Top state court says litigation funding is subject to consumer lending law
A litigation finance company has lost its bid to persuade the Colorado Supreme Court that providing interim funding to allow a tort lawsuit to proceed is more like making an investment than making a loan.
In a Monday decision (PDF), the state’s top court declined to issue a declaratory judgment sought by Oasis Legal Finance and instead held that such transactions are regulated by the state’s Uniform Consumer Credit Code.
Individuals who get the money from litigation finance companies but don’t win their tort cases owe nothing. However, winning parties can later face hefty interest payments to the companies, according to the Denver Business Journal and Forbes.
Oasis hasn’t done business in the state for some time, but was hoping, along with others in the industry, for a green light to resume operations without being subjected to restrictions imposed by the UCCC.
“It will limit the options of thousands of Colorado citizens who each year seek legal funding while they pursue the fair value of an insurance claim,” said the Alliance for Responsible Consumer Legal Funding in a written statement, referring to the supreme court’s decision.
