New York Attorney General Eliot Spitzer on Monday announced that his office has obtained agreements with nine companies that will reportedly change the way cash advance companies do business with New Yorkers with pending personal injury claims or lawsuits.
The firms – all members of the American Legal Finance Association – specialize in providing cash advances – generally $1,000 to $7,000 – to consumers with pending personal injury litigation. In exchange, each company obtains the right to receive a share of the claim proceeds, an amount that significantly exceeds the advance.
Prior to the settlement, the Attorney General raised concerns that some cash advance arrangements could exploit consumers due to the complex nature of the transaction and the fact that many customers are not fluent in English, often the only language in which the contracts were written.
“These agreements will fundamentally change the manner in which these personal injury litigation cash advances are offered and negotiated so that consumers can make more informed decisions,” Spitzer said.
The cash advances provided by these firms are not considered “loans” under New York State law because there is no absolute obligation by a consumer to repay them. The contracts provide that, in the event the consumer receives no recovery from his/her claim, the consumer owes no money to the cash advance firm.
The settlement agreements with these firms mirror an accord Spitzer’s office reached last June in a similar case involving Cambridge Group LLC. Some of the reforms include:
• Clear and conspicuous disclosure statements regarding the cash advance, including the total mount of the cash advance; an itemization of one-time fees such as application, processing, broker and attorney review fees; the annualized rate of return on the cash advance; and the total amount to be repaid; broken down in six month intervals, carried forward to 36 months;
• A five-business-day right to cancel the contract without obligation or penalty;
• A notorized acknowledgment by the consumer’s attorney that the contract has been reviewed and explained to the client;
• For English- and Spanish-speaking consumers, contracts written in the same language in which the oral negotiations were conducted. For consumers whose primary language is neither English or Spanish, a translation of the principal terms into their native language.
In addition, the nine settling companies have agreed to pay a total of $45,000 in costs to the state.
The companies settling with the Attorney General are: BridgeFunds Limited (Nevada); Magnolia Funding, LLC (Carl Place, New York); New Amsterdam Capital Partners LLC d/b/a LawMax (New York City); Oasis Legal Finance Co., LLC (Illinois); Plaintiff Funding Corporation d/b/a LawCash (Brooklyn); Plaintiff Support Services Inc. (Amherst, New York); Pre-Settlement Finance LLC (New York); QuickCash, Inc. (New York City); and the Whitehaven Group LLC (New York City).
Individuals with complaints about personal injury litigation cash advances are encouraged to contact the Attorney General’s consumer help line at (800) 771-7755.
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