There are serious questions about a new loan product in the United States. Legislatures are trying to address the new legal action financing product. Legal action financial loans are opening up new legal problems in several states. Some states are regulating these short term installment loans out of existence, others argue surely it is a needed service.
Lawsuits cost money
It can cost lots of money to sue someone. Years and thousands of dollars are needed to get a case through court, even if the payout is worth it. About $285,000 is what a personal injury legal action will payout on average even though most plaintiffs will not do the legal action because of money. Some people are not giving up on these lawsuits. Instead they are getting lawsuit loans for funding.
The emerging legal action loan market
Investors, including banks and investment firms, are taking on the risk of a personal legal action. This appears to be occurring increasingly more. In some states, the bad credit financial loans (not to be confused with payday financial loans) are called "investments" or "loans" in other states. The plaintiff winning the case means that the investor gets between 150 and 300 percent of the investment amount. This is only if there’s a win though. If the plaintiff loses the case, the investors don’t collect any cash. The annual percentage rate cap is something states are trying to add. These financial loans would have to deal with this. Others are passing consumer-protection legislation that caps the involvement legal action loan companies can have in the case. Maryland is considering a bill that would limit the loan companies to collecting no more than 200 percent of the total loan amount.
Arguments for and against lawsuit loans
You will find many discussions of cost cutting in tort cases. Personal injury lawsuits are in this too. Rising costs of malpractice insurance and business insurance are often blamed on the number of personal injury lawsuits. Some say this is a service that is needed. It helps people that would not be able to represent themselves otherwise. Others would suggest that these loan providers are abusing the legal system to make money by having more lawsuits filed.
How lawsuit loans impact your wallet
While not in a legal action, it seems like lawsuit financial loans are nothing. They might not seem important enough to even discuss. This financial product, however, does affect many individuals. Everybody has to pay for goods, services and insurance that changes based on personal injury or tort lawsuits. Many states don't have a payout cap. This could increase the cost even more. Everyone that does not have lots of money is more able to access the legal system though making things balance out.
Articles cited
Star Advertiser
staradvertiser.com/news/20110310_A_lobbying_clash_over_lawsuit_loans.html
Medical Malpractice
medicalmalpractice.com/legal-advice/medical-malpractice/medical-negligence-lawsuits/what-the-average-payout-negligenc
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