“Crash cash” lawsuit loans are a perniciously profitable business that lurks in the shadowy online realms outside the enforcement of state consumer lending laws. Louisiana legislators have filed bills that will protect consumers and courts by closing the loopholes lawsuit lenders use to evade regulation.

Offers promising “quick cash” while waiting for your day in court take advantage of consumers, and the loan contracts come with fine print masking exorbitant fees and interest rates. Lawsuit lenders are typically repaid from settlements or awards granted by a court with annual interest rates that often exceed 100 percent.

Documents provided by an Oklahoma consumer show how lawsuit loans totaling $6,000 ballooned to $21,000 in less than three years. In New York, journalists have reported on cases where individuals received little, if anything, from court-awarded damages and claim they were misled by lawsuit lenders.

In 2001, the Louisiana attorney general determined “advancement of funds to a plaintiff contingent upon recovery creates a debt and is therefore a consumer loan as defined in the Louisiana Consumer Credit Law.” But there was a catch. Lenders had to have “brick and mortar” offices in Louisiana to be regulated. Online lawsuit lending companies have successfully avoided oversight and taken advantage of consumers by exploiting this loophole.

In addition to harming consumers, lawsuit lending leverages the taxpayer-funded court system for profit and violates a basic doctrine of legal ethics where it is illegal to encourage meritless cases by buying into someone else’s lawsuit. These arrangements can encourage unnecessary lawsuits and prolong costly litigation.

Lawsuit lending is drawing the scrutiny of attorneys general across the nation, and several have taken steps to regulate the industry in states where they have the authority to do so, such as Colorado, Maryland and New York. In addition, legislation to regulate lawsuit lending and cap interest rates has been introduced in eight states this year.

Consumer lawsuit lending lacks regulation and transparency, harms consumers by hiding excessive fees and interest rates and abuses the taxpayer-funded judicial system for private gain.

Lawsuit lenders should have to play by the same rules, whether they have storefront locations in Louisiana or operate online. That means complying with the state’s consumer lending laws, including caps on interest rates.

I applaud the working being done by the state legislature to improve Louisiana’s legal climate. Closing the lawsuit lending loophole is another important step. Urge legislators to protect consumers and courts by passing HB925 and SB414.

Thurbert Baker

former Georgia attorney general