Last November, I reported that the Illinois legislature was set to discuss Senate Bill 3322 which attempted to regulate entities that lend money to litigants in exchange for an assignment of an amount of the potential proceeds of the litigants' legal action. This coinicided with an article on the subject in the New York Times (See here.) and an interesting discussion of the legal and ethical issues that relate to the litigation loan industry in Room for Debate, the Legal Ethics Forum and The Wall Street Journal Law Blog.
The proposed legislation in Illinois was defeated today, though. The Chicago Daily Bulletin is reporting that Senate Bill 3322 failed to get the support it needed to make it out of this year's veto session. Rep. Louis I. Lang is quoted as saying that the funding entities now "will be able to charge 1,000 percent interest. They can do anything they want. No consumer protections at all."
The civil litigation funding industry has been providing its services in Illinois for more than a decade without regulation. Here are the highlights of the failed proposed legislation
-- legal funding companies would be required to be licensed by, and to give annual reports to, the Illinois Department of Financial and Professional Regulation
-- lenders would be required to provide plaintiffs with a detailed contract and a five-day window to cancel their contract
-- there would be criminal and civil penalties for individuals who engage in the business of legal funding without a license.
-- the interest rate on loans would be capped. Illinois would have been the first state to enact such a cap.
According to the article, it is unlikely the proposal will be presented again.