[S]tarting next month, no one in Vermont may offer or enter into a consumer-litigation loan contract for at least a year.
S.73, which governs consumer protection laws and was passed by the Legislature last month, calls for a one-year moratorium on all consumer litigation funding contracts.
The initial bill did not include the section on consumer litigation funding; that section was taken from a different bill, H.12, and added as an amendment to S.73.
Businesses that offer consumer litigation funding will advance money to a person who is seeking a lawsuit settlement and the repayment is contingent on the client’s winning the case, according to the National Conference of State Legislatures. Each violation of the one-year hiatus on this practice will be regarded as a criminal offense, according to the bill.
Oasis Legal Finance is one of the companies that conducts this practice and is in favor of regulating the industry, so long as it is done “properly,” said Eric Schuller, director of government affairs at the Chicago-based firm. “The only people insisting on the moratorium are the businesses,” specifically, insurance companies, he said.
Schuller said that the insurance companies generally oppose litigation funding because clients may be less likely to settle early for smaller settlements if they are able to afford the cost of living during the lawsuit.
“Some cases can drag out for 18-24 months,” Schuller said. “We give them financial assistance to keep their head out of the water.”
Matt Mincieli, the Northeast executive director of Technology Network, which aims to inform government leaders on the technology industry’s value, according to their website, wrote a commentary May 1 in support of the law, in which he argued that these types of loans tend to have “really high interest rates.” Sometimes the interest rates can reach 150 percent, he said. Oasis Legal Finance does not charge its clients 150 percent interest rates, Schuller said.
“I’m not saying that all of these companies are bad, but it’s a billion-dollar industry and so I think something that big needs to at least have some form of regulation considered by state lawmakers,” Mincieli said.
Mincieli said that the new law would begin to protect consumers and businesses from fraudulent cases by regulating the industry, and it doesn’t stop the practice altogether. Other states already have taken legislative action to regulate the litigation-funding industry, he said.
“We applauded Vermont for doing the same,” Mincieli said.
Tiffany Simard, a resident of Wheelock, Vermont, submitted her own commentary through David Schwartz, director of communications at Oasis Legal Finance, in response to Mincieli’s claims.
Simard was a passenger in an SUV when she was hit by a steamroller in July, resulting in a severe foot injury that left her unable to financially provide for her family, she said in her commentary. She was on the verge of losing her apartment, she said.
“The help I received was so important to the well-being of my family,” Simard said in her commentary. “I still get emotional just thinking about it. It changed my life.”
Mincieli’s reference of “frivolous lawsuits” in his commentary insulted Simard, she said in her commentary.
Simard was unavailable for comment, but in her statement she said Mincieli was an “out-of-state corporate lobbyist” who was trying to permanently remove the option of litigation funding by saying people like Simard bring “frivolous lawsuits.”
Mincieli said his commentary was meant to start the process of regulating the litigation-funding industry, and added that Technology Network is hurt by some “frivolous lawsuits,” which is why he lobbies for regulations in this industry, as a registered lobbyist in Massachusetts.
“Her case may not have been frivolous but of the $1 billion invested in lawsuits across the country, some are frivolous, going after businesses with lawsuits void of merit and clogging up the court dockets,” Mincieli said.
“We are not a billion-dollar industry,” Schuller said.
It was estimated by industry participants that total investments in lawsuits at any given time exceeded $1 billion, according to a 2010 study conducted by The Center for Public Integrity in conjunction with The New York Times. There were no exact figures reported in the study.
