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Bankruptcy Law

Lawsuit Loans: Unregulated and Presenting Serious Risks for the Injured

The business of lending to plaintiffs has increased over the past 10 years, with estimates that the industry is now lending more than $100 million every year. In most of the U.S., lawsuit lending remains primarily unregulated, resulting in exorbitant interests rates and other abuses that end up depleting the settlements or jury awards that these plaintiffs receive.

In some cases, it may be years before a plaintiff sees any money from a personal injury case or similar lawsuit. In order to make ends meet until they receive their settlements, plaintiffs sometimes turn to lawsuit lending companies to borrow money, with the pledge that they will repay the loans from their settlements or awards.

For all the good this could do plaintiffs in their time of need, some companies are taking advantage of the fact that they are unrestrained by laws that cap interest rates. Some lawsuit lenders' interest rates exceed 100% per year. These companies are also not required to provide clear and complete pricing information to borrowers, sometimes resulting in misleading information that lures plaintiffs into accepting loans that will, in the end, deplete the majority of their winnings.

How can lawsuit lenders escape unscathed? These companies claim that they are not actually lenders, as plaintiffs are not required to repay the money they borrow if they do not win their cases. Instead, they refer to these transactions as advancements, investments or financing. They also claim that they must charge high prices due to the amount of risk that is involved in these "investments". Borrowers may lose their cases or may receive far less than was expected. Some cases may drag on for years.

In addition to what may be considered predatory abuses, lawsuit loans may have another, darker impact on the American economy. The lawsuit-lending industry encourages civil lawsuits that may only end up sapping the resources of the individuals and companies on which our economy relies – creating further harm in the face of our still struggling economy and continually high rate of personal bankruptcy filings.

If you are dealing with overwhelming debt, foreclosure or other financial difficulties, make sure you work with an attorney who will put your best interests first. Jacoby & Jacoby is a Long Island debt relief firm that represents borrowers throughout the area in all types of bankruptcy and foreclosure related matters.

Contact a Long Island debt relief lawyer at the firm today to discuss your concerns.

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