The Tennessee House of Representatives is expected to consider the Tennessee Litigation Financing Consumer Protection Act in the next few days, a bill that protects consumers from predatory lending practices.
The Nashville Area Hispanic Chamber of Commerce urges legislators to vote "yes" on this legislation. Not only do our Tennessee consumers and business people deserve better, and these companies that engage in this practice should face the same regulation as any other lender in the state, such as a bank or any other loan company.
Today, that is not the case.
These "litigation lenders" are not regulated, of which there are at least 25 companies advertising their "service"; they do not even have to register with the Secretary of State. They go about their business as they see fit, which only benefits themselves, as they loan money to plantiffs — plus interest, of course.
Most of their customers are usually lower-income people who may be hourly workers and need help paying medical bills or living expenses (or even legal fees) while engaged in a lawsuit. Of course, the promise of fast cash looks good to someone who isn't paid if they aren't working.
But any legal settlement cash may quickly go away once lawyers are paid and these lenders are paid, plus interest.
How can any company charge 60 to 150 percent interest? What is right about that?
Nothing. But today in Tennessee, the lawsuit lenders can charge whatever rate they want to — way over and above the bank's rate of 21 percent on credit card accounts and up to 18 percent on installment loans. Thrift companies can only charge 24 percent. Allowing any company to charge any interest rate they choose is not a fair practice and should be changed by law.
What happens to the consumer? They may not only never see a penny from the legal settlement, they may be have to sell a car or a house to pay back the lender — if they even own a car or home.
No Tennessee consumer should be exposed to such predatory practice. The Tennessee Senate approved their version of this bill earlier in the session. This bill would allow these lenders to collect a maximum fee of $300 per year, up to three years, for each $1,000 advanced and places them under the scrutiny of the state attorney general through the Tennessee Consumer Protection Act. The goal is not to outlaw lawsuit lending — it's to make sure those companies follow the same rules as other lenders in our state — but most importantly, that they do not take advantage of Tennesseans. I hope House members will agree and pass HB 1242.
Read the original Op-Ed here at The Tennessean