A coalition of critics, representing business, labor, and government groups, is calling for an investigation into New York’s pension funds to determine if they are supporting third-party legal lending. These critics argue that legal lending practices involve usurious interest rates and exploit injured individuals, with public entities ultimately bearing the financial burden. The group recommends a thorough examination of New York’s pension exposure to these practices and potential divestment from companies involved in third-party legal funding.
Critics view third-party litigation funding as an unregulated sector that encourages individuals to pursue frivolous lawsuits against employers and governments by offering high-interest loans to plaintiffs. There is uncertainty surrounding the exact amount of New York’s state and city pension fund assets invested in this sector. The city’s pension funds have significant investments in Fortress Investment Group, a fund that has extended into the litigation financing industry in recent years. Both State Comptroller Tom DiNapoli and New York City Comptroller Brad Lander have not responded to requests for comment on the matter.
Business Council Executive Vice President Paul Zuber believes it is essential to establish guardrails around third-party litigation financing to ensure the integrity of pension funds. The groups pressing for an investigation argue that investing in schemes that charge 100 to 200% interest on loans is not in the best interest of pension funds and their beneficiaries. Brian Sampson, President of the Associated Builders and Contractors of New York State, emphasizes the importance of investing in initiatives that benefit the general public and pensioners, rather than potentially harmful endeavors.
The coalition behind the call for an investigation has been advocating for legislation in Albany to regulate litigation funding and prevent predatory practices in the state. Fortress Investment Group, one of the firms mentioned in the discussion around third-party legal lending, did not respond to requests for comment on the matter. The lack of transparency and oversight in the legal lending industry has raised concerns among various stakeholders, prompting calls for increased scrutiny and potential divestment from companies profiting off of these practices.
The issue of third-party legal lending and its impact on New York’s pension funds has sparked a united front of critics from different sectors. These critics are pushing for greater accountability and responsible investment practices to protect pension funds from supporting potentially exploitative industries. The group’s letter calls for a comprehensive examination of pension fund exposure to third-party legal lending practices and the adoption of measures to prevent funds from being directed towards entities engaging in unethical activities.
As discussions around third-party legal lending continue, state and city comptrollers are being urged to take action to safeguard the integrity of pension funds and protect the interests of pensioners. The potential divestment from companies involved in predatory legal lending practices could signal a shift towards more ethical and sustainable investment strategies in New York’s pension system. The coalition’s efforts to bring attention to this issue highlight the need for greater transparency, accountability, and oversight in the financial sector to prevent exploitative practices from impacting public funds and stakeholders.
