MONTPELIER, Vt., May 26, 2016 /PRNewswire/ -- Yesterday, Vermont Governor Peter Shumlin signed an omnibus bill, H. 84, containing sweeping new regulations for the growing industry of consumer legal funding, which will bring meaningful oversight of provider companies for the first time in the state's history. The legislation classifies consumer legal funding as a purchase, not a loan, and maintains access for those who need it. Vermont now joins several states, including Oklahoma, Nebraska, Ohio, and Maine, that have enacted strong protections while preserving consumer choice.
This legislative action comes on the heels of an in depth study of the industry completed by Vermont Attorney General William H. Sorrell and the Vermont Department of Financial Regulation (DFR) Commissioner, Susan L. Donegan. The group issued recommendations in December, 2015, that garnered support from industry providers and consumer protection advocates alike — finding rare common ground in an era of political polarization. The new law follows those recommendations.
Consumer legal funding—also known as pre-settlement funding—is a specialty financial service that allows plaintiffs pursuing an insurance claim after an accident to sell part of the potential proceeds of the claim for cash now. Unlike a loan, there is no obligation to the funding company if the consumer does not have a successful outcome to their claim. In addition, because it is the sale of an asset, it cannot affect a person's credit or put them into collections. The legislation made this clear in the statute.
"Consumer legal funding is different from a lot of other financial products. It's easy for a busy legislature to skim over this issue. The Vermont legislature didn't do that. They did their research," said Rob Johnson, executive director of The Alliance for Responsible Consumer Legal Funding (ARC).
Representative Bill Botzow (D-Bennington), a member of the Property and Casualty Committee for the National Conference of Insurance Legislators (NCOIL), led the effort to bring the consumer-friendly regulations to the state and forwarded the bill in the House. "We thank Rep. Botzow for his stalwart leadership on this issue," said Johnson. "Gov. Shumlin, Rep. Botzow, Attorney General Sorrell, and DFR Commissioner Donegan served their constituents well and really worked to get this right."
In developing the report that was the basis for the new law, the group looked at legal funding laws adopted in other states, draft legislation from NCOIL, a 2005 New York Attorney General agreement signed by then-AG Spitzer, and recent regulatory bills introduced in states across the country.
The recommendations called for provider registration, standardizing cost disclosures in contracts, and codifying the non-recourse nature of the product. The recommendations also advised banning provider involvement in a consumer's litigation, or the use of funding for court costs or attorney fees. The bill signed by Gov. Shumlin incorporates all of those recommendations, and goes even further by protecting any confidential information given to the provider regarding the case. Vermont will be the third state to implement this pioneering consumer protection, which will prevent insurance companies from being able to gain an upper hand in court against consumers.
Johnson said, "This is some of the more deliberate, well-researched legislation we've seen in the last few years. It's sure to serve as a model for other states in the years to come. This is good lawmaking in action—a trend which should continue."
These new regulations are set to be implemented July 1, 2016.
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
SOURCE Alliance for Responsible Consumer Legal Funding (ARC)