New York State Senators Leroy Comie (D. 14th) and Michael Ranzenhofer (R. 61st) have co-sponsored new legislation that would subject consumer litigation funding transactions to state regulation – Senate Bill 3651 – The Consumer Litigation Funding Act.”. A “same as” bill has been introduced in the New York Assembly by Assemblyman Erik M. Dilan (D. 54th). The proposed legislation, if passed, will require certain contract requirements, consumer disclosures, and registration with the Secretary of State for consumer litigation funding companies.
The Georgia Supreme Court recently ruled in Ruth v. Cherokee Funding, LLC, that funding provided to plaintiffs during a pending lawsuit is not a loan under Georgia law. The court reasoned that since the funders did not expect repayment if the plaintiffs lost their lawsuits, the agreements were not loans under Georgia’s Payday Lending Act or the Industrial Loan Act. This decision was a win for the litigation funding industry. In an article in Legal News Line, executive director of the American Legal Finance Association was quoted as saying: “The American Legal Finance Association (ALFA) applauds the Georgia Supreme Court’s decision today recognizing the fundamental differences between pre-settlement advances and loans.”
The Consumer Financial Protection Bureau filed a lawsuit in federal court in California in September 2018 against Scott Kohn, Future Income Payments, LLC, and a variety of related entities including: FIP, LLC; BuySellAnnuity Inc.; Cash Flow Investment Partners LLC; Pension Advance LLC; Cash Flow Investment Partners East LLC; Cash Flow Investment Partners MidEast LLC; Lumpsum Pension Advance Atlantic LLC; Lumpsum Pension Advance Southeast LLC; Lumpsum Settlement West LLC; PAS California, LLC; PAS Great Lakes, LLC; PAS Northeast LLC; PAS Southwest LLC; Pension Advance Carolinas LLC; Pension Advance Midwest LLC; and Pension Loans South LLC.
The lawsuit alleges that these companies violated federal law by “representing to consumers that their pension-advance products were not loans, were not subject to interest rates, and were comparable in cost to, or cheaper than, credit card debt .” These “pension advances” sold to retirees were actually subject to “interest rates” that were substantially higher than credit card interest rates.
On December 8, 2017 Judge Anita Brody issued an “Explanation and Order” concluding that the anti-assignment language in the NFL Concussion Litigation Settlement Agreement “unambiguously prohibits” the class members from assigning their monetary awards rendering “any such purported assignment . . . void, invalid and of no force and effect.” This finding was recently adopted by Judge Loretta A. Preska, Senior United States District Judge for the Southern District of New York in the case styled as Consumer Financial Protection Bureau and The People of the State of New York, by Eric T. Schneiderman, Attorney General for the State of New York v. RD Legal Funding, LLC; RD Legal Finance, LLC; RD Legal Funding Partners, LP; and Roni Dersovitz, 17-cv-890 (S.D.N.Y. June 21, 2018). Judge Preska stated: ” In sum, Judge Brody’s interpretation of the term “relating to” complies with New York contract law and basic principles of contract interpretation by giving meaning to the plain meaning of the phrase. Accordingly, the Court agrees with the Explanation and Order’s conclusion. Accordingly, the Court agrees with the Explanation and Order’s conclusion.”
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