My name is Dan Cleary, and I am the owner of Provident Litigation Funding, Inc., a pre-settlement funding company founded in Nashville in 1999 that has operated in Tennessee for almost 14 years. Should HB 1242 be passed into law tomorrow, I will have to close my doors and cease doing business the day the law goes into effect.
HB 1242 is a bill designed by big insurance, and it’s willing accomplice, the US Chamber of Commerce, to do one thing, and one thing only: to eliminate pre-settlement funding from being conducted in the state of Tennessee.
With regard to HB 1242, please be aware of the following:
1. We have had no consumer complaints. This legislation is being brought by big insurance and is designed solely to protect insurance profits by taking us out of business. In all of the hours of I’ve spent on the hill, I have never once heard a representative of the other side voice anything regarding consumer protection. They are using the legislative process to further their own personal agenda.
2. The rate cap puts us out of business. Due to the high cost of capital and the high loss rates we incur, pre-settlement funding companies, both large and small, are unable to operate under HB 1242. A rate structure that would allow us to stay in business was offered, but rejected by the sponsor.
3. The prohibition of assignment puts us out of business. If we cannot assign the proceeds of our investment, we cannot obtain necessary financing.
Besides the rate cap and inability to assign, there are other unusual, industry adverse features to this legislation generally not found in most business contracts:
o Most business contracts include a paragraph that stipulates if anerror does not materially change the nature of the contract, the contract is still enforceable. But HB 1242 stipulates that any error makes the agreement unenforceable by the purchaser; this standard does not require knowledge or intent.
o This bill stipulates that any and all liens are superior to a pre-settlement funding lien. This is highly unusual. We currently perfect many of our liens with the state of Tennessee under UCC law. This bill would preclude us from doing so.
o There is also a bill that appears to prohibit buyouts. This eliminates the possibility that the consumer who finds a better deal, a lower rate, with another company cannot renegotiate the terms with another funding company to save money.
If this bill passes, Santiago, an employee of mine, and a veteran from the 101st Airborne at Ft. Campbell; and Kristi, my assistant, a middle aged woman whose family had earmarked her salary for the next four years to pay for her son’s college education will both lose their jobs.
If this bill passes, thousands of Tennessee residents, like Teresa, who we advanced $2400 to yesterday to keep her car from being repossessed, thereby enabling her to take her two children under medical care to the doctor, will go without funding they cannot find elsewhere.
Four states have considered and passed consumer protection bills to date: Maine, Nebraska, Oklahoma and Ohio. These states managed to pass legislation that properly regulates the presettlement funding industry while allowing it to operate in profitably in their states, and there have subsequently been no issues in any of these four states.
Why is it that Tennessee, a pro business state, is unable to do the same? By marching in lock step with big insurance, the passage of HB 1242 will eliminate a service utilized by multiple thousands of your constituents over the last 14 years.
Is HB 1242 really proper regulation? Is it consumer protection? Please vote no to HB 1242.