- Regulators claimed company engaged in predatory lending
- Company said advances on 9/11 fund claims were not loans
(Reuters) - A litigation financing firm accused of charging 9/11 first responders 250% interest on loans settled a predatory lending lawsuit brought by state and federal authorities for just $1.
RD Legal Funding LLC also agreed not to collect $600,000 customers still owe under its contracts as part of its settlement with the U.S. Consumer Financial Protection Bureau and the New York Attorney General's Office. The settlement requires a judge's approval.
The company did not admit wrongdoing.
The lawsuit in Manhattan federal court alleged the advances RD Legal offered to individuals expecting money from the fund established by Congress to aid paramedics and other first responders were actually high-interest loans that violated New York state law.
Regulators had initially sought damages and penalties, including $5,000 per violation of New York's consumer protection law.
The CFPB said in a statement that the settlement will allow harmed consumers to seek compensation from its victim relief fund. The fund contained $482 million as of the end of September.
A spokesperson for the Attorney General's Office did not immediately reply to a request for comment. An attorney representing RD Legal declined to comment.
RD Legal had argued its funding arrangements were not loans governed by consumer finance statutes but rather sales of legal receivables.
The agencies sued the New Jersey-based company and its founder Roni Dersovitz in 2017, saying that the arrangements were illegal loans with interest rates of up to 250%. New York law criminalizes non-bank loans with annual rates above 25%.
The company had entered into agreements with 12 individuals eligible for payouts from the 9/11 fund, according to the settlement agreement.
The case was delayed for three years over questions about the CFPB's legal authority.
The company won a ruling in 2018 that the CFPB director was unconstitutionally protected from being fired at will by the president. The U.S. Supreme Court reached the same conclusion in an unrelated case, Seila Law v. CFPB, but allowed the agency to continue its already pending cases.
The case is Consumer Financial Protection Bureau v. RD Legal Funding LLC, U.S. District Court for the Southern District of New York, No. 17-CV-00890.
For RD Legal: David Willingham and Michael Roth of King & Spalding
For the CFPB: Benjamin Konop and Hai Binh Thi Nguyen
For the NY AG: Jason Meizlish and Melvin Goldberg
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