Georgia Supreme Court Recognizes Legal Funding as Investments, Not Loans

By USClaims

Most personal injury case plaintiffs are not wealthy.  In fact, a recent study by The Federal Reserve found that nearly 80% of Americans live paycheck to paycheck.  This makes the injured particularly vulnerable to unfair treatment and lowball offers from insurance companies, especially if they are unable to work pending the outcome of a case and related settlement.

Georgia Supreme Court Recognizes Legal Funding as Investments, Not LoansTo fight this power disparity, plaintiffs are able to meet their short term needs while their attorney fights for a fair settlement by entering into transactions with a legal funding company, which provides money to a plaintiff with a pending personal-injury case in exchange for a portion of the settlement.

Recently the Georgia Supreme Court granted review in Cherokee Funding, LLC v. Ruth, a lawsuit that sought to determine if the fees charged by consumer legal funding companies were comparable to interest rates and, if so, if the rates were too high based on Georgia’s existing laws governing interest rates.

In October 2018, the Georgia Supreme Court ruled that legal funding is not a loan, but rather an investment. In a consumer legal funding transaction the plaintiff must only repay the funds if their lawsuit is successful, and the amount to be repaid is limited by the funds recovered in the lawsuit.  Therefore, the Court indicated, neither the Industrial Loan Act nor the Payday Lending Act applies to these transactions.

The ruling, written by Associate Justice Keith Blackwell, referenced the fact that the plaintiffs in Cherokee Funding, LLC v. Ruth were not required to re-pay the funds if their lawsuits were unsuccessful, and that their obligations were limited in scope by the damages awarded.

“A plain reading of the quoted portion of the funding agreements demonstrates that the use of the phrase ‘shall receive nothing’ in conjunction with ‘no associated obligation to pay’ means that the requirement of repayment is completely contingent upon the recovery of proceeds from the related legal claims,” the Court of Appeals previously wrote.

The issue of consumer access to legal funding is expected to be revisited by New York lawmakers at their next legislative session in Albany next year. The last legislative session brought with it various proposals to regulate legal funding access. By preserving access to consumer legal funding, New York lawmakers would put the welfare of victims first – a goal that should be their top priority.

At USClaims, we offer pre-settlement funding, if a case is qualified for pre-settlement funding then we would purchase a portion of the proceeds of the anticipated court judgment or settlement for some cash now. USClaims only gets paid if a case is won or has reached a settlement! Apply now or call us today at 1-877-USCLAIMS to learn more.