A bill aimed at limiting the finance charges on consumer litigation loans sparked heated debate in the state Senate Monday afternoon.
State Sen. Dan Claitor, R-Baton Rouge, said he filed Senate Bill 166 because people can end up paying way too much in fees when they borrow money ahead of an expected settlement.
The loans have been compared to pay day loans. Critics contend that litigants borrow money that will be repaid once they receive a settlement but often end up paying exorbitant fees. The loans are promoted as a way for plaintiffs to stay in litigation while still paying their bills.
“This is a billion dollar industry,” Claitor said.
SB166 would cap the fees at 21 percent to 35 percent depending on the unpaid principal amount of the loan.
State Sen. Danny Martiny objected, saying Claitor initially talked about regulating the industry but not about implementing caps.
Martiny, R-Metairie, said Claitor’s approach would gut the industry and prevent lawyers from being able to finance their cases.
“I do defense work. The inability of a plaintiff to live a meaningful life while awaiting a lawsuit is a serious matter,” Martiny said.
Ultimately, the Senate voted 34-1 in favor of advancing the legislation to the House. Martiny cast the only “nay” vote.