West Virginia Cracks Down on Consumer Litigation Lenders

Accepting Cases in Morgantown, Wheeling, Martinsburg & Nearby West Virginia

Posted: July 22, 2019

Consumer lawConsumer litigation funding is controversial. If you’re not familiar with it, it refers to companies that lend money to plaintiffs who have cases in litigation in exchange for repayment when and if the plaintiff receives a recovery. Those companies are different from commercial litigation finance companies, which make loans to litigants and their lawyers in much larger amounts.

In West Virginia, legislation regarding consumer litigation financing went into effect on June 5, 2019, and is located at West Virginia Code §§ 46A-6N-1 through 46A-6N-9 as part of the Consumer Credit and Protection Act. The statutes place restrictions on virtually every facet of a litigation financier's operations in the state. A recent article in Law.com entitled "As the Litigation Funding Industry Grows, So Do Efforts to Control It" describes legislation enacted by at least ten states, and says that West Virginia "capped interest rates so that funders have mostly stopped doing business" here. 

That will be good news to the legislation's proponents, which are primarily corporations and insurance companies. According to the article, "groups such as the U.S. Chamber Institute for Legal Reform, a business lobbying group, the Lawsuit Reform Alliance of New York, and members of the insurance industry including the National Association of Mutual Insurance Companies (NAMIC) have the lawsuit lending industry in the crosshairs. They argue that lawsuit investment could distort the civil justice system, spur more lawsuits and encourage claimants to press for unreasonable settlements."

One could be forgiven, though, for thinking that the West Virginia legislature is hyper-vigilant in its protection of consumers' rights because these laws are weighed so heavily in favor of the consumer. One would be wrong. For many years, West Virginia's Consumer Credit and Protection Act was considered to be among the best consumer-protection laws in the country and served as the model for other states' laws. Since 2014, however, the legislature's interest has been in restricting and eliminating consumer protections, and these laws maintain that approach.

How do they do that? By imposing so many restrictions and limitations on the ability of consumer litigation lenders to operate in West Virginia that the lenders decide not to do so. I'm not defending or advocating for consumer litigation funding, which may not be appropriate or even necessary for most plaintiffs, but the legislature should not act to ensure that the only well-funded party in litigation is the defendant, which enjoys a built-in financial advantage over almost any plaintiff anyway, under the guise of protecting the consumer-plaintiff. 

Schedule Your Morgantown Consumer Litigation Consultation Today

If you have any questions about consumer litigation funding or any other consumer-related issue, please call me at (304) 769-6058, email me at jeff@mehaliclaw.com, or fill out the contact form on this site. I have more than 30 years of experience pursuing justice for wronged consumers. I serve Morgantown, Wheeling, Martinsburg, and nearby areas of West Virginia. 

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