December 10, 2019 | Firm News
If you’ve recently signed with a defective medical device lawyer, and you are now a claimant in a lawsuit against a medical device or drug company defendant, then you’ve probably heard from companies offering to loan money before your case is settled, (at an extremely high interest rate of course) hoping to capitalize on the fact that you may be facing financial challenges while waiting for your claim to resolve. Terms claimants should be aware of include recourse and non-recourse cash advances, and pre-settlement advances. Recourse advances have as part of their agreements, that the company can use any declared collateral, like boats, homes and cars, to settle the loan.
The impact of predatory lending on claimants who are already dealing with multiple medical procedures, poor health and financial loss can be dire. Increased stress levels, ongoing concerns about when their case will settle, and loss of work and income all have the potential to negatively impact the claimant’s health and well-being. In exchange for a short-term gain, these companies position themselves to recoup a sizable chunk of the claimant’s settlement award.
Many claimants who take out these loans not only have their final recovery fully absorbed, but then owe even more as interest accrues during the claim period. For mass torts like defective drugs and medical devices, settlement can take anywhere from one to four years; thus doubling, and often tripling the amount of the final loan.
Jerise Henson, executive director of client services at The Dunken Law Firm, regularly advises clients not to sign with companies offering settlement cash advances, having noted first-hand how devastating it can be to claimants who were depending heavily on their final settlement awards. “We do not approve of any advanced loans, regardless of circumstance.” Henson and her docket leadership team have trained case specialists to work with clients to help them truly understand what they are getting into with pre-settlement lenders, and the rationale behind Dunken’s policy.
There’s no question, some people really do need financial help during their claim or litigation. When they take out an advance, however, there is always a chance that their final settlement recovery is less than the advance amount, plus accrued interest. Debt and medical injury-related expenses increase, and the claimant is left with a smaller than hoped for recovery and huge debts. It’s the claimant who is likely to suffer the financial burden in the long run, even after all they’ve been through prior to filing their lawsuit. Our mass tort litigation firm stands behind these six solid reasons defective drug and medical device lawsuit claimants and plaintiffs should re-consider taking out pre-settlement loans.
1. High Interest Rates
Case specialists in mass tort practice areas nationwide have noted interest rates up to 40%, even on loans under $5,000. The likelihood of claimants having more debt as a result of pre-settlement loans is high, and the companies are counting on this.
2. Delays During Settlement Process
Reconciling any liens against the claimant’s final award takes time and there are multiple stakeholders involved in approving disbursement of awards, and that means delays in payment to the claimant.
3. Potential Negative Long-Term Financial Impact to Clients/Claimants
Once the claimant owes more money due to a reduced award, they are still responsible for paying the amount of the original loan, and the high interest. Thus, they bear all the financial burden going forward.
4. Loan Companies Require Claimants to Waive Attorney Client Privilege
Once claimants are signed with an advance settlement company, all attorney client communications are open to company representatives and the waiving of attorney client privilege is a condition of sign-on. If a case is leveraged by a pre-settlement loan, the lender becomes party to the claim and the funding source would have to be disclosed to the court and defendants.
5. Loan Companies Place Liens on Final Recovery
All liens, whether financial or medical, will impact the claimant’s final recovery, and these are honored before final checks are mailed. The lien is a legal obligation that must be met after attorney fees and costs.
6. High Pressure, Predatory Sales Tactics
The claimants are often subject to high pressure tactics that reflect the ‘don’t wait, you can have the money you need now’ appeal, which can be attractive to clients who don’t know when their case will resolve. For some, pre-settlement loans can relieve impossible financial burdens on families that are already facing severe health and medical challenges. For many, if not most though, the debt-laden reality is in stark contrast to the painted appeal of ‘you can have money now’. At The Dunken Law Firm, we feel it’s our ethical responsibility to stand firm when it comes to non-recourse, recourse or advance settlement funding for clients: explaining fully the challenges, risks and our rationale for declining, except in severe extenuating circumstances, to sign off on advance settlement loans.