Governor Hochul Signs Bill Championed by

Assemblymember William B. Magnarelli & Senator Jeremy Cooney

The Alliance for Responsible Consumer Legal Funding (ARC) applauds New York Governor Kathy Hochul for signing into law Assembly Bill 804C/Senate Bill 1104, a landmark measure establishing thoughtful regulation for Consumer Legal Funding in the Empire State.

Sponsored by Assemblymember William B. Magnarelli and Senator Jeremy Cooney, this legislation creates a clear framework that protects consumers while preserving access to a vital financial resource that helps individuals cover essential living expenses—such as rent, mortgage, and utilities, while their legal claims are pending.

“I am pleased that the Governor signed this important bill into law today. It is the culmination of 8-years of hard work on this issue. This law will provide a sound framework to regulate financing agreements and provide protections to consumers. I want to thank the Alliance for Responsible Consumer Legal Funding and its President, Eric K. Schuller for working with me to get this bill over the finish line. I would also like to thank and acknowledge my late colleague, Assemblyman Michael Simanowitz, who was the original sponsor of this legislation.” — William B. Magnarelli, 129th Assembly District

For many New Yorkers, Consumer Legal Funding provides a critical financial lifeline while a legal claim is pending, often for months or years. Injured consumers frequently face lost income and mounting household expenses at the very moment they are least able to manage financial strain. Consumer Legal Funding allows individuals to cover essential living costs, such as rent, utilities, transportation, and groceries, without being forced into an early or unfair settlement simply to make ends meet.

Senator Jeremy Cooney stated: “Today marks a historic step forward in protecting everyday New Yorkers from opaque and often predatory litigation financing practices. For too long, vulnerable plaintiffs have been left in the dark about the true cost of third-party funding, only to see the majority of their hard-earned legal recovery eroded by fees and unclear terms. I’m proud to sponsor this bill that brings transparency, accountability, and basic consumer protections to this industry, ensuring New Yorkers can pursue justice without sacrificing financial security.”

Because Consumer Legal Funding is non-recourse, consumers repay funds only if they recover proceeds from their legal claim, if there is no recovery, they owe nothing. This structure protects consumers from taking on debt, preserves their financial stability, and ensures they retain full control over their legal decisions. By enacting this legislation, New York affirms that Consumer Legal Funding supports financial stability and access to justice.

“This law strikes the right balance between consumer protection and financial empowerment, by establishing clear rules of the road, New York ensures that consumers retain freedom of choice, transparency, and access to funds that help them meet their immediate needs during one of the most difficult times in their lives.” said Eric K. Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). “We thank Governor Hochul for her leadership and Assemblymember Magnarelli and Senator Cooney for their commitment to fairness and consumer choice. This new law affirms that Consumer Legal Funding is about funding lives, not litigation.”

Under the new law, Consumer Legal Funding is defined as a non-recourse transaction in which a company purchases a contingent right to receive proceeds from a consumer’s legal claim. The law contains several key consumer safeguards, including:

• Clear Contract Disclosures: All terms, charges, and cumulative repayment amounts must be plainly stated and 
  initialed by the consumer.
• Right to Cancel: Consumers have ten business days to cancel a contract without penalty.
• Attorney Oversight: Attorneys must acknowledge reviewing mandatory disclosures and are prohibited from accepting referral fees or having a financial interest in funding companies.
• Prohibited Practices: Funding companies may not influence settlement decisions, mislead consumers through 
  advertising, or refer clients to specific attorneys or medical providers.
• Registration and Reporting: All funding companies must register with the State of New York and file annual 
  reports, and meet bonding and disclosure requirements. 
   

The act takes effect 180 days after becoming law and marks another milestone in advancing consumer 
protection and responsible business practices across the nation.

About ARC
The Alliance for Responsible Consumer Legal Funding (ARC) is the national trade association representing 
companies that provide Consumer Legal Funding—non-recourse financial assistance that helps consumers 
meet everyday living expenses while their legal claims proceed. ARC advocates for policies that protect 
consumers and ensure access to fair, transparent, and responsible funding options.

Holding Families Together Has Nothing to Do With “Nuclear Verdicts”

The American Transportation Research Institute’s new report, Trucking Litigation: A Forensic Analysis, raises an important question: Why are lawsuit outcomes in truck-related crashes getting bigger and more volatile? The paper points to multiple forces, venue selection, injury severity, negligence patterns, litigation strategies, and rising medical costs, all contributing to rising award sizes and plaintiff victories.

But one thing is not driving these outcomes: Consumer Legal Funding.

Consumer Legal Funding (CLF) is routinely mistaken for the type of financial investment that is designed to shift litigation strategy or chase oversized verdicts. In reality, CLF is used for one simple reason, to help injured consumers keep the lights on and pay rent while their case makes its slow way through the civil justice system.

The ATRI report confirms that the dynamics escalating trucking litigation have nothing to do with how a consumer pays for groceries while they’re out of work after a crash. Instead, the data clearly shows that the true drivers lie elsewhere.

What the ATRI Report Actually Shows

The report identifies several structural and legal factors behind rising litigation cost exposure for the trucking industry:

• State vs. Federal Venue 

State courts drive larger verdicts, median awards exceed comparable federal awards by over $1 million. Plaintiffs use procedural tactics to keep cases in plaintiff-friendly state venues, costing carriers an estimated $102 million in one year alone.

• Injury Severity and Negligence 

Awards scale sharply based on severe injuries such as traumatic brain injuries or spinal damage. Certain negligence types, hours-of-service violations, cell phone use, substance abuse, strongly correlate with awards above $10 million.

• Litigation Tactics 

Anchoring strategies, “reptile theory,” and procedural barriers to federal removal influence jury perception.

• Social inflation and jury sentiment 

The report cites growing distrust of corporations and litigation norms that make settlement harder and trials riskier.

Nothing in the dataset signals any causal influence from a consumer receiving $3,000–$5,000 to pay a mortgage bill while waiting for their attorney to negotiate with an insurer.

Consumer Legal Funding Has No Role in Case Strategy or Verdict Inflation

Consumer Legal Funding:

✔ does not pay legal fees 

✔ does not pay case costs 

✔ does not influence litigation decisions 

✔ does not control settlement timing 

✔ does not give funders any voice over whether a consumer accepts an offer

This is codified in multiple state statutes: funders cannot participate in litigation strategy, cannot communicate with counsel about the legal case, and cannot interfere with attorney-client representation.

These are the exact safeguards that separate CLF from Third-Party Litigation Financing (TPLF).

TPLF, referenced in the ATRI report, involves multi-million-dollar capital investment in lawsuits, commonly in commercial litigation.

CLF funds survival, not strategy.

The consumer uses the money to:

• keeps a roof over the consumer’s head 

• pays utilities 

• buys food 

• support their kids 

• avoid eviction while they’re out of work

The outcome of the case? 

CLF has no influence over it, by design.

ATRI’s Own Evidence Proves the Drivers Are Legal and Procedural, Not Financial Support

Let’s review the report’s key findings:

1️⃣ Venue is destiny 

The largest cost differential comes from state-court litigation. The median verdict in state courts is $1,082,500 larger than federal courts. 

That has nothing to do with whether the plaintiff received a few thousand dollars for living expenses.

2️⃣ Severe injuries drive severe awards 

Cases involving traumatic brain injuries, spinal injuries, or multiple injured plaintiffs consistently lead to high payouts. 

Medical facts, not personal finances, shape outcomes.

3️⃣ Certain negligence types trigger nuclear verdicts 

The top award-generating behaviors: HOS violations, cell phone use, substance abuse, improper onboarding, employer negligence. 

These are safety-and-conduct failures, not wage-gap problems.

4️⃣ Awards are rising even where settlements are common 

Most cases settle — 96.2% in state courts. 

A consumer food bill has zero bearing on settlement calculus between attorneys and carriers.

The ATRI numbers stack up to one conclusion: the litigation environment and the underlying crash conditions, not personal financial stress, drive outcomes.

Why CLF Actually Maintains Fairness

Without CLF, a plaintiff with urgent financial needs faces a coercive choice:

Settle cheap…or risk foreclosure, eviction, utility shutoffs, or debt spirals while waiting for fair compensation.

That dynamic benefits insurers and defendants, not consumers.

By giving families breathing room, CLF allows cases to reach an outcome that reflects the true merits, not the size of the plaintiff’s bank account.

Consumer Legal Funding:

• reduces pressure to accept lowball offers 

• does not increase the economic damages owed 

• does not create new liabilities or shift fault 

• does not inflate pain-and-suffering awards 

• simply guarantees the courthouse doors stay open for injured consumers

If anything, CLF ensures that an outcome, settlement or verdict, reflects the injury and negligence evidence that the ATRI report spends hundreds of pages analyzing.

The ATRI Report Shouldn’t Be Used to Conflate CLF and TPLF

Because the report mentions Third-Party Litigation Funding within a section on legal concerns, it is easy for policymakers to mistakenly assume CLF is part of the trucking litigation problem.

It is not.

CLF does not:

• enter commercial cases 

• finance case expenses 

• fund attorneys 

• influence crash-related negligence 

• affect federal venue eligibility 

• alter juror psychology 

• create “phantom damages” 

• expand award categories

It is simply a consumer financial tool, used for household survival.

All of the trends the ATRI report identifies would continue exactly the same if Consumer Legal Funding disappeared tomorrow.

Blaming CLF Won’t Fix the Problems ATRI Identifies

A System Should Not Punish the Injured for Being Broke

Trucking plays a vital role in the American economy. So does justice.

A person who is hit by a vehicle weighing 80,000 pounds should not be forced into bankruptcy or homelessness while waiting for the legal system, which often takes four years to resolve a case, to function.

Consumer Legal Funding helps families survive through that process.

• It does not change the judge. 
• It does not change the jury. 
• It does not change the evidence. 
• It does not change the verdict.

It only changes whether a family has heat in January.

Conclusion

The ATRI report provides valuable insight into trucking litigation trends. Policymakers should take it seriously. But using its findings to target Consumer Legal Funding would be a profound misapplication of the data.

The report shows that:

• Awards are tied to negligence and injury severity — not plaintiff personal finance 

• Venue manipulation inflates cost — not rent payments 

• Social inflation, not survival assistance, drives volatility

CLF participants don’t ask for nuclear verdicts — they ask for groceries.

And no one should be forced to trade their home for their day in court.

The recently introduced Tackling Predatory Litigation Funding Act seeks to amend the Internal Revenue Code to impose a new federal tax on income derived from “litigation financing agreements.” While the intent, to regulate and tax large-scale speculative investment in litigation, may be understandable, the bill’s definitions are overly broad and risk sweeping in an entirely different financial product: Consumer Legal Funding.
Consumer Legal Funding is not litigation financing. It is a consumer-level, non-recourse financial transaction designed to help individuals cover basic household needs while they await the resolution of a pending legal claim. Taxing it under this legislation would not only misclassify the product but also harm the very consumers the measure claims to protect.

---

1. Understanding the Purpose of the Tillis Bill

At its core, Senator Tillis’s bill would impose a tax equal to the highest individual income tax rate plus 3.8% on “qualified litigation proceeds” received by a “covered party.” The definition of a covered party includes any third-party entity, domestic or foreign, that provides financing for a civil action and receives a return linked to the proceeds of that action

The Tillas Tax Bill defines a “litigation financing agreement” as an arrangement in which a third party provides funds to a named party or law firm in exchange for a direct or collateralized interest in the proceeds of a civil action. In essence, it targets capital providers who invest in litigation as a financial asset, entities that may fund law firms, commercial plaintiffs, or portfolios of cases.

That description, however, does not accurately fit Consumer Legal Funding.

---

2. Consumer Legal Funding Is a Personal-Finance Product, Not a Litigation Investment

Consumer Legal Funding exists to meet individual financial needs, not to invest in lawsuits. When a consumer has been injured and is pursuing a legal claim, often against a large, well-funded insurer, they may be unable to work and face mounting expenses such as rent, groceries, medical costs, and utilities. Consumer Legal Funding provides non-recourse funds to help them maintain stability. If the consumer does not recover in their case, they owe nothing.

Unlike litigation finance firms, Consumer Legal Funding companies do not:

• Fund attorney fees, discovery costs, or expert witnesses;
• Influence litigation strategy or settlement decisions;
• Purchase stakes in law firms or aggregate portfolios of claims;
• Seek to profit from legal outcomes as an investment class.

The consumer, not the company, controls the litigation, the attorney, and all settlement decisions. The transaction’s purpose is humanitarian and financial, not speculative. In short, Consumer Legal Funding funds lives, not litigation.

---

3. The Statutory Definitions Do Not Fit Consumer Legal Funding

The bill defines a “litigation financing agreement” as one that creates “a direct or collateralized interest in the proceeds of [a] civil action,” executed with “any attorney, co-counsel, or named party” to the case

While that might appear to include any transaction tied to case proceeds, Congress has repeatedly recognized the importance of context and intent in tax classification.

Consumer Legal Funding does not create a collateralized interest in the litigation itself. It is a purchase of a contingent right to a small portion of potential case proceeds. The funder has no lien on the case, no security interest in the litigation, and no claim against the defendant or the attorney. The consumer alone holds the legal claim.

---

4. Taxing Consumer Legal Funding Would Harm Consumers, Not Speculators

Applying this tax to Consumer Legal Funding would not affect hedge funds or foreign investment pools; it would directly impact injured consumers. A tax on Consumer Legal Funding companies would force higher transaction costs, reduce available funding, and make it harder for consumers to access help during times of financial crisis.

For example:

• A person injured in an accident may need $3,000 to avoid eviction while awaiting a settlement offer that could take months.
• If the funding company must pay an additional federal tax on its limited return, it will either raise costs or withdraw from certain markets entirely.
• The net result: consumers are left with no safe, regulated option and may turn instead to payday lenders or credit-card debt.

The bill’s sponsors claim to target “predatory litigation funding,” but in reality, taxing Consumer Legal Funding would punish consumers for being poor and discourage access to justice.

---

5. The Bill’s Structure Shows It Was Aimed at Institutional Investment, Not Consumer Funding

Several features of the bill make clear that it was drafted with large-scale litigation finance in mind:

• Entity-level taxation: Section 5000E-1(c) applies the tax at the entity level for pass-through entities such as partnerships or S-corporations, structures typical of commercial investment funds, not consumer-funding companies.
• Anti-netting provisions: The bill forbids offsetting gains with losses, suggesting a concern about investors managing diversified litigation portfolios for profit. Consumer Legal Funding companies operate on a per-case basis, not as hedge-fund-style portfolios.
• Reference to sovereign wealth funds and swaps: The inclusion of foreign sovereign wealth funds and “options, futures, swaps, or similar contracts” clearly points to the commercial investment market, not the small consumer transaction space.

Consumer Legal Funding is the functional opposite of these arrangements. It operates in a retail consumer-finance environment, subject to state-level consumer protection laws, caps, and disclosures, not the high-finance environment this bill seeks to regulate.

---

6. State Legislative Exemptions Demonstrate Clear Distinction

Across the country, several states have enacted legislation or adopted rules that explicitly distinguish Consumer Legal Funding from broader litigation financing or third-party litigation investment products. These statutes and regulations make clear that the two concepts are not interchangeable.

Arizona: The Arizona Supreme Court amended Rule 8 of the Rules of Civil Procedure to carve out Consumer Legal Funding from its definition of litigation financing. This rule recognizes that these transactions are not investments in litigation, but consumer financial products designed to support individuals during pending claims.

Texas’s Supreme Court subcommittee considered including funding in its litigation-financing rule but declined, recognizing that Consumer Legal Funding serves a different purpose.

Kansas: Kansas enacted legislation defining “consumer litigation funding” as a separate, regulated financial product under the state’s consumer protection framework. The statute explicitly provides that such transactions do not constitute loans and are distinct from attorney funding or litigation investment agreements.

Colorado: Colorado’s consumer funding law regulates Consumer Legal Funding through licensing, disclosure, and fee transparency requirements, while clearly exempting it from classification as lending or as traditional litigation finance. This framework demonstrates that the state views these transactions as consumer financial assistance, not litigation investment.

Louisiana: Louisiana’s Revised Statutes (§9:4861 et seq.) likewise treat Consumer Legal Funding as a lawful, non-recourse consumer transaction, distinct from loans and from litigation financing arrangements. Louisiana’s approach reinforces the understanding that these transactions are between funders and consumers, not between investors and law firms.

Collectively, these states’ actions show a consistent national pattern: policymakers at the state level recognize that Consumer Legal Funding occupies its own category, distinct from commercial litigation finance. Any federal measure that fails to preserve this distinction risks disrupting an established and well-regulated consumer marketplace.

---

7. The Economic and Social Role of Consumer Legal Funding

Consumer Legal Funding is a market-based alternative to government aid or high-interest debt. It provides liquidity to consumers who otherwise face “forced settlements”, situations where plaintiffs accept lowball offers simply because they cannot afford to wait.

By stabilizing households during litigation, Consumer Legal Funding:

• Promotes fair settlements that reflect the true value of claims;
• Reduces reliance on social safety-net programs;
• Supports small businesses and local economies by keeping consumers solvent.

Taxing the industry as if it were speculative litigation finance would undermine these benefits and exacerbate inequality between large corporate defendants and individual plaintiffs.

---

8. Consumer Legal Funding Does Not Generate “Qualified Litigation Proceeds”

Under the bill, “qualified litigation proceeds” are defined as realized gains, net income, or profits derived from litigation financing agreements

Consumer Legal Funding companies receive contractual payments directly from consumers’ portion of a settlement, after attorneys’ fees and costs. The consumer, not the funder, is the legal owner of the claim.

In other words, the company’s return arises from the consumer’s contractual obligation. This is a critical legal distinction. The IRS has historically treated such non-recourse contingent-asset purchases as consumer-finance transactions, not income derived from litigation.

If the Treasury were to apply this tax to Consumer Legal Funding, it would represent a fundamental mischaracterization of the nature of the transaction and could open the door to taxing numerous unrelated consumer products tied to contingent events (for example, insurance recoveries, structured settlements, or medical lien receivables).

---

9. Exemption Language Would Align Federal Law with Legislative Intent

To preserve the bill’s intent, targeting large-scale speculative litigation investment, while avoiding harm to consumers, Congress should adopt a clear statutory exemption for Consumer Legal Funding. The exemption could mirror existing state definitions, for example:

“The term ‘litigation financing agreement’ shall not include any non-recourse transaction in which a consumer legal funding company purchases from a consumer a contingent right to receive an amount of the potential proceeds of a settlement, judgment, award, or verdict obtained in the consumer’s legal claim.”

Such language would ensure that consumer-level transactions remain outside the bill’s scope, while still capturing true commercial litigation financing arrangements.

---

10. Conclusion: Funding Lives, Not Litigation

The Tackling Predatory Litigation Funding Act reflects concerns about transparency and profit-seeking in large-scale litigation investment. However, Consumer Legal Funding is not part of that world. It is a consumer-protection tool that gives ordinary Americans breathing room while they seek justice against powerful insurers and corporations.

To treat it as taxable “litigation income” would not punish predatory financiers, it would punish injured consumers, accident victims, and struggling families who simply need help paying rent or buying groceries while their case proceeds.

Consumer Legal Funding is a lifeline, not a loophole. Congress should make that distinction clear by exempting Consumer Legal Funding from the tax provisions of the Tackling Predatory Litigation Funding Act.

As the Alliance for Responsible Consumer Legal Funding reminds policymakers:
Consumer Legal Funding, Funding Lives, Not Litigation.

For years, the insurance industry has loudly opposed any attempt to regulate its own pricing practices, yet when it comes to Consumer Legal Funding (CLF), a private, non-recourse transaction that helps injured individuals stay afloat financially while awaiting the resolution of their legal claims, the same insurers suddenly become champions of “rate caps” and “price controls.” This contradiction is not only hypocritical, it’s revealing. Insurers decry CLF as costly to consumers while simultaneously hiking their own premiums at rates far exceeding inflation. The double standard exposes an industry trying to deflect attention from its own excesses by scapegoating a product that empowers consumers rather than exploiting them.

Soaring Premiums and Renewed Talk of Price Controls

As The Wall Street Journal recently reported, (https://www.wsj.com/finance/regulation/runaway-insurance-costs-bring-back-talk-of-price-caps-fe4df279?mod=author_content_page_1_pos_1)insurance premiums for home and auto coverage have skyrocketed, 50% and 42% respectively since 2020, far outpacing the 26% rise in consumer prices. Lawmakers from Illinois to Louisiana are now exploring legislation to cap rates or ban “excessive” premiums. In Louisiana, Governor Jeff Landry has accused insurers of “sending record profits to Wall Street while our rates continue to climb.” Even some Republican policymakers, typically allies of business deregulation, have conceded that the market has spun out of control. Yet, as pressure mounts for oversight, the insurance lobby warns that price caps would destroy competition and drive carriers out of states. Their argument is simple: government shouldn’t interfere with market pricing, but that principle seems to apply only when insurers are the ones setting the prices. When it comes to Consumer Legal Funding, the same voices demand caps, fee limits, and disclosures so invasive they would cripple the industry.

The Hypocrisy of Selective Regulation

The contradiction is glaring. Insurers insist that their pricing should remain a matter of actuarial science and free-market competition, then turn around and lobby for government-mandated caps on what private CLF companies can charge. Consumer Legal Funding isn’t insurance, lending, or a public utility. It’s a voluntary, non-recourse transaction between an individual plaintiff and a funding company. If the plaintiff loses their case, they owe nothing. If they win, the company is repaid from a portion of the settlement. The funds are used for household expenses, rent, groceries, childcare, or medical bills, not legal fees. Yet insurers push for rate ceilings on CLF under the guise of “consumer protection.” They claim these private agreements drive up settlement values, inflate damages, and contribute to what they call a “tort tax,” an alleged hidden cost of litigation that raises prices for everyone. That narrative is false on every level. Consumer Legal Funding doesn’t create lawsuits, doesn’t affect liability verdicts, and doesn’t add costs to insurance premiums. It simply prevents insurers from weaponizing financial pressure to force injured individuals into accepting lowball settlements.

The Real Driver of Costs: Insurer Delay and Denial

If there is a “tort tax” in the civil justice system, it’s one imposed by insurance company delay tactics. Insurers routinely stall, dispute, and underpay claims, knowing that time is their greatest leverage. As weeks turn into months, many plaintiffs, unable to work and facing mounting bills, are forced to settle for far less than their cases are worth. Consumer Legal Funding helps correct that imbalance by giving people financial breathing room. It ensures that cases are resolved on their merits rather than on the plaintiff’s desperation. That’s not inflationary, it’s restorative. In truth, insurers’ animosity toward CLF stems from the fact that it reduces their negotiating power. When consumers can afford to wait for fair compensation, insurers can no longer close claims cheaply. It’s no surprise, then, that they’ve spent years trying to paint CLF as a villain while quietly raking in record profits.

Record Profits, Record Rate Increases

The insurance industry’s financial health tells the story. Despite claiming heavy losses, major carriers continue to post multi-billion-dollar earnings and pay generous dividends to shareholders. State Farm, for example, defended a 27% home-insurance hike in Illinois by citing actuarial “necessity” while admitting it has made money in 13 of the past 15 years. If any industry merits scrutiny for “excessive” pricing, it’s the one that profits while families struggle to pay their monthly premiums. Consumers can’t shop their way out of this crisis, insurers dominate markets, coordinate rate filings, and benefit from a unique exemption from federal antitrust laws dating back to the 1940s. In other words, insurers already enjoy government protection from true competition. Yet they cry foul when policymakers dare to question their rate hikes or when other industries, like CLF, resist government interference.

The insurance industry’s attacks on Consumer Legal Funding are not about protecting consumers, they’re about protecting profits. Through trade groups and front organizations, insurers have spent millions lobbying for restrictive legislation that would cap CLF rates or require disclosure of funding agreements in litigation. 

Weaponizing “Transparency” to Weaken Plaintiffs

The insurance industry’s call for mandatory disclosure of Consumer Legal Funding agreements is part of a broader strategy to tilt the playing field. Under proposed rules in several states, defendants would gain access to details about how much funding a plaintiff has received, the terms of repayment, and even the identity of the funder. Insurers frame these disclosure requirements as “sunlight” reforms, measures designed to protect the integrity of litigation. In practice, they’re tools of intimidation. With that information, defense attorneys can time lowball offers or drag out discovery to increase financial pressure on plaintiffs, knowing exactly when their resources might run out. This isn’t transparency in the service of justice, it’s transparency as a weapon. By contrast, insurers fiercely protect their own financial secrecy. They refuse to disclose the billions they hold in reinsurance agreements, which allow them to spread risk globally and obscure true profit margins. They guard their claims reserves, the internal estimates that determine how much they expect to pay out, and therefore how much they can safely delay. And they keep confidential their massive defense budgets, funneled to outside law firms that specialize in exhausting plaintiffs through delay and attrition. If transparency truly mattered, insurers would open their own books. Instead, they seek a one-way mirror, plaintiffs are exposed, while insurers remain hidden behind a veil of “proprietary information.” The hypocrisy is unmistakable. Insurers want to know everything about the financial lifeline that allows injured people to survive while waiting for justice, but they reveal nothing about the financial machinery that profits from denying that justice.

The Free Market They Pretend to Defend

David A. Sampson, President of the American Property Casualty Insurance Association, recently lamented in a LinkedIn post (https://www.linkedin.com/posts/david-a-sampson-23a54911_runaway-insurance-costs-bring-back-talk-of-activity-7386111332653223937-2tsL/?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAGWWSgBFESrqDCdnU2Jw-r57mZqFuGuXmQ) that “runaway insurance costs” are fueling talk of government price caps. He warned that rate restrictions would harm the free market and reduce availability of coverage. He’s right about one thing, price controls can distort markets. But what he fails to mention is that insurers have long sought to impose those very controls on Consumer Legal Funding, a product that operates entirely outside the insurance system and poses no risk to public solvency or taxpayer burden. If insurers truly believe in market competition, they should let the market decide the value of Consumer Legal Funding too. Instead, they advocate selective capitalism, deregulation for themselves, regulation for everyone else.

Funding Lives, Not Litigation

Consumer Legal Funding is not the problem, it’s part of the solution. It funds lives, not litigation, helping injured people cover their living expenses while the justice system runs its course. Without CLF, many victims would be forced to accept the first lowball offer insurers put on the table. With it, they can seek fair compensation, hold wrongdoers accountable, and restore balance to an uneven system. That’s not a “tort tax,” it’s access to justice. By contrast, the insurance industry’s soaring rates, opaque pricing, and resistance to oversight impose a very real tax, a premium tax on everyday life. Families across the country are paying hundreds or thousands more each year for coverage that’s less reliable and harder to afford.

Here is The Bottom Line

When insurers complain about rate caps on their own industry, they call it government overreach. When they push for rate caps on Consumer Legal Funding, they call it consumer protection. The inconsistency reveals what’s really at stake, power and profit, not principle. Even the insurance industry’s own leaders acknowledge the dangers of government interference when it affects them. As David Sampson, President of the American Property Casualty Insurance Association, recently wrote on LinkedIn, “Government price controls distort markets and create perverse incentives. Imagine the government telling automakers or builders how much to charge for the cars and homes they make. It’s not a serious solution.”

He’s right, and that same philosophy should apply equally to Consumer Legal Funding. CLF operates in a competitive, private marketplace, where individuals freely choose to engage in non-recourse transactions that help them stay financially stable while pursuing justice. If price controls are misguided and harmful for insurers, then they are equally misguided and harmful when applied to CLF. Those who champion free-market values should apply them equally, giving consumers who rely on Consumer Legal Funding the same liberty to choose that insurers demand for themselves.

Until that happens, efforts to impose disclosure of CLF contracts or artificial rate caps will continue to serve as little more than a diversion from the insurance industry’s own unchecked pricing practices and lack of accountability.

Consumer Legal Funding: Funding Lives, Not Litigation

Consumer Legal Funding: Funding Lives, Not Litigation

Introduction: The Access-to-Justice Gap

The American justice system aspires to a simple but profound principle: equality before the law. As Justice Lewis Powell, Jr. famously observed:

“Equal justice under law… it is perhaps the most inspiring ideal of our society. … It is fundamental that justice should be the same, in substance and availability, without regard to economic status.”

Yet in practice, access to justice is often determined not by the merits of a case, but by the financial stamina of the claimant. While litigation may stretch over months or years, rent, medical expenses, and household bills come due every month. For many injured or aggrieved individuals, this creates a “survival gap” that forces early, inadequate settlements or the outright abandonment of claims.

Consumer Legal Funding (CLF) seeks to bridge that gap. Properly understood, it is not about financing lawsuits, it is about enabling people to endure the waiting period inherent in the judicial process. That is why its advocates distill the mission into the phrase:
“Consumer Legal Funding: Funding lives, not litigation.”

---

What Consumer Legal Funding Is—And What It Is Not

CLF provides non-recourse financial advances to individuals with pending legal claims. The funds are used exclusively for personal needs such as rent, food, utilities, or medical care—not for attorney’s fees or litigation costs. If the case fails, the consumer owes nothing.

This model stands in sharp contrast to commercial litigation funding, where investors back multimillion-dollar lawsuits and may exert influence over litigation strategy. By design, CLF companies do not control litigation decisions, dictate attorney conduct, or purchase an interest in the outcome.

That distinction matters. CLF is a consumer finance product—not a litigation strategy. At its best, it is a tool of survival and empowerment, allowing ordinary people to exercise their rights without being coerced into “forced settlements” by financial desperation.

---

Consumer Voices: Funding Lives in Real Terms

Real impact is best measured in the words of those who have lived it. Below are select excerpts from consumers across multiple states, describing how consumer legal funding made a difference:

“Funding helped me buy a bed pending my settlement.”

“I’m very thankful you help me put a roof over my family’s head.”

“It has helped us pay our past due rent.”

“You helped me pay my electric bill after it shut off, thank you.”

“You helped me by helping me get a place to live.”

“You helped me pay my rent and not get evicted.”

“Legal funding… eliminated having to make the impossible decision to pay bills or pay for medical treatment.”

“Legal funding helped me maintain control of my life. I would have lost both my apartment and my car.”

“The accident changed everything in my life but consumer legal funding became a shining beacon of hope.”

These voices illustrate the variety of circumstances under which individuals have used legal funding to stabilize their lives while awaiting justice: covering rent, utilities, essential medical care, and even basic household furnishings. The stories are especially vivid in depicting near-immediate relief from financial distress: “helped me with bills,” “roof over my family’s head,” “pay our past due rent.”

In every instance, the testimony reinforces that legal funding is not primarily about fueling litigation, it is about enabling survival during litigation. Without that pause, many of these individuals might have accepted unfair settlements or abandoned meritorious claims altogether.

---

Addressing Criticisms

Claim 1: CLF drives “frivolous litigation.”
There is no empirical evidence that providing individuals with living-expense advances incentivizes frivolous lawsuits. In fact, reputable funders underwrite based on case strength—if a claim is weak, the risk is too high.

Claim 2: CLF inflates settlement values and raises insurance costs.
What CLF prevents is premature under-settlement. Insurers may dislike negotiating with financially stable plaintiffs, but that is not distortion—it is justice functioning as intended. Settlements should reflect the true value of claims, not the claimant’s desperation.

Claim 3: CLF is exploitative due to cost.
The non-recourse nature of CLF means providers absorb 100% of the loss when cases fail. That risk must be priced in. The appropriate policy response is transparency and reasonable guardrails—not elimination of the product.

---

Economic and Social Impact

The broader economic impact of CLF extends beyond individual plaintiffs. By enabling claims to reach fair resolution, it:

• Strengthens accountability: Wrongdoers, including corporations and insurers, face fairer settlements.
• Reduces hidden social costs: Without CLF, individuals may turn to public assistance, increasing taxpayer burdens.
• Supports judicial efficiency: By discouraging forced early settlements, CLF aligns case outcomes more closely with merit.

Moreover, the principle of fairness undergirding CLF enhances public confidence in the justice system. A system where only the wealthy can withstand the litigation timeline erodes trust; a system where ordinary citizens can persist strengthens legitimacy.

---

The Path Forward

To ensure CLF remains a tool of empowerment rather than exploitation, stakeholders, legislators, regulators, consumer advocates, and industry leaders, must collaborate on balanced frameworks. The goal is not to eliminate risk (which is inherent in any financial tool) but to preserve access while safeguarding against abuse.

Just as importantly, public discourse must move beyond conflating CLF with commercial litigation funding. The phrase “Funding lives, not litigation” is more than rhetoric, it reflects the essential difference between helping people endure and turning lawsuits into investment vehicles.

---

Conclusion

Consumer Legal Funding embodies a simple but powerful idea: that justice should not be rationed by wealth or timing. It does not bankroll lawsuits; it sustains lives. It ensures that plaintiffs—regardless of income—can pursue their claims without sacrificing housing, food, or medical care in the interim.

Justice Powell’s words remain a clarion call: “Justice should be the same, in substance and availability, without regard to economic status.”

CLF is one mechanism by which that promise can be honored. With thoughtful regulation, and adherence to its core mission, consumer legal funding can continue to play a vital role in advancing fairness, making sure that access to justice is not a privilege of the wealthy, but a right of all.