Thought that American society was already too litigious? You might not like this next stage of the game, wherein Wall Street investment bankers are looking to help fund various lawsuits, in return for a cut of any eventual winnings
. We've already seen how this is popular in patent trolling, but it looks like it's spreading to all sorts of civil lawsuits. Now, the core concept behind this activity is reasonable: lawsuits are expensive. And if you have a legitimate case, and it's too expensive to take on the effort, getting an investor can help you bring the case and bring a party to justice. But, like so many things that Wall Street gets involved in, what can be used for good, can also be massively abused for profits. Apparently, investors are behind some really wacky lawsuits that never should have been filed, and they often push for quick settlements in order to cash out at lower costs. Of course, it's not clear how widespread this practice is in total, since lawyers often don't reveal that there are investors behind a case.
Not surprisingly, the article notes that "lawsuit lending is a child of the subprime revolution," and often the lenders charge ridiculous interest rates, rather than being willing to just take a direct cut of any winnings. And, of course, these days, with the mortgage space being a weak investment, banks have to find somewhere new to put their money, and apparently lawsuits are attractive to some. The whole thing seems so open to abuse and excess that it seems likely that we're going to be hearing a lot more stories of lawsuit lending... and the resulting problems it causes.