CONSUMERS FOR FAIR LEGAL FUNDING COALITION HAILS HISTORIC GOLDEN STATE PASSAGE OF LAWSUIT LENDING REFORM BILL

California Senate Judiciary Committee Acts to Protect Vulnerable Residents with Unanimous Passage of SB 581, The Predatory Lawsuit Pending Prevention Act

SACRAMENTO, CA, April 26, 2023 — Consumers for Fair Legal Funding – California (CFLF-CA), a diverse group of business, social justice, advocacy, and faith organizations, applauded Anna Caballero (D-14) and her Judiciary Committee colleagues for unanimously voting to pass SB 581—The Predatory Lawsuit Lending Prevention Act and enact commonsense reforms to a currently unregulated industry.

The Reverend Kirsten John Foy, founder of The Arc of Justice, a national civil rights advocacy group, and a CFLF-CA member, was in Sacramento this week to share his experience as a lawsuit lending victim and urge lawmakers to reform the unregulated industry by passing SB 581.

“The victims of this industry are disproportionately members of Black and Brown communities, which have a higher percentage of individuals without a financial safety net,” the Rev. Foy said. “This kind of economic savagery must end. Lenders say they provide a financial lifeline to those in need, which is true. But there are currently no guardrails to protect borrowers from bad actors. SB 581 will enact reforms while preserving access to an important funding stream; I look forward to the day California cements its reputation as a progressive leader and makes this measure law.”

“We are pleased with the advancement of this legislation and proud to be a part of a coalition standing up for vulnerable Californians,” said Greg Fidell, Policy Director at Initiate Justice and member of CFLF-CA. “Lawsuit lending is a booming industry, and consumers need to be educated about and protected from unscrupulous lenders. SB 581 does both. The Judiciary Committee’s vote was a significant step in the right direction, but there is more to be done.”

Lawsuit lending—also called litigation funding, pre-settlement funding, or car accident loans—is the practice of providing cash advances to people suing for injuries, mistreatment, or abuse during their pending cases, to help cover medical bills and living expenses.

Borrowers do not have to pay back these advances unless they win their case and receive a settlement or judgement. But due to the complete absence of regulation, lenders can charge as much interest as they want—sometimes 100% or more. As a result, borrowers can owe most or all of their financial winnings to the lender, and sometimes end up in debt.

SB 581 was introduced in early March by Sen. Caballero, marking the first time an effort has been made to regulate the fast-growing lawsuit lending industry in California, which is seen as a top target state for firms—often backed by wealthy hedge funds—making millions in annual profits.

“Without regulation and transparency, people who are victims of injustices or mistreatment get victimized again,” said Sen. Caballero in a statement on the bill when it was introduced. “SB 581 will provide oversight in the third-party litigation financing process to protect consumers from those seeking to profit from the plaintiff’s injuries.” 

The bill is likely to be reviewed by the Senate Appropriations Committee sometime next month. To learn more about CFLF-CA and SB 581, visit https://www.fairlegalfundingca.org/legislation.  

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About Consumers for Fair Legal Funding – California (CFLF-CA):

Consumers for Fair Legal Funding – California (CFLF-CA) is a statewide coalition working to stop predatory lawsuit lenders, who are targeting of vulnerable Californians, especially people of color. The absence of any regulations or guardrails on the practice has created a burgeoning industry, where large investment firms take advantage of Californians who need financial assistance. CFLF-CA supports legislation like SB 581 to regulate this industry and create an ethical path forward for lenders and borrowers. To learn more, go to https://www.fairlegalfundingca.org/, like us on Facebook, or follow us on Twitter.