Uber, Lyft join call to clamp down on third-party litigation funding
Uber, Lyft join call to clamp down on third-party litigation funding | Insurance Business America
Insurance News
Uber, Lyft join call to clamp down on third-party litigation funding
TPL industry is “unregulated and predatory,” group says
Insurance News
By
Ryan Smith
Ride-hailing giants Uber and Lyft have joined a coalition of New York community groups, business interests and social justice organizations in a push to reform the third-party litigation finance sector.
The coalition, known as Consumers for Fair Legal Funding (CFLF) focuses on reforming what it calls an “unregulated and predatory lawsuit lending industry.”
Uber is the nation’s largest insurance consumer, and aims to ensure affordable coverage and safety for drivers and riders alike, CFLF said in a news release.
“Uber drivers operate in every corner of the state and are critical to helping New Yorkers get around, while also playing an important role in supporting the local economy,” said Hayley Prim, senior policy manager at Uber. “The unchecked lawsuit lending industry is driving insurance costs up, consuming an ever-larger share of fares, and making it harder for drivers to earn a living. Lawmakers need to establish some simple rules to reign in lenders and protect hard-working individuals statewide.”
“Steadily rising insurance costs are the biggest hurdle to keeping rides affordable and paying drivers more,” said Megan Sirjane-Samples, director of public policy at Lyft. “If we can curb – or better yet, reduce – these costs, the savings are going to go directly back into drivers’ pockets and help lower fares. Without putting in place some common-sense regulations, the lawsuit lending industry will continue to boom, and consumers and hard-working New Yorkers will pay the price.”
Third-party litigation finance has ballooned into a multibillion-dollar industry over the past decade, CFLF reported. A 2022 study found that increased litigation fueled by this funding drives insurance costs up.
“That’s something New York, with the nation’s second-highest average insurance premiums, can’t afford,” CFLF said in a news release.
CFLF was founded in 2022 to push for litigation funding reform that would preserve a funding stream for vulnerable individuals – such as those who need help covering medical bills or legal expenses as they await the outcome of a legal action – while protecting them from unscrupulous lenders.
“CFLF supports both an interest rate cap on lawsuit loans and transparency in the lawsuit lending process to expose conflicts of interest and create a level playing field for all,” the organization said.
CFLF said that lenders often target unbanked and underbanked individuals and members of communities of color, promising them fast cash by allowing them to borrow against expected legal settlements.
“With no limit in interest rate caps, lenders can charge up to 100% – or more – and borrowers can end up owing most or all of their eventual settlement or jury award to a lender, ending up with very little of their settlement or even in debt,” the organization said.
“If the governor and lawmakers are truly committed to a robust and equitable consumer protection agenda this session, they will pass lawsuit lending reform,” said Rev. Kirsten John Foy, founder of CFLF member Arc of Justice. “At a time when New Yorkers are struggling and the state faces a budget deficit, this issue is an easy way to protect vulnerable individuals – at no additional cost to the taxpayers.”
Florida is also wrestling with the issue, with the state House of Representatives currently considering a bill that would increase transparency in third-party litigation financing. Last year, the state passed a law aimed at curbing frivolous lawsuits.
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