Colorado Attorney General John Suthers recently filed a lawsuit against a couple of our competitors regarding the availability of pre-settlement financing in Colorado. Attorney General Suthers wants to portray lawsuit pre-settlement funding as a “loan” so that it will fall under the ambit of the various consumer protection laws which are purportedly designed to protect consumers.
The classic legal definition of a loan includes an absolute obligation to re-pay the advanced funds. Not one pre-settlement funding advance Great Bay Capital has ever made contained an absolute obligation to re-pay the advance. Every pre-settlement funding advance is contingent upon the plaintiff recovering funds from the lawsuit sufficient to repay our advance. If the case is lost, so is our advance. It is a very simple business arrangement. It’s not a loan. The only similarity to a traditional loan is the fact that a pre-settlement advance also charges “interest.” (Wonder what he would think if we just took a percentage of the final settlement, much like the attorney’s do?)
Despite the obvious difference, Mr. Suthers declares his olifactory legal acumen superior, stating “If it looks like a loan, and smells like a loan, it’s a loan.” As we all know, things “smell” different to different people. One man’s “loan” is another man’s lifeline. As we await the presumed appeal in this battle of “loans vs. business arrangements” I leave you with a point to ponder:
It’s comically ironic that the “Consumer Protection Code,” which by definition is designed to protect “consumers,” ends up helping the big insurance companies. Who gets hurt if pre-settlement lawsuit funding is declared a “loan” in Colorado and therefore unlawful if over the pre-determined satisfactory loan interest rates? The big insurance companies will continue the practice of dragging out settlements as long as possible. They know most of America lives paycheck to paycheck. They know that Joe Consumer can’t afford to go another month without funds to make his truck payment. (And, of course, the insurance payment on his truck as well.) Ultimately who gets hurt is the poor consumer, who will lose that truck and his house as a result of someone else’s negligence for which the insurance company is ultimately responsible. I don’t hear Mr. Suthers, or any other of the “consumer protectionists” screaming about the age old insurance company practice of “starving the plaintiff” over time into a settlement. When Mr. Suthers fighs to declare pre-settlement funding a “lawsuit loan,” he should ask himself who is going to pay his family’s grocery bill when he gets hurt?