The Tennessee House subcommittee on consumer and human resources debated HB1242 on January 28th, which holds the fate of lawsuit lending (aka legal funding) in Tennessee in the balance.
Should Tennessee State Representatives believe the US Chamber’s claim from the hearing that “we don’t want to drive the industry out of business”? Seems difficult when their recipe is to provide a rate cap that limits providers from charging more than 36% annually for “a year or two”. No financial product with the level of risk that lawsuit landing has, with charge offs in the 20% to 30% zip code, comes anywhere close to charging that low of a rate. And those other products usually have a current pay feature, collateral posted, and personal recourse to the consumer that might only be dischargeable through personal bankruptcy. So when has the US Chamber ever before weighed in to say that a company should not be allowed to make too much profit or should be told what it can charge?
Even more interesting is the assertion that the US Chamber’s local Tennessee counsel made at the hearing. He stated that “”we want to protect the consumer”. So when did the US Chamber start standing up for the little guy and become the great protectorate of the consumer? Well, in the hearing the local Tennessee man for the chamber stated that these consumers “are unsophisticated…they are vulnerable…many of them do not have access to other capital”. Good to know they care. But hearing that, it seems to be in contrast to something else the US Chamber said in a public statement. In a public letter to Richard Cordray, the at the time Director of the CFPB, they expressed their concern that consumers be over-protected by anything more than clear disclosure, and that clear disclosure (as opposed to price regulation) was the panacea to giving consumers both choice and protection.
In fact, here is the quote, from under the heading “Preserve Credit Availability and Choice for Consumers”:
“Consumers and small businesses rely on consumer credit products and services, and one of the key strengths of our credit markets is the abundance, and diversity, of legitimate products and services that fit needs of all kinds.” The letter goes on to say, “while the Bureau can and should ensure that consumers have the facts they need to make informed decisions, it should not make those decisions for consumers by requiring the offering of some financial products and prohibiting the offering of others. The credit market will remain vibrant only if informed consumers are free to make those decisions for themselves”.
Apparently, that quote only pertains to products sold to consumers by members of the US Chamber, and is meant to specifically exempt any product that might be competitive or impact products sold by the big insurance companies (i.e., State Farm and Allstate) that drive the US Chamber and its Institute for Legal Reform mission.
See http://tnne.ws/... for more details on the debate in Tennessee on legal funding.