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March 2017

Regulation in Consumer Litigation Finance

The litigation finance industry has been referred to as "the wild west of finance."  You’ll find many articles on the web pointing to interest rates in excess of 100%.  You may be asking yourself one, isn’t that usury and two, why would anyone in their right mind pay that much?  Well it’s not technically usury.  Under the current laws usury applies to loans and since repayment is contingent upon the outcome of a lawsuit, it’s not considered a loan.  People are willing to pay this much to borrow money because they have no other options.  If you’ve been in an accident, are out of work, have no savings and a low credit score what other options are there?  Also, when the plaintiff repays the amount owed, it comes from the proceeds of their lawsuit so they don’t feel it as much as if it were coming from their paychecks.

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