WASHINGTON, March 14, 2016 /PRNewswire-USNewswire/ -- Last week, the Indiana legislature passed House Bill 1127, validating that consumer legal funding is not a loan—and shouldn't be regulated like one. The bill, sponsored by Rep. Matt Lehman, would make Indiana the third UCCC state whose legislature has come to the same conclusion in recent years. "This part of the bill is a major win for consumers. I'm glad they got it right," said Rob Johnson, former Oklahoma Republican state legislator and Executive Director for The Alliance for Responsible Consumer Legal Funding (ARC). "By passing HB 1127, the Indiana Legislature confirmed that there is a need for consumer legal funding in the Hoosier state."
In 2013, Johnson helped usher in comprehensive consumer protections for legal funding through sensible regulation in Oklahoma—another UCCC state—all while fostering free-market principles, and defining legal funding as its own type of product. Maine, also a UCCC state, passed similar legislation in 2007.
In November 2015, the Colorado Supreme Court went against many federal and state courts from across the country, issuing a decision in Oasis, et al v. Coffman that called legal funding a loan. In its decision the court indicated that its holding was, in part, due to insufficient guidance in statute. Now, just four months after that ruling, Indiana has become the first UCCC state to reject the decision. They were clear, stating explicitly "[a consumer legal funding transaction] is not a consumer loan" and that such a transaction may not "be considered a loan or to be otherwise subject to any other provisions of Indiana law governing loans."
"In the last few months, the Insurance Industry has come out publicly trying to give false significance to the Colorado ruling in an effort to regulate legal funding providers out of business. But what Indiana shows is that when an informed legislature looks at the issue, they agree that the product is not a loan and that there is a need," said Johnson.
The insurance industry and groups like the U.S. Chamber of Commerce—which counts insurance companies as some of their largest members—have come out hard against legal funding providers in statehouse battles across the country. Supporters of legal funding say that this opposition exists because legal funding gives people an alternative to taking a low, unfair offer on an insurance claim.
"This is a product that regular working-class people need to be able to access," said Johnson. "Most Americans can't go months without working. They just don't have that kind of savings. And, who's going to give you a loan when you aren't working and the multi-billion dollar insurance company is slow-waling your claim? We refuse to let people become puppets at the mercy of the insurance industry--allowing them to pull the strings. They use financial pressure to force people into low, unfair settlements for bona fide claims instead of doing what's right by their neighbor. People are not in good hands if they have no alternative."
One tactic used by the insurance industry, in an effort to limit access to legal funding, is lobbying for strict price controls. In many states, they have pushed for price caps far below regular annual loan rates—even when loans can damage a consumer's credit and put them into collections, and legal funding can't.
This tactic was somewhat successful in Indiana. Though the bill clearly states that legal funding is not a loan, price restrictions were also included. Similar price controls in Tennessee have all but eliminated the availability of legal funding in that state.
While this Indiana legislation is a huge win for supporters of legal funding on a larger scale, it may be a loss for Indiana consumers in the near term. "It's not a loan," Johnson said. "They got that right. But the bill differs greatly from the common-sense regulation implemented in other states that brings consumer protections, preserves choice, and encourages free-market principles. We will continue to work with the Indiana legislature to ensure that all people have access to legal funding when they need it most. We are going to make sure the trend of pro-consumer, pro-business legislation continues."
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)