The legislative session is heating up and once again there seems to be a “sharknado” in the forecast for Springfield as the “lawsuit loan sharks” are trying once again to push their harmful agenda through the legislature.
All of the lawsuit lenders seen in advertising on TV make it sound so wonderful: Get a loan to pay bills while you are involved in a lawsuit and you only have to pay the loan back if you win your case. Lawsuit loans seem so easy and simple until the individuals who take out these loans have to start paying them back.
Individuals who do not read the fine print often are surprised at how much money they have to pay back even for a small loan. In some cases, lawsuit lenders have been known to charge nominal interest rates as high as 150 percent. There are all kinds of horror stories of plaintiffs who end up with little or nothing from a judgment or settlement as result of high interest lawsuit loans they took out. Illinois attorney Frank Avila has spoken about how one of his clients took out a $50,000 lawsuit loan and ended up owing the lawsuit lender nearly $1 million.
Here in Illinois, lawsuit lenders have been pushing legislation to codify outrageously high interest rates for several years. Last year, the lawsuit loan sharks tried to pass a bill that would have set the lawsuit lending industry’s nominal rates at 72 percent, which in some cases could have produced an annual APR of more than 100 percent.
This year, as in previous years, competing lawsuit lending bills have been introduced (SBs 1396 and 1397 both sponsored by State Sen. Bill Haine). In addition to the lawsuit loan industry bill, a measure has been introduced to set more reasonable protections for consumers who take out lawsuit loans.
What is needed is a thoughtful and reasonable compromise on the issue of lawsuit lending. Haine clearly is committed to orchestrating such a compromise. What lawmakers should not do is give the lawsuit loan industry a regulatory framework that allows them to have free rein to charge those excessive interest rates that have been the hallmark of the industry in recent years.
The money to pay back lawsuit loans has to come from somewhere and that somewhere would be the businesses and individuals who are the targets of litigation. Exorbitant interest rates from lawsuit loans will only make the cost of litigation even higher than it already is. Increasing the cost of litigation is the last thing we need in Illinois. Illinois is already ranked as one of the most litigious, plaintiff-friendly states in the country. According to a recent report from the global research firm Harris Interactive, Illinois is ranked 46th out of 50 states for legal fairness.
What the state needs is lawsuit reform, not ways to increase the cost of litigation. Illinois lawmakers can help create jobs and move the state’s economy forward by working to pass common sense, reasonable regulations that protect consumers from predatory lawsuit lenders. The time for reasonable guidelines on lawsuit lending is long overdue.