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How the Finance Industry Is Trying to Cash In on #MeToo

Accusations of sexual harassment have felled dozens of executives, but in one quiet corner of the financial world, the #MeToo movement looks like a golden opportunity.

Companies that offer money to plaintiffs in anticipation of future legal settlements are racing to capitalize on sexual harassment lawsuits.

That is setting off alarms in some quarters because the industry, like payday lenders, has a history of providing cash at exorbitant interest rates to customers who need the money for living and sometimes medical expenses.

The largely unregulated companies have operated with less public scrutiny than the rest of the litigation finance industry, which provides money to law firms to fund commercial lawsuits.

Historically, settlement-advance businesses have targeted personal injury and medical malpractice plaintiffs, many of them referred by their lawyers. But in recent months, lawyers say, more pitches are directed at women with sexual harassment claims.

For example, days after news broke of the Hollywood mogul Harvey Weinstein’s history of sexual harassment, LawCash, a settlement-advance company, was trying to cash in. “Sexual abuse is a crime #HarveyWeinstein,” read a LawCash tweet. The Brooklyn company offered cash upfront to sexual abuse plaintiffs “if you or someone you know is in need of financial help.”

The settlement-advance firms get paid back only if a plaintiff collects money from a lawsuit. They make money by charging interest rates as high as 100 percent, which they are able to do because technically the money is considered an advance — not a loan — and therefore is not subject to state usury laws.

Consumer groups call the industry predatory. The companies counter that they are providing a vital service to people without other options.

Legal and business experts said there are scores of firms providing advances to tens of thousands of plaintiffs each year. The largest firms make cash advances totaling up to $40 million a year, according to an unpublished 2014 report by Diligence, a business intelligence firm.

Legal Bay of Fairfield, N.J., is one of the settlement-advance firms trawling for sexual harassment clients.

In one October news release, Christopher R. Janish, its chief executive, said he had “set aside a large portion of their presettlement cash advance funding specifically for plaintiffs of sexual harassment cases.” The next month, the firm trumpeted its “special focus for victims of unwanted sexual advances.”

Mr. Janish said he did not know if the pitches had landed any clients. “It just really is more of a public awareness and branding thing,” he said.

The firms advertise on television and include hot-button search terms on their websites to lure traffic. That was how Heather Rothermund of Redding, Calif., learned of Nova Legal Funding in Los Angeles last summer. She had sued her employer, an adult care facility, for failing to discipline a co-worker who she said had groped her breasts and forced his hands down her jeans. Along with a state civil rights agency, she sought $250,000 in damages. The facility’s owner did not respond to a request for comment.

Ms. Rothermund, 41, said the alleged assault left her with bills for therapy and anxiety medications that she couldn’t afford. Her car was about to be repossessed when she came across Nova’s online advertisement. The company advanced her $2,000 against an anticipated future legal settlement, she said.

The money got her out of a financial hole and helped her avoid having to accept a lowball settlement offer. She said that if the case settled within the year she might owe $4,000 — double what she borrowed. If the case drags on, she will owe more.


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