on your loyalty to your country? U.S. Chamber of Commerce board member Pfizer apparently can. Sitting upon $144 billion of deferred profits piling up overseas, the pharmaceutical giant has re-characterized its takeover of a smaller Irish rival as a “takeover” by the Irish firm of the much larger Pfizer. The benefit? Dodging $42 billion in taxes, roughly a quarter of the company’s stock market value. The Chamber claims to represent America’s small businesses. But in reality, it represents elite Fortune 100 companies—many of whom aren’t even based in the U.S. anymore.

The U.S. Chamber of Commerce is the largest special interest spender in the United States, with over $120 million on lobbying in 2014 alone.[1]  The lobbying campaigns waged by the U.S. Chamber influences legislation impacting millions of hard-working  Americans every year for the benefit of the corporations behind the scenes of its initiatives. With the gaining popularity and huge financial incentives to shareholders for tax inversions, how long before the majority of these U.S. Chamber members pulling its strings are no longer from the United States?

At the same time the U.S. Chamber of Commerce is pushing legislation in states across the nation that would close the doors of legal funding providers—all U.S.-based small businesses with less than 150 employees—that pay taxes and employ people in your communities. These closures would mean limited options for everyday people fighting to get fair settlements from insurance companies after an accident.

Where is the U.S. in the U.S. Chamber of Commerce these days? Where’s its commitment to small businesses? Clearly patriotism and principles take a back seat to profit.

For more fact checking on who the U.S. Chamber of Commerce represents, see http://www.motherjones.com/politics/2010/01/fact-checking-chamber-commerce-tom-donohue

[1] https://www.opensecrets.org/lobby/clientsum.php?id=D000019798

legal funding

Hoosiers Forward Smart Regulation for Legal Funding

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This morning, the Indiana State General Assembly’s Senate Civil Law committee sent a bill to the Senate floor that would bring smart regulation to consumer legal funding providers and strong consumer protections to the people of Indiana. Senate Bill 353, sponsored by Sen. Randall Head, is aligned with our ARC best practices and met with no opposition. The committee vote was 7 to 0. If the bill is passed in its current form and signed into law, Indiana would join with states like Oklahoma, Ohio, Nebraska, and Maine that have established strong consumer protections for constituents and promoted a pro-business environment to help the economy grow.

ARC best practices:

  • Require plain English and transparent contracts that clearly shows the consumer’s rights and obligations.
  • Require consumers to know the first day of the contract how much they may have to repay every six (6) months and the MAXIMUM amount the purchaser may ever receive out of a recovery.
  • Require that the consumer has the Right of Rescission for five (5) days after receiving proceeds from the sale.
  • Require consumers to inform attorney of the funding providers contract and requires attorney to acknowledge having been informed.
  • Prohibits the sale proceeds provided to consumers from being used to fund any part the litigation process. Can only be used for household needs.
  • Prohibits providers from interference or decision making with respect to the pursuit of the legal claim.
  • Prohibits the payments of commissions, referral fees, rebates, etc., to attorneys, law firms, medical providers, chiropractors, or physical therapist or any of their employees.
  • Requires funding providers to include registration fees, the posting of bonds to ensure solvency, and the filing of all forms and contracts with the state authorities.
  • Prohibits false and misleading advertising by funding providers.
  • Prohibits attorney’s from having any financial interest in a funding provider that transacts with their clients.

The 50 Shades of Legal Funding

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If you have ever tried to look up information on legal funding, it’s immediately clear that these types of transactions have been given many different names over the last decade—the 50 Shades names of legal funding. Less sexy than the titillating best-selling book, legal funding is nevertheless an important topic, so here’s an attempt to explain the many names of legal funding.

Let’s start at the beginning. Legal funding really became widely available in this country about 15 years ago. Since its inception, people have been calling it different things. In the UK, where the industry has been around a bit longer “litigation finance” is the preferred term. But, since the idea of it is so new to most of the general public in the U.S., nothing has really stuck yet.

Compounding the confusion is the fact that the legal funding industry is divided into two types of legal funding: commercial and consumer. The Alliance for Responsible Consumer Legal Funding (ARC) advocates on behalf of consumer legal funding, which helps everyday people when they are seeking a claim after an accident.

Our coalition uses the term “legal funding.” The American Bar Association used “alternative litigation finance” in its Ethics Commission 20/20 white paper. Wikipedia has an entry for “legal financing.”

Many other names might come up with using a simple Google search:  litigation funding, civil procedure funding, advance payment, professional funding, settlement funding, pre settlement funding, alternative litigation financing, or any combination of the previously mentioned terms. Several different terms have been used in legislation across the country.

All of these monikers attempt to accurately describe and brand a transaction that is becoming more widely used on a national scale.

There is power in a name. Marion Michal Morrison knew it. His stage name was John Wayne. David Robert Jones knew it. He became David Bowie. Dana Owens knew it. She’s now Queen Latifah. It can help sell a sultry, provocative bestselling book—like the one referenced in the title of this blog. Names can build associations in peoples mind when they hear it.

For example, a legal funding crowd-sourcing company likes to call legal funding “plaintiff financing” to evoke the feeling of empowerment. The company touts legal funding’s ability to level the playing field and increase access to justice.

The U.S. Chamber of Commerce’s Institute for Legal Reform and Big Insurance often use the terms “lawsuit loans”, “lawsuit lending,” “lawsuit funding,” or “crash cash” in order to create a negative association with aspects of less consumer friendly products, like loans. Loans create debt, have payments, can hurt a person’s credit, put them into collections, or cause repossession of collateral like a car. Legal funding has none of those things, because it is a purchase.

These big players want push this narrative because they want to regulate legal funding like a loan—even if it’s improper and would hurt consumers. The fewer people that have access to legal funding, the more low-ball settlements people will be pressured to take. The more low-ball settlements people take, the more their bottom line grows.

Some legal funding companies have been a little loose with jargon, themselves. They sometimes say they provide “lawsuit loans”—a name that uses more commonplace parlance, though the term is inappropriate. They view it as good marketing. Ultimately, it a free market and it’s their choice.

As legal funding becomes more familiar to the general public, one name will likely dominate. But for now, these “50 names of legal funding” represent a product that helps families get back on their feet after an accident and is a solution to a need in the free market. Whatever you want to call it, it’s a necessary choice for everyday people.

Lump Sum

Time Value of Money: Why Lump Sum Payments Cost More

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We’ve all played the lottery—bought tickets for a chance at winning the $1.5 billion Powerball. If you flick your eyes to the fine print, you see that if you win you can get the money in an annuity over 30 years.  You can elect to receive a lump sum payment now, bu only if you are willing to accept much less than the amount it said you won on the ticket.

Why is this? Well, it’s tied to the “time value of money.” If the lottery pays you as a part of an annuity, they get to hang on to the rest and invest it—so it will cost less for the state to pay you over time. If the state pays you upfront, it costs the state much more.

Insurance companies know this well! They make most of their money by investing premiums and holding on to that cash as long as possible—thus the long and burdensome claims process.

You may have seen this if you make student loan payments. If you asked to defer your payments until after you graduated from school, you might remember that the election caused your rate to double.

The time value of money principle says that everyone wants to receive money now and pay money later.

Legal funding providers are on the short end of this stick.  They pay now and receive later – often much later.  Could be 6 months or 6 years – or never.  By contrast, loans get monthly payments, which lenders can invest in ways that help alleviate the cost of carrying that debt. Legal funding providers carry risk without getting any payments until the end, costing them much more.

Opponents of legal funding intentionally misrepresent the numbers, and the true cost to legal funders of the time value of money. Don’t let them.

FED Rate Hike Will NOT Affect Legal Funding Consumers

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On Wednesday, Federal Reserve Chair Janet Yellen announced that the Federal Reserve would raise interest rates of the first time in almost a decade. Immediately, financial publications like the Wall Street Journal predicted that average Americans will see an immediate impact in higher charges on credit products. People will see their credit card rates, mortgages and auto loans increase, taking an unsavory bite out of their monthly take home pay.

But there is good news for people who take advantage of legal funding in their struggles with insurance companies—their rates won’t go up. Why? Since legal funding is a purchase, pricing is based on the value of a legal claim, not based on their creditworthiness or what the Federal Reserve did yesterday. People with legal funding make no monthly payments and do not have contracts that adjust when rates increase. They face less risk then people who use conventional credit-based products like credit cards or personal loans. And, after an accident, less risk can provide a needed sense of security.

Insurance

Insurance Industry Taboo Broken–Are we really that surprised?

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This Saturday’s Wall Street Journal reported that life insurance companies are breaking a major “industry taboo” by raising rates on life-insurance policies they sold to consumers years ago. According to the article, insurers have already notified tens of thousands of people they cover to let them know that they plan to exercise a little-used contractual right to raise their policy cost.  This move will affect seniors in their 70s and 80s who bought policies they have been paying into as far back as the 1980s—many of whom are now on fixed incomes. Millions of senior citizens are expected to be impacted.

Why you ask?  Low interest rates have impacted investment returns which have lowered insurance carrier profits. This is an industry that recorded $177 Billion—that is with a “B”—in profits from investment income alone in 2014, according to the latest federal government report (p. 23). Apparently that’s not enough.

The article quotes Michelle Clements, whose family faces a 15% increase on the policy of an 80 year old family member. “I find it really challenging that the insurance industry has the ability to institute sharp increases such as this and the consumer is left with very little options as to what to do.”

The insurance industry is using contract fine print to squeeze customers? Are we really that surprised?

More on this story at:  http://www.wsj.com/articles/surprise-your-life-insurance-rates-are-going-up-1449225000?tesla=y#mod=todays_us_

The Big Insurance Equation for Hypocrisy

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Antitrust laws were created to protect consumers by promoting market competition. These laws are supposed to regulate anti-competitive conduct so that no company becomes too powerful to impact pricing and the freedom of the market. Very few industries and businesses are exempt from antitrust laws. One big industry that is: insurance.

This means that on a federal level, insurance companies are completely exempt from restrictions on coordinating prices on products. States are left to regulate insurance, and laws vary. But in most states, insurance companies can engage in joint data collection, policy development, and price trending.

The insurance industry thinks they should get special treatment and be free of these federal regulations that protect consumers, yet they want to limit customer choice by promoting harmful overregulation of legal funding?

Free market competition and consumers should be empowered, not the insurance industry.

Antitrust exemptions = bad for consumers

In 1945, Congress passed a law called The McCarran-Ferguson Act creating exemptions from antitrust liability for the “business of insurance.”

According to State Farm Insurance, the exemption is “very narrow”. But in 2010 the sitting Assistant Attorney General of the Antitrust Division at the Department of Justice, Christine Varney, testified before Congress that the exemption is “very expansive” with regard to anything that falls within the business of insurance. This includes premium pricing and market allocations.

Varney said that insurance companies are “virtually always found immune” of the “most egregiously anticompetitive claims, such as naked agreements fixing price or reducing coverage” due to their antitrust exemption.

Similarly, the acting Assistant Attorney General from the Office of the Attorney General for New York, Elinor Hoffmann, asked Congress in 2006 to reexamine McCarran-Ferguson Act because it “precludes federal antitrust enforcement of serious anticompetitive conduct” in insurance. She referenced her department’s investigations into “new and pervasive instances of abuse” in the insurance sector, including bid-rigging and questionable brokerage fees.

When addressing the potential repeal of McCarron-Ferguson, State Farm proudly pronounces on its website, “Any change . . . should promote competition, not inhibit it. We will oppose any proposals that inhibit competition or add extra layers of regulation on top of the current state–based regulatory system.”

Really? Antitrust laws promote competition and could lead to more choice for consumers, but the insurance industry does not want that kind of regulation for themselves.

Elimination of market alternatives = bad for consumers

At the same time the insurance industry is trying to put regulations on competitive threats. It want to use its influence to eliminate consumers’ ability to access legal funding—a free-market alternative consumers use to make ends meet instead of taking an insurer’s lowball settlement offer far below the fair value of their claim.

Antitrust exemptions + the elimination of market alternatives = VERY BAD FOR CONSUMERS.

The insurance industry has spent hundreds of millions of dollars on lobbying—a truly massive sum. One of its key legislative initiatives is to push zealous regulations on the market alternative legal funding provides to consumers.

Free market competition and consumers should be empowered, not the insurance industry.