There are several companies that offer to loan personal injury plaintiff’s money in exchange for a few ‘processing fees’ and interest on the loan. They go by names like case advance companies, lawsuit loan companies, lawsuit cash advance companies, lawsuit lending companies, and other similar names. Some only offer to advance money towards a settlement or a structured settlement payout. In the end, they are all very similar. They are personal injury loan sharks. We discourage clients from using a personal injury loan company as discussed below.
Personal Injury Loan Sharks
What most people do not realize is that these companies are the loan sharks of the personal injury world. They prey on people when they are down, hurting, cannot work, and cannot think straight. They get you to agree to a small loan in exchange for outrageous interest rates compounded monthly instead of annually. Or, they may offer you pennies on the dollar now for a settlement that has a structured future payout. By the time a personal injury plaintiff’s case settles, their $2,000.00 loan plus a $300.00 fee has quickly become a $7,000 debt.
How Personal Injury Loans Harm Your Case
The problem these lawsuit funding companies create for the average personal injury attorney in Houston TX is that he is faced with trying to make a settlement work when the plaintiff has already received his money. Why would the plaintiff want to accept what would normally be a reasonable settlement offer when he is receiving nothing in his pocket at the end of the day? The plaintiff now has no real risk because he can go to trial, gamble and if he loses, he discharges all debt to the lawsuit advance company in bankruptcy. So why accept the reasonable settlement that simply pays off what he owes?
Attorney-Client Privilege May Be Compromised
In addition to the above problem, personal injury loan companies create a whole different problem. They are not stupid. They do not want to loan money on bad cases. Thus, to extend the loan, they want the attorney to give them all the details of the case. Some of this information may be privileged. The kind of disclosures case loan companies seek could very well violate the attorney-client privilege.
The personal injury lawyer handling the case has to be very careful about what he discloses and what he refuses to disclose, even though the refusal may make the loan shark decline the loan. Sometimes the best solution is for the lawyer to hand the file back to the client and part ways. Particularly when it appears that the client is going to insist on a course of conduct that could result in hindering the effective representation of the client.