When Larry Long suffered a stroke due to his consumption of prescription pain medication Vioxx, it resulted in significant harm, both physical and financial. He became dangerously close to foreclosure while waiting for a settlement from a class-action lawsuit, and had to explore his diminishing options until he could receive the money he knew was coming. He decided to take out a loan from lawsuit lender Oasis Legal Finance in the amount of $9,150 to tide him over until his settlement came through. When he finally received his settlement of $27,000 a mere 18 months later, Long found himself owing Oasis over $23,000.
Unfortunately, stories like Long's are all too common. Lawsuit lenders are a fairly recent phenomenon, growing in popularity and success over the last 10 years. Their purpose is to loan money to people who are fighting court battles or waiting on settlements, providing immeasurable relief and peace of mind to plaintiffs who are unable to make ends meet due to an accident or injury. While the benefits of such a loan are undeniable to those in need, they are often caught by surprise when the lender gives them a final bill.
Companies such as Oasis are quick to disclaim their role in the process, stating that they are not lenders but investors or financers, and basing this claim on the fact that personal injury plaintiffs are not required to repay the loan if they do not win their case. They cite this justification for their high interest fees, stating that they lose money in between five and 20 percent of the cases they fund. However, lenders work hard to make sure that the number of losing cases they take on is minimal, rejecting approximately 70 percent of all loan applications and lending no more than 20 percent of the amount they expect the plaintiff to win, on average. In fact, they employ attorneys whose sole duty is to analyze cases and 'pick winners'.
We will continue our discussion of this topic on Monday.
Source: Herald-Tribune, "Lawsuit Loans Add New Risk for the Injured", Binyamin Appelbaum, 17 January 2011