In a recent op-ed published in The Washington Informer, Dr. Benjamin Chavis, a human and civil rights leader and president of and CEO of the National Newspaper Publishers Association, wrote about the need for third-party litigation funding reform and the dangers of an unregulated system with little transparency. He notes how unregulated “litigation funding” disproportionally harms Black and Brown communities, who often have fewer financial safety nets. 

Dr. Chavis warns that because many accident victims and others with major claims borrow against potential settlements or judgments to pay for current legal fees and medical expenses, the lack of regulation enables unscrupulous lenders to charge “as much as 200%” in interest, trapping vulnerable patients in debt. 

One particularly egregious example Chavis highlights involves a Bronx mother who was paying for a 65% loan that compounded monthly:

“Adding insult to injury, the mother later discovered that the firm her lawyer recommended was owned by the attorney’s brother. The court ultimately determined that the lack of knowledge of this relationship could be interpreted as a conflict of interest, since the attorney could have influenced his client’s acceptance of a settlement to his brother’s benefit.”

He notes that these practices are not confined to New York, and are occurring across the country, often trapping people in cycles of debt due to lack of proper oversight and regulation. 

Chavis goes on to call for for commonsense reforms that “reasonably caps interest rates and ensures transparency,” concluding:

“Only by mandating the disclosure of lawsuit loans during the legal process can potential ethical lapses like this one be sure to be brought to light, leveling the playing field for all parties. Who knows how many settlements have been delayed, decreased or improperly influenced to the detriment of borrowers merely to ensure that usurious loans are repaid to their predatory lenders?”