The #MeToo movement has been a strain on the bottom line of giant corporations scrambling to protect their profits in the wake of sexual harassment allegations. But where some companies see financial disaster, others see an opportunity. On Monday, the New York Times revealed that payday lending firms offering cash advances against potential settlements have found what they hope is a goldmine: sexual harassment lawsuits.
Just days after the Harvey Weinstein story broke, LawCash, a Brooklyn-based settlement advance company, took to Twitter to remind potential customers, "Sexual abuse is a crime #HarveyWeinstein." LawCash offered money upfront to sexual abuse plaintiffs, “if you or someone you know is in need of financial help.”
In New Jersey, Legal Bay touted its “special focus for victims of unwanted sexual advances" in a press release. The release conveniently did not mention Legal Bay's CEO's Christopher R. Janish's checkered past. As the Times notes, "Mr. Janish formed Legal Bay in 2014, a few years after getting out of state prison in New York for orchestrating a $13 million stock manipulation scheme."
These settlement-advance firms are only paid back if the plaintiff obtains money from a lawsuit. "They make money," the article explains, "by charging interest rates as high as 100 percent, which they are able to do because technically the money is considered an advance—not a loan—and therefore is not subject to state usury laws."
As the Times notes, the proliferation of these financial services is "setting off alarms in some quarters because the industry, like payday lenders, has a history of providing cash at exorbitant interest rates to customers who need the money for living and sometimes medical expenses." It's also creating some unexpected alliances, "uniting consumer groups and big business in opposition. Consumer activists argue that recipients don’t understand how quickly the costs accumulate. Business groups, including the U.S. Chamber of Commerce, argue that cash advances artificially drive up litigation costs."
The Consumer Financial Protection Bureau, as well as the New York and Colorado State Attorney General's offices, have separately sued settlement advance firms. In the past, these firms have focused on personal injury and medical malpractice, but increasingly "more pitches are directed at women with sexual harassment claims."
Heather Rothermund, who sued an adult care facility for $250,000 in damages resulting from its failure to discipline a sexually abusive co-worker, found herself saddled not only with legal fees, but bills for therapy and medication she could not afford. She responded to an ad from Nova Legal Funding of Los Angeles, which loaned her $2,000 against a future settlement. She now owes the firm $4,000, twice the amount of the original loan.
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