A Call for Reform: Protecting Vulnerable Individuals from Predatory Lawsuit Lending Practices
By Dr. Benjamin F. Chavis Jr.
Dr. Benjamin F. Chavis Jr.
My first encounter with the justice system occurred at just 12 years old. I walked into the local library in Oxford, N.C.—a place explicitly off-limits to Black Americans—and attempted to check out a book. The librarian's response was to call the police.
A dozen years later, at age 24, I and nine others were wrongfully accused of arson during race-related civil unrest in Wilmington, N.C. Dubbed The Wilmington Ten, we were unjustly sentenced to a combined total of 282 years in prison. It took over 40 years for the state of North Carolina to issue a “Pardon of Innocence” to us.
These personal experiences as a civil rights advocate have given me firsthand knowledge of how the levers of justice can be manipulated to harm vulnerable individuals and underserved communities. Today, a glaring example of such injustice exists in New York, where the booming and unregulated lawsuit lending industry preys on those in desperate situations.
Also known as "litigation funding" or "car accident loans," lawsuit lending allows individuals to borrow against potential legal settlements or judgments to cover living expenses or medical bills while awaiting case outcomes. In theory, this service could be a lifeline for those without financial safety nets, particularly unbanked or underbanked individuals, many of whom are people of color.
In practice, however, the absence of regulation enables unscrupulous lenders—often backed by hedge funds or foreign interests—to exploit borrowers. Without an interest rate cap, these lenders can charge exorbitant rates, sometimes reaching 200%.
Take, for example, the story of a young mother from The Bronx. After a difficult pregnancy, one of her twins suffered severe brain damage during birth. Overwhelmed by medical bills, she filed a malpractice case and was referred by her attorney to a lender offering a loan with a 65% interest rate, compounding monthly at 1.5%.
Adding to her hardship, the mother later discovered that the lending firm was owned by her attorney’s brother. The court deemed this undisclosed relationship a potential conflict of interest, as the attorney might have influenced her settlement decisions to benefit his brother’s firm.
Only through mandated disclosure of lawsuit loans during the legal process can such ethical lapses come to light. This transparency is essential to ensure fairness and prevent settlements from being delayed, reduced, or improperly influenced to repay predatory loans.
A properly regulated lawsuit lending industry could have provided that mother with fair financial support. It could also serve others, including people like me, who have been wrongfully imprisoned or convicted and are now being aggressively targeted by these lenders.
State lawmakers must act by enacting commonsense reforms. Reasonable caps on interest rates and mandatory loan disclosures will ensure that lawsuit lending serves as a genuine lifeline rather than a predatory trap.
Those enduring some of the hardest times of their lives deserve compassion and protection—not repeated victimization. It’s time to level the playing field and safeguard the rights of vulnerable individuals across New York and beyond.