Tennessee Would Be First State in Nation to Enact Law Regulating Lawsuit Financers

INDIANAPOLIS, April 24, 2014 /PRNewswire-USNewswire/ — Tennessee would become
the first state in the country to enact legislation limiting the rate of
interest that could be charged by “lawsuit financers” if Gov. Bill Haslam signs
recently adopted legislation, according to the National Association of Mutual
Insurance Companies. The group is urging Haslam to sign the legislation.

Colorado, Kansas, Louisiana, Maryland, and North Carolina have determined by
court decision, attorney general opinion, or regulation that lawsuit financing
should be treated as a loan or form of consumer credit, but Tennessee will be
the first state capping the fees that can be charged in these transactions by
statute.

Joe Thesing, NAMIC’s vice president of state affairs, said this practice
concerns NAMIC because lawsuit financing interferes with the claims settlement
process, discourages reasonable settlements, increases litigation costs, and
potentially increases litigation. “All of these can result in higher premiums
for insurance consumers,” he noted, adding that the Tennessee General Assembly
should be commended for adopting this common-sense approach to regulating the
controversial practice of providing money to a party to pursue a lawsuit.

According to Erin Collins, the group’s state affairs director for Tennessee,
litigation financers currently have “carte blanche” to charge whatever interest
rate they want. This financing practice is currently unregulated in most states
including Tennessee, which results in consumers being charged interest rates
that can well exceed the original amount of the transaction. “Capping interest
rates will ensure a larger portion of judgments or settlements are preserved for
injured parties, rather than paying uncapped interest rates to financers,” she
said.

Senate Bill 1360 was approved by the Senate on Jan. 14 and was adopted by the
House of Representatives on April 3. The bill provides a regulatory framework
for registration and bonding requirements, enforcement by the state attorney
general, and a 36 percent annual cap plus a 10 percent administrative fee for a
maximum of three years. The fee cap provisions of the bill would not go into
effect until 2015.

NAMIC is the largest property/casualty insurance trade association in the
country, serving regional and local mutual insurance companies on main streets
across America as well as many of the country’s largest national insurers. The
association has 179 members doing business in Tennessee.

Lisa Floreancig
Public Affairs Director, State & Policy Affairs
lfloreancig@namic.org
317.875.5250

SOURCE National Association of Mutual Insurance Companies

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