Maybe you’ve seen the ads late at night promising cash to help you with your expenses while you await a settlement from your lawsuit. Call a 1-800 number and you can have a check before you know it, they say. And don’t worry! If you don’t win your case, you don’t owe anything.

Hopefully, you’ll never to need to call these guys. Some lawsuit lenders are bad news, and they’re hurting Arizona’s legal environment.

Lawsuit lenders seek out plaintiffs and loan them cash for living or medical expenses while they await settlement of their case. Plaintiffs then pay back the loans with the proceeds of their settlements.

There are times, however, that these loans come with sky-high interest rates, often in the 100 percent range. So it is not unusual for a plaintiff to reject a reasonable settlement offer because they’re facing crushing debt as a result of the lawsuit loan. This extends expensive, time-consuming litigation. Even when the plaintiff settles, he or she walks away with no money, or very little, anyway, because the plaintiff has to pay attorney fees and pay the loan off.

Turning down a fair settlement offer can be a dangerous gamble for plaintiffs. Sometimes the cases go to court, where the plaintiff loses and walks away with nothing. In those instances, no one wins. The plaintiff recovers nothing, the plaintiff’s attorney doesn’t get paid and the defendant has to go through a long, expensive trial and discovery process.

This is serious stuff. These loans can lead to diminished recoveries, increased litigation costs and crowded court dockets.

Arizona leaders have worked hard over the last several years to advance tort reform measures that foster a legal environment conducive to economic growth. We’ve seen legislation passed into law that discourages frivolous lawsuits; that improves our medical malpractice picture; that increases transparency in contracts between the government and outside attorneys; that protects the right of appeal for defendants; that shields manufacturers from punitive damages when they’ve complied with all necessary standards; and we’ve seen court rules changed to prevent junk science from getting into the courtroom.

These aren’t small issues. A state’s legal environment is an important component of its overall competitiveness. States known for expensive litigation and trial lawyers running wild are more likely to end up on the American Tort Reform Association’s Judicial Hellholes list than on Chief Executive Magazine’s Best States for Business list.

Lawsuit lending presents another opportunity for reform. Legislation by state Sen. Kimberly Yee, Senate Bill 1403, would ensure that all lawsuit lenders adhere to the same limits on interest rates that other lenders must adhere to.

Predatory lawsuit lenders upend the basic framework of our legal system, which assumes that litigation should be between a plaintiff and a defendant. Lawsuit lenders insert themselves into the litigation, creating an unwelcome and expensive distraction, which could impact the direction of the case and undercut the ability of the client to be in control of his or her own case.

In states like Colorado, Oklahoma, Tennessee and Maryland, big lawsuit lenders have strongly opposed bills like Sen. Yee’s that seek to bring them into alignment with existing lending laws. Lawsuit lenders claim that they offer “non-recourse financing,” not loans. This is an industry-created fiction that allows them to operate outside the normal rules that apply to other lenders. Providing money that is to be paid back on a payment schedule with interest at a rate determined by the amount of time since the money was originally provided is, by definition, a loan.

Don’t be persuaded about the supposed risk these lenders assume if a plaintiff doesn’t reach a favorable outcome. Litigation is not something to be bet on; our courtrooms aren’t casinos. We shouldn’t be encouraging third parties with no connection to the central elements of a case to take a financial stake in the outcome of a case.

Not all lawsuit lenders exceed existing interest rate limits. But if the industry is going to do business in Arizona, everyone at least needs to play by the same set of rules.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry.

The Arizona Chamber of Commerce and Industry is committed to advancing Arizona’s competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans.