I have an excerpt of what Big Insurance industry agents are saying in their letters to Republican House members of the Tennessee General Assembly on why to support HB 1242, which will ban legal funding in Tennessee.
The letter from a State Farm agent opens with, "I wanted to share some insights from the insurance industry concerning HB 1242."
Yes, the industry that is adverse to the consumer in litigation has some thoughts for you.
"Currently lawsuit funding is completely unregulated in Tennessee. As a result, there are more than twenty-five lawsuit lenders advertising in this state, charging an unlimited amount of interest that often exceeds 100% annually."
First off, 25 providers sounds like a pretty competitive market. Second, the legislation amendment provided by the legal funding industry offered fee caps as low as 36% for consumers willing to make current payments, and well below the Big Insurance industry's inflated claim of 100% annually.
"Lawsuit funding increases litigation costs, inflates settlements, crowds court dockets, and diminishes recoveries for injured plaintiffs. Ultimately it is the policyholders who are left paying the price for these abusive practices through increased premiums."
No evidence for any of these claims exists. These claims are small, and are only getting to the court dockets if Big Insurance companies are aggressively fighting the consumer's claim. Insurance profits are also at a record high, and insurance carrier surpluses have increased substantially over the course of the last 10 years that a legal funding industry has been active. CEO compensation at Big Insurance companies is a more likely contributor to premium increases.
"Other alternative lenders such as payday lenders, title pledge lenders and pawnbrokers are regulated in Tennessee, and their interest rates are capped in order to prevent predatory lending to vulnerable consumers."
These products do not involve the sale and purchase of an asset, and unlike a lawsuit funding transaction these products create debt. These products also are, unlike legal funding, priced well in excess of 100% in Tennessee. In fact, last week the Tennessee House approved a bill that allowed for payday companies to charge 276%. The legal funding industry is a lower cost alternative to these products that does not create any cycle of debt issues.
"Regulation of the lawsuit funding industry is supported by the Tennessee Chamber of Commerce, U.S. Chamber of Commerce and multiple business interests."
Excellent reasons not to support the bill. As consumer groups know over many years of experience, if the US Chamber of Commerce is for something then it cannot be good for the consumer.
Maybe this "grassroots" effort will be effective, and the Tennessee State House Republicans will block poor peoples' access to capital because of "concerned" insurance agents like this. Tomorrow, we will find out when the Tennessee State Republicans vote on whether they will block working poor people from making their own decisions.