HOW IT WAS:
These loan companies, also known as personal injury finance companies, have been around for a few years now. They advertise on television and provide the service of loaning you money today on your eventual settlement of your personal injury case. These companies have created a lot of emotion and controversy. On one hand these companies have served as an invaluable lifeline to people on the brink of homelessness. On the other hand, their interest rates on settlement vary but are largely outrageous, upwards of 40-80% per year or more.
For some time now lawyers who focus on personal injury cases have wondered when the State of Colorado might intervene and determine the legality of these sorts of loans. Colorado has laws restricting the interest rates that can be charged and these companies vastly exceeded those interest rate limitations. These companies argue that they are not subject to the interest rates laws because this type of loan isn't a loan at all. It is called "non-recourse financing." Meaning, if you win or settle your case, you owe them, but if you lose your case, you don't owe them anything.
Well, on April 29, 2010, the issue was finally addressed by the Colorado Attorney General's Office. The state's attorney was asked to provide an opinion as to the legality of these loans and whether these companies needed to be licensed like banks and regulated on the interest rates they charged Colorado consumers.
The four page opinion letter, detailed unequivocally that these sorts of loans were subject to the laws regulating interest rates in Colorado, and that these companies had to be licensed and regulated like a bank in order to provide loans, and certainly not at the rates of interest that was occurring.
If you received a cash advance on your personal injury claim that has yet to be paid back, I think there is a real question as to the collectability of these loan proceeds. More specifically, on the clear language of the Colorado Attorney General's opinion letter these companies should feel lucky to get back their principal, and very likely little or no interest.
The down side of course to this recent finding is that many thousands of people needing these loans will likely find no one willing to finance them. However, in the short run, those in the position of currently owing these companies would do wise to make sure that their personal injury lawyer is aware of the State's attorney's position when they negotiate these loans. If you think this may apply to your case, go to this LINK and print the letter off for yourself and then take it to your attorney to discuss it with him.
If you have taken a cash advance on your personal injury claim, there are recent legal developments under the Colorado State Attorney General's office that raises questions as to whether those funds must be paid back. If your attorney is unaware of these developments, consider speaking with one of our attorneys who are familiar with the current legal climate.
At Anderson, Hemmat & McQuinn, we know the importance of staying current on developments in Colorado law and realize that often times, changes in the law will have a significant impact in the amount of money we are able to get to our clients to help compensate them for injuries they received through no fault of their own. If you have questions about how these matters may affect your case, please do not hesitate to contact us.