But it's unlikely the CFPB will take an active role in regulating lawsuit lenders under acting director Mick Mulvaney, or under a future permanent director appointed by President Donald Trump, said Nora Freeman Engstrom, professor of law at Stanford Law School.
"At least in the near term, if there's going to be protection for consumers it will need to come from the states," she said.
Arkansas, Indiana and Tennessee have enacted laws in recent years to limit interest rates to maximums set by existing consumer lending laws or to require disclosures from lenders, said Page Faulk, senior vice president of legal reform initiatives for the U.S. Chamber Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce.
Rich Palma, president of Golden Pear Funding, said plaintiffs who take out advances receive better protection than borrowers may in other lending situations, because their own lawyers typically review, and often sign, advance agreements.
"In our business, the plaintiff is given an agreement that the plaintiff and the attorney both acknowledge," he said.
Because litigation moves slowly, the loans can have a beneficial role to play for injured plaintiffs, said Engstrom.
"What these companies are doing is addressing in some cases a genuine financial need, in that a victim is hurt, the victim can't go to work, the bills keep piling up and settlement is months if not years away," she said. "But the question is are these funding arrangements fair and made with adequate transparency."
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