Limit regulation, let the free markets cure everything. Key Republican principals. Tennessee State Senator Jack Johnson wanted to make sure he started the year off on the right foot by proving that Republicans have no shame when it comes to conveniently ignoring fundamental principals. He decided to bag some favor points with the US Chamber of Commerce, the Tennessee Chamber of Commerce, State Farm and Allstate and the rest of the minions of big insurance early. His big kiss was to pass their model bill on lawsuit lending without taking into account any input from the legal funding the bill targets with regulation. Big insurance gets a love kiss, Legal funding gets the double whammy kiss of death with "a fairly handsome rate of return" (the words of State Senator Jackson) of 25% that does not even adequately cover the industry loss rates, to say nothing of its other costs, and intimidating, invasive and unnecessary automatic unilateral discovery requirements for consumers that will scare them out of entering into a transaction.
I previously shared a link to the online audio of the floor debate. I have added some of the more quotable moments below.
This is from State Senator Green, who opposed the bill and stayed true to his Republican principals (which in this circumstance, I respect):
"I’m a physician I mean listen litigation I am not a -- the trial lawyers and I we do occasionally have some differences of opinion but you got a guy who can’t pay his water bill who needs some help he goes to these funding guys to get his bills paid until an appropriate settlement can be done. You know and I guess I also want to make a comment about risk and reward as I understand it. I am really opposed at the core of my conservative free market being telling someone that oh you are going to roll the dice on this risk. And we are going to tell you how much reward you can get out of it, we are going to cap it at a certain amount. And I just would like to share my opinion on that I’m opposed to telling someone who’s willing to take risk wait for that reward that we are going to say this is the best you are going to get out of the deal, so thank you."
State Senator Jackson's response:
"I respect your view points that the bill that’s before you will create the Tennessee Lawsuit Funder Consumer Protection act. These folks do provide a valuable service to folks out there in need and you made that point very well. And believe it or not there are some in the business community there are some probably in this chamber who would want to outlaw this practice altogether. Would want to do away with this practice altogether, the bill doesn’t do this. It allows the practice to continue and allows for those entities that are willing to do it to put some money at risk as you say. And for what I would submit to you I would assert to you is a fairly handsome rate of return on the loan, the investment, the funding whatever nomenclature you want to use to describe this particular transaction. Now again I point out it’s not as if these people are taking every plaintiff that comes in the door. They underwrite, they evaluate, they examine the merits of the case they discuss it with their attorney and ultimately decide that at the end of the day there is a pretty strong likelihood that this case will result in a settlement of some amount of money and therefore, they will advance the money if they don’t think there is any merit to the case they are not going to getting into the risk reward comment, thank you Mr. Speaker."
State Senator Gardenhare:
"I have a real problem with this body or any of us dictating to an industry what they can and can’t do when it’s a free market society. I mean that just goes against the core of my basic beliefs and the core of the basics of what a lot of us I know believe in. I don’t think we ought to be involved in. And number two is, if you said okay 25% that’s a fair profit what happens when interest rates go back up like they did in the ‘70s and ‘80s and don’t dare tell me that that can’t ever happen again. All of a sudden 25% may be too low that you can't do it, why put a cap on something."
He continues with:
"I have a real problem in us voting to put a cap on anything if you think 25% is fair well maybe I think 10% is fair or maybe 50%. But just to say 25% in a time period in the economy when interest rates could skyrocket, they are at the lowest possible levels they are right now anyway. And if it goes up the 25% is going to be nothing. So why put an artificially capped rate on there that could be totally outdated in a couple of years. And second when you put a cap on any type of industry like this right here you are making it a monopoly for a certain people. And if you think those guys are that bad, why are you making the entry level for people to compete against him, why are you wiping that out. Because that’s exactly what you are doing you start constricting the way people can do business. By the way Mr. Speaker I like your flowers."
He further continues:
"You mentioned in your talk before that about the way they evaluate their loans or they evaluate their investments and how they do all sorts of studies on it. And come to a conclusion this is a profitable loan to me, didn’t you just describe to me the life insurance industry or the regular insurance benefit with all the types of things they go through and whether or not to write a policy on somebody? Maybe we should go back and revisit and make sure that an insurance company covers everybody and not just exclude them because they think it’s a bad risk or underwrite them because it’s a good risk. I mean you are violating the basic principle of free enterprise here."
The limited floor debate ends, the US Chamber's model act gets approved, and afterward State Senator Kyle makes a comment to poke a finger in the eye of his
hypocritical colleagues:
"Well I won’t take the senator’s time ladies and gentlemen we have an unregulated industry that’s providing a service that we now propose state regulation, welcome to the majority."