WASHINGTON, June 27, 2016 /PRNewswire/ -- It is not common to see bi-partisan support behind well-researched and debated legislation the spring before a big November election faceoff, especially on a much-debated topic like consumer legal funding. But, that's exactly what has happened in Vermont and Indiana—two states that couldn't be more different politically.
Both Vermont and Indiana state legislatures recently passed game-changing legislation set to go into effect July 1. The bills create regulatory structures in these states for consumer legal funding —also known as pre-settlement funding—and will not only enact robust consumer protections, but also maintain access for those that need to use it.
With three-quarters of Americans living from paycheck to paycheck, giving people options has been a big need in communities across the country. Consumer legal funding allows cash-strapped individuals pursuing a legal claim after an accident to sell part of proceeds of the claim for money to help them get by while they seek a fair resolution. It's a concept many can get behind, but because it is different from most other financial products, finding the right way to implement regulations can be tricky.
"Consumer legal funding can be a lifeline for people after an accident. Your body can take time to heal, legal cases take time to settle, but life goes on. The mortgage has to be paid, you have to provide for your family. With so many families in our country living on the financial edge, an event like an accident can be devastating. Even missing a week at work can really put people behind," said Rob Johnson, Executive Director of the Alliance for Responsible Consumer Legal Funding (ARC). "We are so happy legislators in these states recognized the need and took the time to do this right."
In Vermont, Attorney General William H. Sorrell's Office and the Vermont Department of Financial Regulation (DFR) took over six months investigating the issue of consumer legal funding and issued recommendations to the General Assembly. In Indiana, consumer legal funding was a hotly debated topic for several years in the state legislature. The legislation that passed this year contains many of the same consumer protections as the Vermont bill, and bills from other states.
These consumer protections include notice and disclosure provisions, standardization of contracts, attorney sign off, protection of attorney-client privilege, and the banning of attorney referral fees. It also makes the important distinction that consumer legal funding is not a loan. Because it's a sale and purchase of an asset, not a loan, if a person loses their case, they owe nothing. It also can't affect a person's credit, put them into collections, or cause other collateral damage—potentially making it a safer alternative to loans.
In both Vermont and Indiana, the legislation that passed received widespread support across party lines—something rarely seen in the current confrontational political landscape. Johnson said that the key to success was that this new wave of consumer protections and regulations not only protects citizens by setting guidelines for consumer legal funding providers, but also protect individual choice.
"I think we will see these regulations inform future bills in states across the country. This is how great public policy gets made," said Johnson.
The Alliance for Responsible Consumer Legal Funding (ARC) is a coalition established to preserve legal funding as a choice for the many Americans who have suffered an unexpected economic loss due to an accident and have a pending legal claim. Legal funding can help families pay for immediate personal needs such as rent, mortgages, car repairs, utilities and groceries while they wait for their claims to settle fairly. ARC trade association promotes practices and regulations that lead to informed decisions between individuals and their attorneys, so families have more options—not fewer.
Contact: Crystal Olsen
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SOURCE Alliance for Responsible Consumer Legal Funding (ARC)