As the whole world struggles with COVID-19, existing economic disparities are heightened, and impossible to ignore. The pandemic has created an environment in which those already living paycheck to paycheck must now grapple with employers, insurers, and others who have let them down during this crisis.
Does Consumer Legal Funding Put Consumers in Debt?
As the whole world struggles with COVID-19, existing economic disparities are heightened, and impossible to ignore. The pandemic has created an environment in which those already living paycheck to paycheck must now grapple with employers, insurers, and others who have let them down during this crisis.
JD Supra reports that litigation funders are well-placed to pick and choose which cases they’ll invest in, as we experience massive spikes in litigation. Meanwhile, individuals who have lost their source of income or are being denied a much-needed insurance payout may find themselves at a loss and unable to obtain even a small bank loan to cover expenses. This is where Consumer Legal Funders can be of the most help.
In March of this year, Utah Governor Gary Herbert enacted the Maintenance Funding Practices Act, which regulates the industry. Echoing protection laws in Vermont, Oklahoma, Nebraska, and others, this new law requires funding entities to register with Consumer Protection agencies. It also details specific disclosures, requires non-recourse transactions, allows clients to vacate agreements within five days, and prohibits funders from making major decisions about the cases they fund. Unlike other states though, ‘The Act’ doesn’t limit fees that funders can charge.
The Alliance for Responsible Consumer Legal Funding (ARC) issued a statement in favor of the new law, saying it will encourage transparency and weed out funders with bad intentions. The industry supports not capping fees, as harsh limits on funding fees have placed such a stranglehold on the industry, that consumer funders are no longer operating in those states that implemented fee caps.
In the end, the new law should provide clarity of expectation on the client, legal, and funding side of the litigation – and it does so without being too onerous for the industry to operate. As we soldier through a pandemic and subsequent recession, consumers will need access to all of the financing options available to them. Thanks to the new Maintenance Act, consumers will still have the option of obtaining funding as they await their case settlement.
