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Bill Would Regulate the Legal Finance Industry Settlements

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

If you get injured in an accident and sue to recover damages how do you pay your bills while the case moves through the court system if the defendants won’t settle?  For an increasing number of people they get an advance on their future settlement from a third party.  The plaintiff gets funds in advance of their settlement and the third party gets paid from the proceeds of the settlement…….if there is a settlement.

This is largely an unregulated industry in Alabama.  Senator Cam Ward (R from Alabaster) has introduced a bill, SB68, to regulate that business model.  Industry representatives however think that Sen. Ward’s bill goes too far and would essentially drive them out of the state.  On Wednesday, April 1 SB68 was debated in a public hearing in the Senate Committee on Banking and Insurance.

SB68 reads in the synopsis: “This bill would regulate the providing of money or credit to a consumer pursuant to an agreement under which the consumer is not prohibited from using the money or credit for a purpose other than prosecuting a dispute, and under which repayment of the money or credit is conditioned upon the consumer’s recovery of money in a dispute or where recourse against the consumer by the person providing the money or credit is limited exclusively or primarily to the amount recovered by the consumer in a dispute.  This bill would define provider of money or credit as a consumer lawsuit lender.  This bill would provide that each provision of money or credit would be deemed to be a consumer loan and the maximum finance charge on the loan would be as provided in this bill, regardless of the amount of the loan or credit provided.”

The President and Chief Executive of the highly influential Business Council of Alabama (BCA) William J. “Billy” Canary spoke in favor of the bill.  President Canary said, “The presence of the third party increases litigation costs.”  The presence of the third party causes plaintiffs to reject good settlements.

Canary said, “This has been on our legal and judicial reform agenda.”  Canary said that those companies don’t take cases that don’t have good prospects of winning and charged that they extend lawsuits.

Sen. Hank Sanders (D from Selma) question why with prison overcrowding the legislation created more people with criminal records because of penalties in the legislation. 

Sanders said that the 10 percent maximum rate in the legislation is an unreasonably low level that means nobody will be able to operate in Alabama.  “Payday loans are much higher and there is no penalty.”

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Sen. Ward said, “I am for reducing payday loans rates.”

Sen. Sanders said that banks couldn’t issue credit cards if they could loan no more than 10%.

Senator Paul Sanford (R) said that he was a free market Senator and did not like the state capping interest rates.

The Director of Government Affairs for Oasis Legal Financial, Eric Schuller said that Oasis purchases a settlement.  “This is not a loan.”  “There are no payments made while the case is out.  There are no credit checks and we don’t care if they have money in the bank and don’t care if they have a job.  All we care about is if they have a prospect of a settlement.”

Schuller said, “We wait often 18 or 24 plus months.  We have one case in Alabama that has been going on for 8 years.”  Director Schuller said that it is impossible to owe more than the settlement. 

Schuller provided the Senators with a list of clients who have used the service in their individual districts.  “They aren’t using the money to go to the Bahamas.  They use it to maintain a roof over their head, pay the light bill, pay the car payment.”

Schuller said that the industry wanted regulation; but “This bill is designed to do one thing and that is too put the industry out of business.  There is a need for this product because consumers have been slow walked by the insurance companies.”  Our average payment is just $1800 and typically we won’t pay out more than ten percent of the anticipated settlement with five to seven percent in the initial payment.

Sen. Ward said that Tennessee has a bill that passed last year.

Schuller replyed “As a result companies have pulled out of the state.”

Sen. Ward said that anytime I hear an industry present the idea that we want to come in and regulate ourselves consumers and citizens of the state are not well served.

Sen. Sanford asked: “Where would a plaintiff in the case know where to get a legal finance company and what percentage of the loans (fundings or whatever you call it) default?

Schuller said that they find us on the internet and 27 percent….for our company.

Sen. Hightower said I could not find any information about your company.

Schuller said we are a privately held company. 

Director Schuller said, “The 300 percent interest rate is a misnomer it is over the life of the product NOT on an annual basis.  There is a lot of risk with this.”

Sen. Hightower asked: “You are making a lot of money of the people you are selling this product to.  Why doesn’t somebody come in with ten percent interest and take away your business?”

Schuller answered, “Because they can’t.  We have a nontangible asset.  We have pieces of paper there is nothing that the people that lend us our money can get if we default.”

Schuller said that if the client gets nothing from the law suit, “We get nothing.  We have never gone after and will never go after our clients.” 

Former Georgia Attorney General Thurburt Baker (D) spoke next in support of SB68.  “I am here on behalf of the U.S. Chamber of Commerce.”  Former GA AG Baker said that the Chamber has gotten a lot of complaints about this product.  People would call in $10,000 loan ended up owing $20,000 and did not understand the process. 

AG Baker said the big issue is whether it is a loan or not.  The problem for the industry is the transaction becomes subject to consumer lending if it is a loan and a regulated transaction.  “I am a country lawyer myself.”  The industry advertises itself as loans and they have advertising and it is not just the internet.

Baker said that someone gets injured.  Then they hire lawyers usually on the contingency that the lawyers will be paid out of the settlement.  Lawyers would not take the case on contingency unless there is a good chance of winning.  Then these companies come in and claim a portion of the settlement after the lawyer’s contingency.  The risk is much overstated.

AG Baker said, “The transaction tends to re-victimize the persons injured.  Attorneys get 33 percent of the settlement then the industry takes another big bite out of the apple.”  “The is a billion unregulated industry.  It is like the wild wild west out there.  This is a good bill.

Baker said, “The chamber is not opposed to this type of loan per se, but there needs to be some safegards in place.”  Baker said that the bill was produced by the business community, the state attorney generals, plaintiffs attorneys and consumer groups all coming together in a coalition.

Sen. Sanford said, “I was taken back by you using the term “victimize”.”  There are 45 residents in my district who used this product.  The reasons they gave for using the product are: I lost job because of my wreck, I was homeless, the company helped me get caught up on my bills…. “You are saying somebody is victimizing them?”

AG Baker said that a number of states have started to get caught up with this industry and have regulated it as loans.  Attorney Generals have gotten involved.  The Banking Administrator in Kansas.  The trend nationwide is toward regulation.

The Executive Director of the American Legal Finance Association Kelly Gilroy told the Senators that the industry is open to regulation but opposes SB68 as too restrictive.

Among other provisions Sen. Ward’s bill, SB68, would: require that each consumer lawsuit lender get a license, allow the Superintendent of Banks of the State Banking Department to issue regulations and interpretations, would provide that criminal penalties be provided for willful violation of the maximum finance charge provision or for failure to get a license, would limit the interest rate on the loans to just ten percent, and set the license at $125 per agent and branch.

SB68 was held over in committee for another week.

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Josh Moon

Opinion | Merrill’s opinions on vote by mail not supported by facts

Josh Moon

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Voting by mail does not lead to fraud. 

We know this because voting by absentee ballot is essentially the same thing as voting by mail. And it is so safe that millions of people, including the U.S. military, the current president, most of his family, a good chunk of Alabama legislators and about half of Congress, do it every year and still the incidents of fraud are less than 1 percent. 

There have been exhaustive studies and audits completed to prove this point, including “research” conducted by a committee formed by Donald Trump three years ago. That committee found no real evidence of widespread voter fraud of any kind, only unique instances in which bad actors with access to ballots committed crimes. 

The rate of fraud in the 2016 election was 4 in more than 130 million votes cast. There was no evidence of undocumented workers voting. No evidence of in-person fraud. No evidence of widespread absentee ballot fraud. No evidence of hacking. No evidence of dead people voting. 

And most importantly, in states, such as Florida, that allow for mail-in voting, there was no evidence that casting a ballot by mail has ever spurred any increase whatsoever in voter fraud. 

These facts are apparently lost on Alabama Secretary of State John Merrill, who, in an effort to attract the eye of Trump on Twitter, declared that Alabama would not have a direct vote-by-mail option to provide citizens with a safe, secure alternative to voting in person in the middle of a pandemic. 

Merrill then followed that up with an appearance on CNN — an appearance he is apparently proud of since he’s retweeted a clip of the interview about a dozen times over the last two days — in which he bemoaned the clear and present danger that mail-in voting clearly brings. 

And how does he know that voting by mail will increase fraud in elections? Because in Alabama, there has been voter fraud and 83 percent of the fraud committed has been absentee ballot fraud. 

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Case closed. 

Well, except for a couple of minor points. 

First, 83 percent of what number? 

Six. Yes, Merrill’s 83 percent figure that he cited to support his position that mail-in voting is unsafe was reference to the 5 out of 6 convictions in voter fraud cases over the past eight years. (It’s likely that there have been just six convictions — out of millions of ballots cast — over the last 12 years, but searching for specific charges in Alabama’s online court filing system is nearly impossible.)

That’s right, Alabama has experienced a grand total of six voter fraud convictions over the past eight years. And five of those convictions were for tampering with absentee ballots. 

However, it’s worth noting that not a single conviction involved votes in a statewide or legislative race. Four of them stemmed from the same incident in which workers rigged a city commission race in Dothan. 

That’s probably because you can’t commit enough fraud to alter the outcome of such a race. You can’t have more votes than registered voters, and you can only steal so many ballots before someone catches on. 

Regardless, six is the number of fraud cases Merrill was leaning on to justify his decision to not simply mail out absentee ballot applications to all registered voters. 

And here’s the second point that undermines this ridiculous argument: If absentee ballot fraud is so much of a problem that we can’t allow mailed ballots in a pandemic, then why hasn’t the Republican-dominated Alabama Legislature passed a single law to restrict absentee ballot access or make them more secure? 

The legislature certainly hasn’t been shy about passing voter ID laws to address in-person voter fraud. That type of fraud occurs at roughly .0000013 percent. In Alabama specifically, we’ve had one conviction for in-person fraud in the past 20-plus years. 

Still, the Alabama Legislature pushed through an absurd voter ID law a few years ago, requiring specific forms of government-issued photo IDs. 

But for the fraud that is so widespread that we’re prepared to ask people to risk their lives, nothing. 

Not a single bill. Not a single law. Not even a discussion of a bill. 

So weird. Mail-in fraud is so worrisome that we can’t risk even sending voters an absentee ballot application unless they ask for it, but not so worrisome that state lawmakers will do anything at all to address it. 

If I didn’t know better, I might think the Republicans running this state are really happy with some people voting by mail and scared to death of mail-in voting making it easy for massive numbers of Alabamians to cast votes. 

Making this whole matter even more absurd is the “fix” that Merrill and state leaders have come up with to address the concerns of people who don’t want to risk COVID-19 infection by voting in person: Lie. 

Alabama has included a new reason on applications requesting an absentee ballot. Voters can now select that they are “ill or infirmed” and unable to appear at the ballot box. Merrill, along with Gov. Kay Ivey, has instructed anyone who fears standing in line at a polling location during a pandemic to simply check that box. You don’t have to be ill or infirmed to do so. 

Swell. 

Merrill loves to repeat the line you’re entitled to your own opinion but not your own facts, and he should live by that now. Because the facts are decidedly against him on this. 

There is no evidence that mail-in voting is more susceptible to fraud. There is no evidence that the absentee ballot system in this state has been subjected to widespread fraud. The only fraud Merrill can cite are six cases from small-town races, where the people involved had access to multiple ballots because of their employment. 

In truth, there’s only one reason mail-in voting won’t be an option here: The more people who vote, the fewer Republicans get elected.

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Courts

Alabama Parole and Probation Officers supervising nearly 9,000 violent criminals

Brandon Moseley

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The Alabama Bureau of Pardons and Paroles released a report Thursday that was shared with state legislators and the media this week that shows Alabama’s 300 parole and probation officers are tasked with supervising 8,993 people convicted of violent crimes.

The officers are tasked with supervising more than 27,000 Alabama offenders as well as more than 3,600 offenders from other states who chose to move to Alabama following their incarceration in other states. Those are just the active cases.

There are an additional 22,947 inactive offenders for a total caseload of 50,055.

“The supervision of all these offenders that our officers provide daily is crucial to the safety of Alabamians and we are thankful for the selfless and dedicated work of these law enforcement officers,” said Bureau Director Charlie Graddick in a statement.

Graddick said that the Bureau put nine new officers into the field last week to begin supervising parolees and probationers and hopes to hire up to 138 more officers over the next three years — if the budget allows.

In the session that recently ended, the Legislature cut the bureau’s budget nearly in half.

“We are in need of more officers as we work to reduce caseloads,” Graddick said.

The report shows that 79 percent of the Alabama clients the bureau supervises were granted probation by judges throughout the state.

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Sixteen percent of the Alabama offenders are parolees who were granted release from prison by the Alabama Board of Pardons and Paroles.

Of the 6,078 Alabama parolees being supervised, 58 percent are violent offenders, some requiring much more intensive supervision.

Alabama has historically underfunded and understaffed the aging prison facilities managed by the Alabama Department of Corrections.

The Alabama Bureau of Pardons and Paroles is tasked with attempting to safely reintegrate parolees into society as well as to rehabilitate offenders sentenced to probation so that they do not re-offend and have to join the state’s prison population again.

A recent Department of Justice report claimed that Alabama’s prisons are among the most dangerous in the country.

The state has a critical need to increase prison capacity to reduce prison overcrowding and protect the public from crime and violence.

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Economy

Sewell, Rogers vote for bipartisan bills to improve Paycheck Protection Program

Brandon Moseley

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U.S. Reps. Terri Sewell, D-Selma, and Mike Rogers, R-Saks, voted in favor of a bipartisan bill aimed at improving the Paycheck Protection Program, dubbed the Payroll Protection Program Flexibility Act.

“The Paycheck Protection Program has been a lifeline for tens of thousands of Alabama businesses, but there are still too many small businesses that have been unable to access necessary resources because of the program’s strict stipulations,” Sewell said.

Sewell said many small businesses have not applied despite their urgent need because they do not believe they can meet current standards, and many are afraid to use the money because of the program’s strict requirements.

“The bills the House passed today would both make the PPP program more flexible so it can reach more small businesses in need, and also increase the program’s transparency to ensure funding is going to main street businesses that need support the most,” Sewell said.

Rogers said he was pleased the act passed the House.

“The bill will add more flexibility to these loans to help small businesses even more,” he said. “It will extend the loan forgiveness period, allow businesses that receive forgiveness to also receive payroll tax deferment and will allow businesses to spend different amounts on payroll costs and mortgage, rent, and other expenses. I hope these modifications will further help our small businesses that are the heartbeat of our local economies.”

According to the U.S. Small Business Administration, more than 60,000 Paycheck Protection Program loans have been issued to small businesses in Alabama with each recipient receiving an average PPP loan of about $100,000.

According to Sewell’s office, the new bill would provide needed flexibility to the Paycheck Protection Program — originally created by Congress in the CARES Act in April — in order to make this key program functional for the small businesses that need it the most.

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Sewell’s office provided a lengthy explanation of what the legislation does:

Under the current Paycheck Protection Program, the PPP loan converts to a grant as long as the small business uses the loan within eight weeks of the CARES Act enactment – that is, by June 30 – and uses at least 75 percent of the loan proceeds on payroll and the rest for such necessary expenses as rent, mortgage interest, and utilities. Many small businesses, particularly very small businesses, have reported that, with these restrictions, the loans do not meet their needs.

The bill makes the PPP program more flexible in the following key ways, in order to make it more accessible and usable for the vulnerable small businesses that need it the most:

Allowing loan forgiveness for expenses beyond the 8-week covered period to 24 weeks and extending the rehiring deadline. Back in March, the PPP program was established as an eight-week program, ending on June 30. However, it is clear that the economic effects of the pandemic will impact small businesses long past June 30. The current eight-week timeline does not work for local businesses that could only very recently have customers and those that are only allowed to open with very heavy restrictions. Small businesses need the flexibility to spread the loan proceeds over the full course of the crisis, until demand returns.

Increasing the current limitation on the use of loan proceeds for nonpayroll expenses from 25 percent to 40 percent. Currently, under regulations issued by the Trump Administration, the PPP loans require that no more than 25 percent of loan proceeds can be spent on non-payroll expenses such as rent, mortgage interest, and utilities. This limitation has prevented many small businesses, such as independent restaurants, from applying to the program because their rent is significantly more than 25 percent of their monthly expenses. The 40 percent limitation in this bill is much more realistic.

Extending the program from June 30 to December 31. By ensuring the PPP program will operate for 24 weeks, rather than only eight, this bill will ensure that many more truly small businesses will be able to take advantage of the program.

Extending loan terms from two years to five years. According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. This was also true for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenues to pay back the loan.

Ensuring full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with liquidity to weather the crisis. Receiving both should not be considered double-dipping. Businesses need access to both sources of cash flow to survive.

The Payroll Protection Program Flexibility Act passed on a 417 to 1 vote. Alabama Congressmembers Bradley Byrne, Mo Brooks, Robert Aderholt, Martha Roby, and Gary Palmer also voted for the legislation. It now heads to the Senate for their consideration.

Rogers represents Alabama’s 3rd Congressional District. Sewell represents Alabama’s 7th Congressional District.

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Congress

Brooks, Palmer join lawsuit against House’s proxy voting rule change

Brandon Moseley

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U.S. Rep. Gary Palmer, R-Hoover, and Mo Brooks, R-Huntsville, have joined constituents and members of the House Republican Conference as plaintiffs in a lawsuit challenging the constitutionality of a recently passed resolution that allows representatives to cast votes for themselves and others on the House floor, known as proxy voting.

The rule change was supported largely by Democrats along party lines who said it was needed during the pandemic to protect the health and safety of members of Congress.

“This rule change is not a mere procedure change, but a direct assault on the Constitution and over 200 years of precedent,” Palmer said. “The Constitution requires that Congress assembles. There is no emergency so great that Congress cannot meet to do its job of representing the people.”

Brooks said the proxy voting scheme is not only “unprecedented and antithetical” to the job of a House member, but it is also “blatantly unconstitutional.”

“Article 1, Section 5 of the Constitution requires that a ‘a Majority of each (House of Congress) shall constitute a Quorum to do Business; . . . and (each House) may be authorized to compel the Attendance of absent Members,'” Brooks said. “The Constitution requires that the House assemble a majority of its Members to conduct business, and there is no more serious House business than voting.”

Palmer said members of Congress should rise to the challenge of the pandemic and meet in person.

“Our history is littered with wars, pandemics, and attacks on American soil, but none of that has ever prevented Congress from meeting to do the people’s business,” Palmer said. “The current public health crisis should not change that precedent. Precautions can be taken, but Congress must show up to work like everyone else.”

House Republican Leader Kevin McCarthy of California is the leader of the proxy vote lawsuit. Alabama Congressman Bradley Byrne, R-Montrose, is already one of the plaintiffs.

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Byrne sues Speaker Pelosi to stop House rule changes

“The Constitution is clear that a majority must be present for the House to conduct business,” Byrne said. “Speaker Pelosi’s attempt to allow Democrats to cast multiple ‘proxy’ votes for their colleagues is a blatant violation of the Constitution. Under rules adopted last week, as few as 22 Democrats could claim a quorum and win a vote against all 197 Republicans. This scheme gives Pelosi and her lieutenants complete and dangerous unconstitutional powers. If Democrats won’t show up to vote, they should turn the speaker’s gavel over to Leader McCarthy and the Republicans who are actually willing to show up and work for the people they represent.”

“This week, House Democrats will break over 230 years of precedent and allow Members of Congress to vote by proxy on the House floor,” Leader McCarthy said. “This is not simply arcane parliamentary procedure. It is a brazen violation of the Constitution, a dereliction of our duty as elected officials, and would silence the American people’s voice during a crisis. Although I wish this matter could have been solved on a bipartisan basis, the stakes are too high to let this injustice go unaddressed. That is why, along with other members of the House and our constituents, I have filed a lawsuit in federal court to overturn Speaker Pelosi’s unconstitutional power grab.”

The Republican plaintiffs point out that in the last 231 years, the House of Representatives has never permitted a member to vote by proxy from the floor of the chamber. This includes during the Yellow Fever of 1793, the Civil War, the burning of the Capitol during the War of 1812, the Spanish Flu of 1918 and 9/11.

The GOP plaintiffs claim that voting by proxy is flatly prohibited by the Constitution.

Article I, Section 4, Clause 2 states: “The Congress shall assemble at least once in every Year, and such Meeting shall . . . .” o Article I, Section 5, Clause 1 states: “Each House shall be the Judge of the Elections . . . and a Majority of each shall constitute a Quorum to do Business; . . . and may be authorized to compel the Attendance of absent Members.” o Article I, Section 6, Clause 1 states: “The Senators and Representatives . . . shall . . . be privileged from Arrest during their Attendance at the Session of their respective Houses” • The constitution clearly contemplates the physical gathering together of representatives as a deliberative body. As the Supreme Court has held, to constitute a “quorum” necessary to “do business,” the Constitution requires “the presence of a majority, and when that majority are present the power of the house arises.” United States v. Ballin, 144 U.S. 1, 6 (1892)

The plaintiffs have filed a constitutional challenge in the D.C federal district court seeking to enjoin the use of proxy voting in the United States House of Representatives.

Congressman Mo Brooks represents Alabama’s Fifth Congressional District. Congressman Gary Palmer represents Alabama’s Sixth Congressional District. Alabama Democrats were unable to find candidates willing to challenge either of the two popular incumbents. Brooks did defeat a Republican challenger in March.

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