Q: Can a legal funding charge 300% intrest rate. They claim its not a loan they call it a purchase agreement.
A: It is probably legal. It sounds like a rent to own type of transaction.
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A:
In California, legal funding companies are generally subject to the state's usury laws, which limit the amount of interest that can be charged on loans. As of September 2021, the maximum annual interest rate that can be charged on consumer loans under $10,000 in California is 36%.
However, some legal funding companies may argue that they are not subject to usury laws because they are not providing loans, but rather purchasing an interest in a potential recovery in a legal claim. In such cases, the legal funding company may structure the agreement as a purchase of an asset or claim, rather than a loan.
It's important to carefully review the terms of any agreement with a legal funding company and to consult with an attorney if you have any questions or concerns about the terms of the agreement. If you believe the legal funding company has engaged in unfair or deceptive practices, you may file a complaint with the California Attorney General's office or consult with a private attorney about your legal options.
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