A quick internet search for “lawsuit loans” turns up millions of results from companies looking to lend money to injured parties waiting for a lawsuit to settle or reach a verdict. These funders promise a cash advance for medical bills or just day-to-day living expenses, and their websites share tales of grateful “borrowers” who can’t say enough good things about their experience with the practice.

But here’s the truth.

Lawsuit cash advance firms are not regulated under New York’s consumer protection laws because lenders claim the loans are actually “investments,” and their interest rates charged are not subject to usury limits (16%). Interest on these loans is often compounded monthly, and the annual rate can be more than 100%. Injured parties may win their lawsuits only to receive a small fraction of the settlement after legal fees and interest. In the worst cases, injured parties become victims again and end up in debt to the lawsuit lender.

These are the true stories of lawsuit lenders and their victims.

THE REAL STORIES

Elmer Santiago 9/11 first responders scammed out of settlement funds

In February 2017 New York Attorney General Eric Schneiderman filed a complaint against RD Legal Funding, a New Jersey based lawsuit cash advance firm, for shamefully taking advantage of 9/11 first responders and brain-injured NFL players by offering high interest advances on expected payouts from legal settlements.

In 2016, former NYPD officer Elmer Santiago was sued by RD Legal for refusing to pay 66% interest on the advance loaned to him by the company as he awaited payment from the federally-funded Ground Zero Victims Compensation Fund.

The Attorney General’s filing also highlights the case of an unnamed first responder on the ground on 9/11 who was advanced $18,000 while she awaited settlement funds, after six months she owed $33,000—an 83% increase in less than a year.

Photo: New York Daily News

Joseph Gill “LawBuck$ won’t let me get on with my life”

Brooklyn resident Joseph Gill borrowed $4,000 from lawsuit lender LawBuck$ to pay for medical bills while his lawsuit against the NYPD was in court. By the time Joseph’s lawsuit settled five years later, LawBuck$ demanded repayment to the tune of $116,000—29 times the amount loaned. The Judge who presided over Joseph’s case, Justice Ellen Spodek, demanded that LawBuck$ explain it’s loan agreement, reportedly calling the loan “usurious” and “unconscionable.” Currently, a ruling has not been reached.

Photo: New York Post

LAWSUIT CA$H ADVANCES

Carolyn Williams “I was definitely misled” In 2007, Carolyn Williams, a former nurse in the midst of a disability lawsuit with her former employer, borrowed $5,000 against her case to pay medical bills. The lender, USClaims, did not inform Williams or her lawyer of the rate of interest to be charged on the loan, and it was not until nearly a year later that she discovered the annual rate was 76%. Quoted in the New York Times, Williams said, “I was definitely misled. I never expected that high of a rate.” After three years, Williams’ case remained unresolved and her loan debt had ballooned to nearly $19,000.

Photo: The New York Times/Gary Tramontia

Former New York City Police Officer Anthony Flammia developed sleep apnea and lung scarring after working for three months in the wreckage of ground zero. In 2010, he joined more than 9,000 other ground zero workers in a class action lawsuit against numerous City agencies. Unbeknownst to Flammia, however, his lawyers borrowed more than $35 million to finance the lawsuit—a fact he first discovered when he received an interest bill for $828.93. The law firm attempted to bill clients $6.1 million of the $11 million owed on the loan— fortunately the judge overseeing the case, Alvin Hellerstein, ordered the law firm to pay the entire cost.

Anthony Flammia “I’m going to be very careful”

Brooklyn resident Elwin Francis borrowed $27,000 from lawsuit lender LawCash while his slip and fall lawsuit was pending. When the case finally settled for $150,000, Francis was relieved to be done with the ordeal. To his horror, he discovered that he owed LawCash $99,889 for interest and principal on the loan. After paying his lawyers, he was left with only $111. Francis sued his lawyers for legal malpractice, but the case was dismissed by the Supreme Court in 2013.

Elwin Francis Received less than 20% of his final settlement

Sources

Elmer Santiago: Whitehouse, Kaja. “Lender scammed 9/11 first responders out of millions: suit”. The New York Post. 7 February, 2017. http://nypost.com/2017/02/07/lender-scammed-911-first-responders-out-of-millions-suit/ Joseph Gill: Gorta, William J. “Bitten by Lawsuit ‘Sharks’”. New York Post. 12 December, 2011. http://www.nypost.com/p/news/local/brooklyn/bitten_by_lawsuit_sharks_50H1EYevFanwCmIFBzgsWM Carolyn Williams: Applebaum, Binyamin. “Lawsuit Loans Add New Risk for the Injured”. Center for Public Integrity/The New York Times. 14 January, 2011. http://www.publicintegrity.org/2011/01/14/2198/lawsuit-loans-add-new-risk-injured Anthony Flamia: Applebaum, Binyamin. “Betting on Justice: Borrowing to Sue”. Center for Public Integrity/The New York Times. 15 November, 2010. http://www.publicintegrity.org/2010/11/15/2320/betting-justice-borrowing-sue Elwin Francis: Rogers, Joan C. “Law Firm Wins Dismissal of Suit by Client Whose Litgation Loans Ate Up Settlement”. Bloomberg BNA. 30 January, 2013. http://www.bna.com/law-firm-wins-n17179872101/

Photo: The New York Times/Gordon Grant