Can Lawyers Loan Money to Clients?
If this occurs, the victims of motor vehicle collisions turn to family and friends for financial help.
Occasionally, these people ask their attorneys for a loan pending the outcome of their case. These injury victims see that there will likely be a time when they will have a pool of money from which to repay loans.
In North Carolina, lawyers are especially forbidden to loan money to clients. Occasionally we will get requests from clients to loan them money. Unfortunately, we are unable to accommodate these requests because the law prevents lawyers from loaning money to clients.
In time has passed, there were individuals and small companies who would be willing to loan money to clients based upon a potential recovery in their personal injury suits. However, several years ago the North Carolina Supreme Court enacted a rule that there were strict limits on such loans and that usury law would apply to prevent high-interest rates on those loans. As a result, the sources for such loans dried up in North Carolina. We are currently not aware of any companies which are willing to make loans to clients based upon a loan secured by potential personal injury settlements.
However, this does not stop family members or friends from making loans to victims of motor vehicle collisions. However, people who make such loans should understand the strict usury law applies and that the interest charged may not be greater than 8 percent per annum.