Borrowing in the Shadow of Death: Another Look at Probate Lending
53 Pages Posted: 11 Sep 2017 Last revised: 21 Dec 2017
Date Written: September 7, 2017
“Fringe” lending has long been controversial. Three decades ago, demand for subprime credit soared, and businesses started to offer high-interest rate cash advances, such as tax refund anticipation loans, payday loans, and pension loans. These products have sparked intense debate and are subject to a maze of rules. However, in Probate Lending, 126 YALE L.J. 102 (2016), a co-author and I examined a form of fringe lending that has gone largely unnoticed: firms that pay lump sums in return for an heir or beneficiary’s interest in a pending decedent’s estate. Capitalizing on a California law that requires companies to file these contracts in probate court, we analyzed seventy-seven loans that stemmed from deaths in 2007. In this companion Article, I report the results of a study of an additional twenty-two months of probate records. My research provides hard evidence about the multi-million dollar inheritance-buying industry, including the prevalence of loans, characteristics of borrowers, how often lenders are repaid, and annual interest rates. I then use this data to compare probate lending to other species of fringe lending and to outline how courts and lawmakers should regulate the practice.
Keywords: probate loan, inheritance advance, litigation loan, payday loan, litigation finance, champerty, usury, TILA, truth-in-lending act, empirical, probate court
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