Tennessee Citizens Lose as New Law Leaves Thousands Without a Vital Lifeline
Anti-Competitive Price Controls Taking Effect July 1
Pre-Settlement Funding Companies Forced to Withdraw
NEW YORK--(BUSINESS WIRE)--The American Legal Finance Association (ALFA) announced today that the majority of its member companies are expected to cease serving customers in the state of Tennessee following the enactment of recent legislation taking effect July 1, 2014. SB-1360, which Governor Bill Haslam signed on April 29th, places unprecedented price controls and other anti-business measures on a funding source relied upon primarily by citizens in need of temporary financial assistance for everyday expenses while recovering from injuries in auto accidents, slip and fall injuries, medical malpractice, and other personal injury and tort claims.
“I am an entrepreneur that has successfully served Tennesseans without incident for 13 years. I am shocked and appalled by the success out of state insurance companies achieved by using the Tennessee legislature to bully my locally-built company.”
“We told lawmakers that the industry would have no choice but to cease service to Tennessee customers, which is exactly what we are expecting as this legislation takes effect next month,” said ALFA Chairman Harvey Hirschfeld. “Customers utilize pre-settlement funding in order to pay for everyday expenses while negotiating fair settlements with insurance carriers, and now Tennessee citizens will no longer have access to this funding source. The only winners are billion-dollar insurance carriers that now have even greater leverage over injured Tennessee citizens seeking fair settlements.”
Hirschfeld explained that legal funding is a product that helps individuals injured in an accident who have both a pending legal claim and are represented by an attorney, by providing them debt-free, non-recourse financial assistance to help them make ends meet while they wait for a fair settlement to be reached in their case. These needs usually arise when an individual has been in an accident, usually at no fault of their own, that leaves them out of work with limited financial resources to pay bills or put food on the table – all while awaiting their legal claim to be heard. The funding helps to bridge gaps in personal expenses due to the injury and is not used to file “frivolous claims” as industry critics have stated.
SB-1360, which instituted price controls on the amount a private business could charge for the transaction, was fought by a bipartisan group of legislators in the Tennessee House of Representatives before the legislation was narrowly approved on April 3. According to industry sources, the Tennessee law’s price control provisions would effectively force the industry to operate at a loss. ALFA members have indicated that they have begun the process of notifying customers and employees that they will be winding down their Tennessee operations immediately.
Dan Cleary, operator of Nashville-based legal funding company, Provident Litigation Funding, Inc., stated, “I am an entrepreneur that has successfully served Tennesseans without incident for 13 years. I am shocked and appalled by the success out of state insurance companies achieved by using the Tennessee legislature to bully my locally-built company.”
In addition to the price control provisions within SB-1360, the law also includes two other provisions designed to drive the industry from the State: an anti-assignment provision preventing a legal funding company from utilizing their bank lines to fund the transaction, and a provision which states any (and all) liens take priority and must be satisfied before a legal funding company is to receive funds – no matter who writes the lien or when the individual grants the lien.
ALFA Executive Director Kelly Gilroy added “The intent of this legislation is not aimed at protecting the citizens of Tennessee but is targeted at shutting down the industry. Using the legislative process to favor one business at the expense of another is contrary to America’s free enterprise system. It is especially harmful when a valued product is denied to customers through this process. Our members can’t operate their businesses at a loss, and they have no choice but to exit the business in Tennessee, leaving citizens as the real losing party.”
American Legal Finance Association
The American Legal Finance Association is made up of forty of the country’s leading legal funding companies, who work toward a mutual goal of ensuring fair, ethical, and transparent funding standards in the legal funding industry. All ALFA members sign and adhere to a “Best Practices” code of ethics, and the organization works proactively with state policy-makers to establish legal and regulatory guidelines for the industry as a whole. By helping to establish a regulated, fair system, ALFA has helped ensure a successful and functioning free market that continues to expand and helps more Americans every day.