I have previously blogged about a class action case here in Alabama against Oasis Legal Financing and their questionable-at-best lending practices. Litigation against Oasis, and other “non-recourse” lenders has spread, and a number of states are now looking more closely at these predatory lenders.
On January 17, 2011, the New York Times ran a front page article titled, “Lawsuit Loans Add New Risk for the Injured.” The article, written by Binyamin Applebaum, profiled several cases where personal injury victims took out loans from Oasis and similar lenders, only to discover after the fact that the small “non-recourse” loans ate up most of their lawsuit settlements. While the Alabama case was not discussed in this article, lawsuits from other states challenging these unscrupulous lending practices were discussed. The lenders, in turn, have filed lawsuits seeking to prevent states from applying lending regulations to them because, in their estimation, they aren’t making a loan but instead are buying an interest in the underlying lawsuit. Thus, under their argument, they do not fall within truth in lending requirements or interest rate caps. The article also demonstrated the lobbying efforts being made by Oasis and its brethren to have exceptions carved out in various states so they can continue to take advantage of injured people while dodging regulatory or judicial scrutiny.
In an interesting letter to the editor following this story, Darren McKinney, the Director of Communications for the American Tort Reform Association, stood up against Oasis and the “non-recourse” lenders. His letter ran in the New York Times on January 22. Mr. McKinney pointed out the historical ban on third parties investing in lawsuits, and chided legislators who were supporting these lenders. As Mr. McKinney pointed out, not only are the injured people taken advantage of, but the practice of lawsuit lending could be seen as encouraging the filing of more lawsuits – something the American Tort Reform Association certainly opposes.
With such a diverse group of interests opposing Oasis and its ilk, hopefully legislatures around the country will stand up and hold these lenders to the standards that apply to all other lenders. I applaud those who are challenging the “non-recourse” lawsuit lending industry and hope the courts and legislatures will do the right thing and reign in this predatory practice.
