House squashes 'Lawsuit Loan Shark' bill
The waning days of the 96th General Assembly have been a major departure from a typical lame-duck session. The death penalty, pension reform, worker's compensation reform and tax increases are just a few of the big ticket items brought up during the lame duck session.
But while Illinois residents remain focused on these important issues, a bill to allow for lawsuit lending in Illinois was quietly moving through the legislative process.
The legislation (SB3322) would create a new, unregulated loan industry with virtually no oversight and would open the door in Illinois to predatory "lawsuit lenders" who invest in litigation.
Champerty is the term used for the practice of lending money to litigants in exchange for a cut of the payout. Champerty is an old English word, but the practice of lawsuit lending is very much alive and well in 21st century America. Nationally, there are about $1 billion in lawsuit loans out at any given time.
Here in Illinois, the lawsuit loan industry is trying to push through legislation that would make them exempt from the consumer loan regulations that apply to the so-called "payday" loan industry.
Just hours after a House Committee advanced the SB3322, the full House resoundingly rejected the legislation on Thursday, Jan. 6.
The final vote was 87 voting against the legislation with only 28 lawmakers voting in favor of it.
The victory, though, could be short lived as proponents of the legislation will undoubtedly try to pass the bill again during the 97th General Assembly set to begin on Jan. 12.
But this is not to say the victory won on Jan. 6 is an insignificant one. Lawmakers were under tremendous pressure to vote for SB3322, but they overwhelmingly rejected the legislation. It is true the proponents will try again to get the bill passed, but the final vote tally proves they have a long way to go.
The final vote also shows the power of grassroots activism. The phone calls and e-mails made by people opposed to this legislation in the last few weeks made a difference in helping to defeat SB3322. The efforts clearly paid off as evidenced by the shellacking the bill received on Jan.6.
For the moment, lawsuit loan sharks will not be descending on Illinois and that is certainly welcome news. At a time when jobs are at a premium, the last thing Illinois needs is legislation to incentivize even more jobs-killing lawsuits.
Incentivizing litigation will pave the way for higher judgments and settlements. Plaintiffs will be less likely to accept a fair settlement offer because they will need to clear enough to pay off the lawsuit loan shark, which will ultimately lead to dramatically inflated settlements and payouts.
Illinois should not become known as the land of "lawsuit loan sharks."
An important victory was won in the Illinois Legislature. Hopefully, lawmakers will continue to stand firm against future attempts to get SB3322 passed into law.