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Measure to cap litigation finance interest moves on after hot debate

By Tom Humphrey, The Knoxville News-Sentinel, Tenn.
McClatchy-Tribune Information Services

April 03--NASHVILLE -- In contentious debate Thursday, legislators argued which side is trying to exploit desperate and vulnerable citizens for profit in a lobbying war between the U.S. Chamber of Commerce and the litigation financing industry.

The litigation finance business, also known as "lawsuit lending," advances money to people who are seeking damages for injuries in court, typically for living expenses during a long wait for a case to come to trial or be otherwise resolved. They are repaid only if the lawsuit is successful.

The bill (SB1360), sponsored by House Speaker Pro Tempore Curtis Johnson, R-Clarksville, would subject the industry to state government regulation for the first time and put a cap of 46 percent on the amount of interest that can be charged.

The Chamber of Commerce is pushing the bill, along with other general business interests. It is opposed by the litigation financing industry. Both sides have hired multiple lobbyists, as Johnson noted in debate.

"What I care about most of all is that there is nothing in the law in our state right now that prevents poor people in my district, at their most vulnerable time, from being taken advantage of by these companies," said Johnson.

"Intent of this bill is not to help poor people. The intent is to hurt poor people," said Rep. Vance Dennis, R-Savannah, arguing against SB1247. "I despise it."

The bill aims to "put an industry out of business" because it gives people money to keep going while a lawsuit is pending. Without an advance of money, the "poor desperate people" will agree with an insurance company or business to settle the lawsuit for less money, he said.

"This will keep more money in the pockets of the insurance companies," Dennis said.

On the other hand, Rep. Tony Shipley, R-Kingsport, said the litigation financing industry is hurting people and the bill will help correct that situation. He cited the case of a friend, badly injured in a car accident through no fault of his own, who wound up with nothing from a lawsuit after the litigation financing company and his lawyers were paid.

Rep. Steve McManus, R-Cordova, countered that "the intent is pretty malicious" in that the goal of the legislation is to stop advances to litigants -- or make them more difficult to obtain -- and thus allow businesses or insurance companies to "low ball" their payments for injuries.

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McManus said Tennessee would be the first state in the nation to impose limits on the fees charged by the industry. Since the company stands to lose its investment if the lawsuit is unsuccessful, he compared the transaction to buying stock and the cap to declaring that a stock could never return more than 46 percent. He also noted that interest caps for the payday loan business can run as high as 260 percent.

Rep. Joe Pitts, D-Clarksville, said the companies do not provide an advance unless they are virtually certain the lawsuit will be a success, thus there is very little risk for the investment.

The bill was debated for more than an hour last week in the House, then put off until Thursday, when another hour of debate ensued.

In the end, the bill passed 52-36. The Senate had approved it earlier, 27-2, with little discussion. It now returns to the Senate for concurrence on a minor amendment.

___

(c)2014 the Knoxville News-Sentinel (Knoxville, Tenn.)

Visit the Knoxville News-Sentinel (Knoxville, Tenn.) at www.knoxnews.com

Distributed by MCT Information Services

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