In Governor Brian Kemp’s press conference on Thursday, he announced that his lawsuit abuse reform package will include increased transparency and accountability surrounding third-party litigation funding. Third-party litigation funding is when a company or individual helps pay for the costs of a lawsuit in exchange for a share of the future settlement or damages. We see this happening in Georgia when third-party lenders provide clients loans to fund lawyers and medical providers who then inflate costs during court cases to increase settlement payouts to line their own pockets. All too often though, it’s the client who is left in debt. 

To bring more transparency to the system and protect consumers, Governor Kemp promised his tort reform package will “require any litigation financers to register with the Georgia Department of Banking and Finance.” The package will also “establish basic guidelines for litigation funds that protect consumers and plaintiffs from predatory practices like bogus fees or sky-high interest rates and make third-party litigation agreements discoverable by the other party in a case.”

The lack of clear regulation in the  third-party litigation funding system is taken advantage of by bad actors looking to profit off of unsuspecting client. Dr. Benjamin F. Chavis, a human and civil rights leader, explained that since there is no interest rate cap “unscrupulous lenders can charge as much as they want — sometimes as much as 200%,” citing the story of one pregnant woman who was directed to a lender from her attorney who gave her a loan with a 65% interest rate. Even worse, she didn’t know that the lender was the attorney’s brother, raising clear concerns about profit motives.

This third-party lawsuit funding also not only harms the victims of these cases, but every Georgian in the state by creating higher insurance premiums and hidden costs, estimated to cost over $5,000 a year per household. More accountability and transparency is needed to protect consumers and victims alike, and we applaud Governor Kemp’s initiative to bring meaningful tort reform to Georgia.