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When is a loan not a loan? That depends on how you define “loan.”

The simple definition could bring big changes for dozens of companies that give money to personal injury victims who need cash while they’re suing for damages.

Opponents contend these litigation-funding companies are lenders that charge high interest rates — as much as 100 percent a year. The companies contend they are investors who put their money at risk and are entitled to big rewards.

At the heart of the issue is Legal Bucks, a Forsyth County company that gave money to accident victim Nancy Odell of Reidsville while she awaited judgment in a personal injury lawsuit.

Odell’s contract with Legal Bucks said that if she won a lawsuit against the driver who hit her car, she would pay the money back to Legal Bucks plus a payment up to 325 percent of the original amount.

If she lost the lawsuit, she was entitled to keep the money and pay Legal Bucks nothing.

The N.C. Court of Appeals ruled this week that the practice is an unfair and deceptive trade practice and violates usury laws, which limit interest rates.

Odell’s contract with Legal Bucks said she owed the company $9,582 on a $3,000 payment from the company after she settled the lawsuit. But instead of paying, she and Greensboro attorney Fred Berry sued Legal Bucks in Rockingham County Superior Court, claiming that her contract was illegal under several state laws.

The Rockingham court ruled in Legal Bucks’ favor. Odell appealed, and the state court ruled that Legal Bucks is a lender and is violating the state’s cap of 16 percent interest on loans.

If it stands, said Greensboro attorney John Bloss, the ruling could lead the way in legal disputes on the practice, help hundreds of customers and shake up North Carolina’s litigation funding companies.

“Nationally, this ruling is on the cutting edge of consumer protection law,” said Bloss, who is working with Berry on the case.

“This isn’t cutting edge,” said Keith Tart, Legal Bucks’ vice president and legal counsel. “I believe Fred Berry is a person who simply doesn’t want Legal Bucks and companies like it to exist.”

Tart vows to take every option to fight for the case, and could ask the state Supreme Court to review the case. He has 35 days to file that request.

“The only way I’m going to change my business model is if — and not until — the last court in North Carolina tells me to,” Tart said. “This opinion as issued by the Court of Appeals is not law and we don’t intend it ever to be law. It’s simply wrong and it’s a misinterpretation of North Carolina law.”

Tart believes his company helps people who have bad credit or have nobody else to turn to for money while they await the outcome of lawsuits.

Companies such as Legal Bucks typically receive clients referred to them by attorneys, Tart said. Before the clients can accept any money, they must sign a form along with their lawyers that they have read and understood the contract.

“The problem with the plaintiffs is they get caught up in the semantics of it,” Tart said. “What we’re doing is buying the right of the proceeds and accepting 100 percent of the risk of loss.”

But Bloss said the business takes advantage of people in terrible circumstances.

“Legal Bucks’ own internal documents acknowledge their potential clients are desperate and willing to pay almost anything for an advance,” Bloss said. “'Desperate’ is their word. The purpose of usury laws, which have been in place in this state for more than a century, is to protect desperate people from entering into predatory lending agreements.”

Contact Richard M. Barron at 373-7371 or richard.barron@news-record.com