Summary
Some consumers looking to free up cash for holiday spending this year are turning to a costly source: cash advances on lawsuits.
“This is a very busy time with holiday cash needs,” said Chris Janish, chief executive officer of Legal-Bay LLC, which describes the cash it sends to plaintiffs as “non-recourse advances.”
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But it’s unlikely the CFPB will take an active role in regulating lawsuit lenders under acting director Mick Mulvaney, or under a future permanent director appointed by President Donald Trump, said Nora Freeman Engstrom, professor of law at Stanford Law School.
“At least in the near term, if there’s going to be protection for consumers it will need to come from the states,” she said.
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Because litigation moves slowly, the loans can have a beneficial role to play for injured plaintiffs, said Engstrom.
“What these companies are doing is addressing in some cases a genuine financial need, in that a victim is hurt, the victim can’t go to work, the bills keep piling up and settlement is months if not years away,” she said. “But the question is are these funding arrangements fair and made with adequate transparency.”
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