PRO-CONSUMER LEGISLATION AIMS TO ADDRESS PREDATORY, EXCESSIVE AND UNREGULATED LAWSUIT LOANS

HB 1595 DELIVERS TRANSPARENCY, CONSUMER PROTECTION

AUSTIN, TEXAS—Citing a lack of transparency and predatory, anti-consumer practices, Rep. Doug Miller and other leaders today urged lawmakers to support HB 1595 which will impose new and necessary regulations on the lawsuit lending industry in Texas.

“Lawsuit lenders prey on consumers when they are at their most vulnerable and the industry is growing rapidly in Texas and beyond,” said Miller, the sponsor of HB 1595. “These lenders are virtually unregulated, often unscrupulous, and charge fees that are excessive by any standard.  With this legislation, we are sending a clear signal: your business is welcome in Texas¬, but you are going to face the same proper disclosures, regulations and consumer protections as conventional loan makers and banks.”

HB 1595, the Consumer Lawsuit Lending Act, is set for hearing today in the House Judiciary and Civil Jurisprudence Committee.  A companion measure, SB 927, by Sen. Joan Huffman, has been filed in the Texas Senate and referred to Senate State Affairs.

The industry is growing too fast for lawmakers to ignore, Miller added, noting that a Google search of lawsuit loans can lead to more than 40 million results, most of whom are lenders.  More than 20 companies currently operate in Texas. The former Attorney General of Georgia, the Hon. Thurbert Baker, joined Miller and others for today’s event.

“As a former attorney general – charged with protecting consumers – and a practicing lawyer, the explosion of this very aggressive industry gives me nothing but heartburn,” said Baker, a Democrat who now works at McKenna Long & Aldridge. “Injecting a third party into lawsuits, whose sole interest is financial, is a dangerous precedent that creates an ethical morass for practicing lawyers.  For these reasons and others, the effort to regulate these lenders has generated diverse and broad-based support and will continue to do so.”
The move in Texas to strengthen consumer protection and regulation of this specialty form of lending enjoys support from consumer groups, business organizations, civil justice reform groups and many in the legal community.

Supporters include the Mexican American Chamber of Commerce, Texas Association of Business (TAB), Mexican American Bar Association of Houston, Hispanic Bar Association of Austin, National Federation of Independent Business (NFIB-Texas), Citizens Against Lawsuit Abuse (CALA) and the League of United Latin American Citizens (LULAC).

“It’s rare that you’ll see such broad and diverse support from business, consumer organizations and even many in the trial bar, standing together in support of legislation,” said Bill Hammond, president and CEO of the Texas Association of Business. “The bottom line is we can all agree that lawsuit lending – operating in its current form — simply doesn’t pass the smell test and must adhere to some standards in order to ensure Texas consumers are protected.”

Chip Hough, chairman of Citizens Against Lawsuit Abuse (CALA) of Central Texas, added, “Just like barratry and online advertising scare tactics, lawsuit lending is another practice that preys upon consumers when they are at their most vulnerable. These practices can hurt consumers and also allow uninvolved third parties to leverage lawsuits, and our courts, for their own personal financial gain.”

HB 1595 would apply the same level of consumer protection and transparency that other traditional lenders must provide their customers.  The bill would:

  • Subject consumer lawsuit lending agreements to Finance Code provisions if the annual interest rate exceeds 10 percent;
  • Require consumer lawsuit lenders to be licensed under the Finance Code;
  • Require plaintiff’s attorneys to disclose any consumer lawsuit lending transactions to the court and opposing parties.

“This legislation is about protecting Texas consumers from a rapidly growing and often unscrupulous industry,” Miller added.  “Unsuspecting consumers can end up upside down when they take on a lawsuit loan, often owing more to the lender than they receive in a settlement. By calling their high-rate, unregulated loans ‘investments,’ lawsuit lenders are misleading the public while raising legitimate ethical concerns about their policies and practices.”

In addition to Texas, legislation to regulate consumer lawsuit lending is being considered this year in Illinois, Indiana, Missouri, Oklahoma, Rhode Island, Kansas and Tennessee.

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