A coalition of critics in New York is calling for an investigation into the state and city pension funds to determine if they are supporting third-party legal lending, which they describe as a predatory and unethical industry. The group, made up of representatives from business, labor, and government, wrote a letter to State Comptroller Tom DiNapoli and City Comptroller Brad Lander urging them to examine how their pension funds may be investing in hedge funds that profit from legal lending practices. They argue that these funds exploit injured individuals with usurious interest rates and that public entities are ultimately paying the price for these unethical practices. The group recommends that the pension funds consider divesting from these third-party legal lenders to protect their constituents.
Critics view third-party litigation funding as a sector that lacks regulation and encourages individuals to pursue frivolous lawsuits against employers and governments by providing them with high-interest loans. It is unknown how much of the billions of dollars in pension fund assets from the state and city are invested in this sector, but concerns have been raised about the city pension funds’ substantial investment in Fortress Investment Group, a fund that has delved into litigation financing in recent years. Despite requests for comment, neither State Comptroller Tom DiNapoli nor City Comptroller Brad Lander have responded to the growing calls for an investigation into their pension fund investments in third-party legal lending.
Representatives from various organizations, including the Associated Builders and Contractors of New York State, the Business Council of New York State, and the Lawsuit Reform Alliance of New York, have expressed their concerns about the lack of oversight in the third-party legal lending industry. They believe that the time has come for the comptrollers to establish guardrails around these practices and ensure that pension funds are not inadvertently supporting predatory lending schemes. With interest rates on these loans often reaching 100-200%, critics argue that it is not in the best interest of pensioners or the general public for these funds to be invested in such schemes that ultimately harm those they are meant to support.
For years, the same groups have been advocating for legislative measures in Albany to regulate third-party litigation funding and protect vulnerable individuals from falling victim to predatory lending practices. The lack of response from Fortress Investment Group to these mounting concerns adds to the urgency of investigating the pension funds’ connections to third-party legal lending. Critics are calling for transparency and accountability in how pension funds are invested to ensure that they are working in the best interests of the public and not supporting industries that exploit vulnerable individuals for profit. The pressure is on the state and city comptrollers to take action and address these ethical concerns surrounding their pension fund investments.
