A litigation funding firm said it is leaving Tennessee as the state now requires firms like his to register and regulates their business of loaning money to consumers bringing lawsuits.
Illinois-based Oasis Legal Finance, one of the country’s largest consumer legal funding services, announced it was leaving the Tennessee market on July 1, the day the Tennessee Litigation Financing Consumer Protection Act went into effect.
The new law imposes price controls and other measures on lenders that provide financial assistance to consumers while they pursue legal settlements.
Oasis CEO Ralph Shayne said the law was a victory for the insurance industry over consumers.
“We weren’t bluffing. We told lawmakers the industry would have no choice but to cease service to Tennessee consumers, which is exactly what we are doing,” said Shayne. “It is lose-lose in Tennessee. Consumers will lose access to funding. Funding company employees will lose their jobs. The only winner is a billion-dollar insurance industry that now has even greater leverage over injured Tennessee citizens seeking fair settlements.”
The new law requires litigation financing firms to register with the state, pay a filing fee of $100, and post a surety bond in the amount of $50,000.
The law also regulates the fees the firms may charge consumers for the financing and gives consumers a right to rescind the deal.
Under the law, lenders must allow a consumer to cancel the litigation financing contract without penalty or further obligation if within five business days following the consumer’s receipt of the funds, or execution of the litigation financing contract, whichever is later.
Firms are prohibited from charging more than 10 percent of the loan and one annual fee per year of $360, or $1,000 over three years, the maximum length allowed any such contract under the law.
The litigation agreement must indicate whether the consumer is represented by an attorney and how the attorney will be paid.
The law defines litigation financing as “making non-recourse transactions in which financing is provided to a consumer in return for a consumer assigning to the litigation financier a contingent right to receive an amount of the potential proceeds of the consumer’s judgment, award, settlement or verdict obtained with respect to the consumer’s legal claim,” according to Secretary of State Tre Hargett.
The bill was sponsored by Republican Senators Jack Johnson of Franklin and Curtis Jonson of Clarksville. Gov. Bill Haslam signed it into law in May. The Senate bill (SB 1360) passed 27-2, while the House (HB 1242) approved its version 52-36.