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Illinois legislators thwart bill to encourage lawyers' lawsuit loans

From the Illinois Civil Justice League, an e-mail alert.

SPRINGFIELD - Legislation that would allow loans to litigants in lawsuits as cases proceed through court systems was overwhelmingly blocked Thursday by a coordinated effort by business organizations, including the Illinois Civil Justice League, Illinois Insurance Association, Illinois Chamber of Commerce and others.

SB 3322, the "Non-recourse Civil Litigation Funding Act" -- or more commonly referred to as the "Lawsuit Loan Shark" bill -- is not dead yet but an amendment by the sponsor, Rep. Louis Lang, D-Skokie, was trounced on the House floor, 87-28, Thursday afternoon.

Substantive language had been stripped from the bill and he amendment, agreed to in the House Judiciary Committee earlier Thursday, became the substance of the bill and it's rejection on the House floor means the bill is dead, most likely for the balance of the current legislative session which technically ends early next week when the 97th General Assembly begins.

The bill's text and legislative history are available here.

Illinois Lawsuit Abuse Watch has been actively working against the bill. Give The Chicago Tribune credit, as well, for helping to prevent the bill's passage through its Dec. 23 editorial, "Lawsuit loan sharks," reminding readers of the crime of champerty. Excerpt:

The bill before the General Assembly would carve out a special new niche for this industry through the Department of Financial and Professional Regulation: Lawsuit lending would be exempt from the state's consumer-loan regulations, circumventing dusty prohibitions against champerty as well as up-to-date fair-lending laws.

The bill would require specific disclosures spelling out terms of the loans. But those consumer protections amount to mere window dressing. Borrowers easily could wind up handing over their entire proceeds from a settlement to cover the loans they got when their cases started.

And there's ample evidence that litigation lending leads to abuses, including cases brought only because lenders see the potential for a payoff.

With legislatures convening all across the country this month, it would pay to keep an eye out for similar pieces of law-distorting special interest legislation in other states.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.