The organization representing some of the country’s leading lawsuit lenders has fired back at efforts to defeat new Illinois state legislation designed to regulate the lawsuit lending industry, calling claims by business groups “disingenuous” efforts to undermine legislation the lenders say would allow consumers greater opportunities to maximize payouts from companies targeted by lawsuits.
This week, Illinois state lawmakers are scheduled to hold a hearing on the so-called Consumer Legal Funding Act. The proposed law, designated as Senate Bill 1099, would change the way the state governs the rapidly growing industry that allows third party lenders to finance other people’s lawsuits.
The industry of third-party litigation financing continues to boom in the U.S. and around the globe, offering hedge funds and other investment groups the chance to sink big money into helping people press their legal claims, in exchange for potentially even bigger money in return.
According to global law firm Brown Rudnick, lawsuit lending companies generally reap returns of 300-400% on their investment, usually from settlements. Those returns are generally considered safe even when other investment vehicles may flounder amid recessions and other difficult market conditions.
Business groups, however, have raised alarms over such financing, pushing for greater transparency, to force plaintiffs and their lawyers to reveal who is funding lawsuits, and with whom the businesses actually may be negotiating in settlement talks.
Such reforms have been hard to come by in Illinois, where the Democratic supermajority in the General Assembly draws big campaign dollars from the trial lawyers and their lobby.
However, while the reforms sought by employers and other business groups have largely been ignored, the Democratic majority instead has moved quickly to advance SB1099.
That bill is backed by the Illinois Trial Lawyers Association and by the Alliance for Responsible Consumer Legal Funding, a national trade association representing 42 lawsuit lenders.
Eric Schuller, president of ARC Legal Funding, told the Cook County Record his organization has pushed for the passage of SB1099, believing the legislation is needed to ensure Illinois residents retain access to the financial products offered by the lawsuit lending companies he represents.
Schuller asserted SB1099 would offer “some of the strongest consumer protections on the (litigation funding) industry in the country.”
The law would give borrowers 14 days to rescind their contract, the longest such period required by law in any state, Schuller said.
Further he said the law would bar investment firms from having any role in deciding how the lawsuits would be prosecuted and ultimately settled. That would be left to the plaintiffs and their attorneys.
Should it be discovered that lenders have violated that law, he said, the Illinois Attorney General would be empowered to “come down hard” on such lending companies, Schuller said.
“The enforcement provisions are not a stick, they are a club,” he said.
Illinois’ Attorney General Kwame Raoul is a Democrat, who has also received steady campaign donations from Illinois’ trial lawyers since his time in the Illinois General Assembly, and has received financial backing from other Democratic campaign organizations heavily financed by the trial lawyers, such as those operated by former Illinois House Speaker Michael J. Madigan.
Business groups have expressed skepticism that the law would provide anything but a veneer of regulation, behind which lawsuit lenders would be allowed to steer waves of profit-generating lawsuits throughout Illinois’ historically plaintiff-friendly courtrooms.
Without any provisions requiring plaintiffs to disclose who loaned them money to finance their lawsuits, and who stands to gain from any settlement, the business groups warn the lenders would only continue to lean on lawyers and plaintiffs to grind the process even more slowly, as the lenders seek to maximize their returns.
Some groups, such as the American Property Casualty Insurance Association, warned the new law would “make settlements harder to achieve” while leaving “consumers with little recovery of their own.”
They particularly noted the law would allow lenders to charge interest rates of 18%, assessed every six months, rates the insurance advocacy group described as “egregious” and “predatory.”
Schuller, however, called such concerns from insurers and business groups over interest rates “disingenuous, at best.”
He asserted the insurance industry has supported lawsuit lending reform and regulation measures introduced in other states with significantly higher rates and fees, including some laws with no caps on rates at all.
Schuller asserted the insurers oppose SB1099 because “this is the backyard of State Farm and Allstate,” two Illinois-based insurers who are among the largest in the country.
“They don’t want this product offered to the people of Illinois,” said Schuller.
He said the rules created in SB1099 would allow plaintiffs to “hang on longer” in lawsuits, and press for “a fair and just offer, not just the first one offered to them.”
Schuller said his industry would continue to oppose any measures to require automatic disclosure of third-party lawsuit financing.
He asserted such disclosure is already available to defendants. However, they must secure an order from a judge to require it. However, he conceded Illinois courts have been almost unanimously reluctant to order such disclosure.
Schuller said business groups are trying to secure such transparency and disclosure requirements as a way to “bypass the legal system” and “overturn” court rulings against mandatory disclosures.
SB1099 has moved relatively quickly through the Illinois General Assembly, and may soon be headed to the desk of Illinois Gov. JB Pritzker to become law.
The measure was first introduced in February 2021, and has since earned the backing of powerful Illinois Democratic legislative leaders, including Senate President Don Harmon, D-Oak Park, and House Speaker Emanuel “Chris” Welch, D-Hillside.
The state Senate approved SB1099 in February 2022, and it is now assigned to the Illinois House’s Judiciary – Civil Committee. A hearing is scheduled to consider SB1099 on March 23 at 8 a.m.
Opponents of SB1099 have urged lawmakers to slow consideration of the bill, to allow for more time for debate and amendment.
They warn passage of the bill would encourage abuse of the Illinois legal system, which they say would ultimately lead to higher costs for all in Illinois, as the costs of Illinois’ high lawsuit activity are tacked onto the prices of everyday goods and services, a phenomenon the U.S. Chamber of Commerce’s Institute for Legal Reform has called the “tort tax.”
The Institute for Legal Reform has estimated the average American household is forced to pay an additional $3,300 annually in such higher costs fueled by lawsuits.
Editor’s note: The Cook County Record is owned by the Institute for Legal Reform.
k, lawsuit lending companies generally reap returns of 300-400% on their investment, usually from settlements. Those returns are generally considered safe even when other investment vehicles may flounder amid recessions and other difficult market conditions.
Business groups, however, have raised alarms over such financing, pushing for greater transparency, to force plaintiffs and their lawyers to reveal who is funding lawsuits, and with whom the businesses actually may be negotiating in settlement talks.
Such reforms have been hard to come by in Illinois, where the Democratic supermajority in the General Assembly draws big campaign dollars from the trial lawyers and their lobby.
However, while the reforms sought by employers and other business groups have largely been ignored, the Democratic majority instead has moved quickly to advance SB1099.
That bill is backed by the Illinois Trial Lawyers Association and by the Alliance for Responsible Consumer Legal Funding, a national trade association representing 42 lawsuit lenders.
Eric Schuller, president of ARC Legal Funding, told the Cook County Record his organization has pushed for the passage of SB1099, believing the legislation is needed to ensure Illinois residents retain access to the financial products offered by the lawsuit lending companies he represents.
Schuller asserted SB1099 would offer “some of the strongest consumer protections on the (litigation funding) industry in the country.”
The law would give borrowers 14 days to rescind their contract, the longest such period required by law in any state, Schuller said.
Further he said the law would bar investment firms from having any role in deciding how the lawsuits would be prosecuted and ultimately settled. That would be left to the plaintiffs and their attorneys.
Should it be discovered that lenders have violated that law, he said, the Illinois Attorney General would be empowered to “come down hard” on such lending companies, Schuller said.
“The enforcement provisions are not a stick, they are a club,” he said.
Illinois’ Attorney General Kwame Raoul is a Democrat.
Business groups have expressed skepticism that the law would provide anything but a veneer of regulation, behind which lawsuit lenders would be allowed to steer waves of profit-generating lawsuits throughout Illinois’ historically plaintiff-friendly courtrooms.
Without any provisions requiring plaintiffs to disclose who loaned them money to finance their lawsuits, and who stands to gain from any settlement, the business groups warn the lenders would only continue to lean on lawyers and plaintiffs to grind the process even more slowly, as the lenders seek to maximize their returns.
Some groups, such as the American Property Casualty Insurance Association, warned the new law would “make settlements harder to achieve” while leaving “consumers with little recovery of their own.”
They particularly noted the law would allow lenders to charge interest rates of 18%, assessed every six months, rates the insurance advocacy group described as “egregious” and “predatory.”
Schuller, however, called such concerns from insurers and business groups over interest rates “disingenuous, at best.”
He asserted the insurance industry has supported lawsuit lending reform and regulation measures introduced in other states with significantly higher rates and fees, including some laws with no caps on rates at all.
Schuller asserted the insurers oppose SB1099 because “this is the backyard of State Farm and Allstate,” two Illinois-based insurers who are among the largest in the country.
“They don’t want this product offered to the people of Illinois,” said Schuller.
He said the rules created in SB1099 would allow plaintiffs to “hang on longer” in lawsuits, and press for “a fair and just offer, not just the first one offered to them.”
Schuller said his industry would continue to oppose any measures to require automatic disclosure of third-party lawsuit financing.
He asserted such disclosure is already available to defendants. However, they must secure an order from a judge to require it. However, he conceded Illinois courts have been almost unanimously reluctant to order such disclosure.
Schuller said business groups are trying to secure such transparency and disclosure requirements as a way to “bypass the legal system” and “overturn” court rulings against mandatory disclosures. He said requiring such disclosure would unfairly spotlight the financial "vulnerability" of many plaintiffs.
SB1099 has moved relatively quickly through the Illinois General Assembly, and may soon be headed to the desk of Illinois Gov. JB Pritzker to become law.
The measure was first introduced in February 2021, and has since earned the backing of powerful Illinois Democratic legislative leaders, including Senate President Don Harmon, D-Oak Park, and House Speaker Emanuel “Chris” Welch, D-Hillside.
The state Senate approved SB1099 in February 2022, and it is now assigned to the Illinois House’s Judiciary – Civil Committee. A hearing is scheduled to consider SB1099 on March 23 at 8 a.m.
Opponents of SB1099 have urged lawmakers to slow consideration of the bill, to allow for more time for debate and amendment.
They warn passage of the bill would encourage abuse of the Illinois legal system, which they say would ultimately lead to higher costs for all in Illinois, as the costs of Illinois’ high lawsuit activity are tacked onto the prices of everyday goods and services, a phenomenon the U.S. Chamber of Commerce’s Institute for Legal Reform has called the “tort tax.”
The Institute for Legal Reform has estimated the average American household is forced to pay an additional $3,300 annually in such higher costs fueled by lawsuits.
Editor’s note: The Cook County Record is owned by the Institute for Legal Reform.