There has been a lot of discussion if Consumer legal funding is a loan and thereby creates debt for a consumer Consumer legal funding, sometimes called litigation funding or lawsuit funding, provides cash upfront to plaintiffs, to be used for household needs, which are involved in legal proceedings in exchange for a portion of the eventual settlement or judgment. It doesn’t create debt like a loan from a bank or credit card, these distinctions contribute to its classification as a unique financial product rather than a loan or debt.

• Non-recourse nature: Unlike loans, where the consumer is personally liable for repayment regardless of the outcome, consumer legal funding is non-recourse. This means that if the plaintiff loses their case, they are not obligated to repay the funding. The repayment is contingent upon the success of the lawsuit.
• No monthly payments: In a loan, borrowers usually make monthly payments to repay the principal amount plus interest. With consumer legal funding, there are usually no monthly payments required. Instead, repayment only occurs if and when the case is settled or won, and the repayment is often structured as a lump sum.
• Risk sharing: Consumer legal funding providers assume a significant amount of risk by providing funds to plaintiffs who may not ultimately win their case. Unlike lenders who typically assess creditworthiness and require collateral, consumer legal funding companies evaluate the strength of the case and base their decision on the likelihood of success and not the creditworthiness of the consumer.
• Not regulated as loans: Consumer legal funding is often subject to different regulations than loans. While loans are typically governed by banking and lending laws, consumer legal funding has its own set of regulations that ensures consumers are protected and the product is offered in a responsible manner.

Some of the other key differences between consumer legal funding and debt from a loan is in how repayment works. With a loan, the consumer borrows money and agrees to repay it with interest, regardless of the outcome of the situation, creating debt. However, with consumer legal funding, repayment is contingent upon the success of the case. If the consumer loses their case, they will not have to repay the funding. But if they win, they will have to pay back the amount funded, with fees that are known upfront.

So, therefore consumer legal funding doesn’t create debt. Unlike Consumer legal funding, some loans can put consumers in a cycle of debt.

The term cycle of debt refers to a pattern where individuals or households become trapped in a recurring pattern of borrowing money to meet financial obligations, only to find themselves in even greater debt over time. This cycle often involves:

• Initial Borrowing: The cycle typically begins with an initial borrowing of money, such as taking out a loan, using a credit card, or obtaining other forms of credit to cover expenses or emergencies.
• Accumulation of Interest and Fees: As time passes, the borrower may struggle to make timely payments on their debts, leading to the accumulation of interest charges, late fees, and other penalties.
• Financial Strain: The increasing debt burden can put a strain on the borrower’s finances, making it difficult to cover basic living expenses and other financial obligations.
• Additional Borrowing: To address their financial difficulties, borrowers may resort to additional borrowing or using high-cost forms of credit, such as payday loans or cash advances, to make ends meet.
• Repayment Challenges: The cycle continues as the borrower struggles to keep up with mounting debt payments, leading to further financial stress and the need for more borrowing.
• Escalating Debt: Without significant changes in financial habits or circumstances, the debt continues to escalate, with the borrower owing more money than they can realistically repay.

Breaking the cycle of debt often requires proactive steps such as budgeting, reducing expenses, increasing income, seeking financial counseling, and finding ways to pay down debt strategically. It may also involve negotiating with creditors, consolidating debts, or exploring debt relief options such as debt settlement or bankruptcy.

Consumers who use Consumer legal funding are never placed in a cycle of debt. Consumer legal funding has many other positives to a consumer besides not placing them in debt.

• Immediate Financial Assistance: Consumer legal funding provides plaintiffs with immediate cash to cover living expenses, medical bills, legal fees, and other costs associated with their lawsuit. This can be particularly helpful for individuals facing financial hardship due to their inability to work or other circumstances related to their legal case.
• Non-Recourse: Consumer legal funding is non-recourse, meaning that if the plaintiff loses their case, they are not obligated to repay the funding. This reduces the financial risk for the plaintiff, as they only repay the funding if they win their case.
• Leveling the Playing Field: Consumer legal funding can help level the playing field in legal disputes by providing plaintiffs with the financial resources to pursue their case effectively. This is particularly beneficial for individuals who are up against well-funded defendants or corporations.
• No Upfront Costs: Unlike loans, consumer legal funding does not require upfront payments or monthly repayments. Instead, repayment is structured with a known outcome and amount.

Overall, consumer legal funding can be a valuable resource for plaintiffs in need of financial assistance during legal proceedings without putting them in debt.

Jefferson City, MO,—Missouri Governor Michael Parson signed an omnibus bill, SB 103, containing sweeping new regulations for the growing industry of consumer legal funding—bringing meaningful oversight of provider companies for the first time in the state’s history.

Missouri now joins several states, like Oklahoma, Nebraska, Ohio, Utah, Nevada, Vermont, Tennessee, Indiana, and Maine, who have acted to enact consumer protections while preserving consumer choice.

Consumer legal funding—also known as pre-settlement funding—is a specialty financial service that allows plaintiffs pursuing a legal claim to sell part of the potential proceeds of the claim for cash now. Unlike a loan, there is no obligation to the funding company if the consumer does not have a successful outcome in their claim. And because it’s the sale of an asset, it can’t affect a person’s credit or put them into collections. This legislation ensured that it will be treated as a consumer asset.

“Consumer legal funding is a financial lifeline to those engaged in civil litigation who lack savings. Governor Parson giving his approval to this legislation is a win for robust consumer protections and protecting access to legal funding in Missouri.” Stated Missouri State Representative Phil Christofanelli

Missouri State Senator Sandy Crawford stated “I am pleased that we were finally able to take the Consumer Legal Funding legislation across the finish line.  Although this process has taken several years, I am confident the finished product was worth the time it took.  I was happy to play a role in passing this important legislation.”

“Consumer legal funding is different from a lot of other financial products. It allows a consumer to get the financial assistance they need while their claim is making its way through the legal system.” said Eric Schuller, President Alliance for Responsible Consumer Legal Funding, the Trade Association that represents the companies that offer Consumer Legal Funding. 

Missouri State Senator Curtis Trent stated: “I appreciate the Governor’s support.  This measure will ensure that Missourians have better access to the financial resources they need to protect their rights in Court.”

Schuller said, “this is well-researched legislation we’ve seen comes out in the last few years. It’s sure to serve as a model for other states in the years to come. This is good lawmaking in action—a trend which should continue.”

There has been a lot of interest in ChatGPT and similar AI technologies. People and organizations are using this technology answer questions, to help with research and just learn about what’s what’s….

Recently we typed in the following questions and the responses were interesting.

What is Consumer Legal Funding?

Consumer legal funding is a form of alternative financing for individuals who are pursuing a legal claim and need cash before their case settles. It provides a cash advance against the potential settlement or award in the case, allowing individuals to pay for necessary expenses while they wait for their case to be resolved.

Is Consumer Legal Funding a loan?

Consumer legal funding is not a loan, but rather a cash advance against a future settlement or award in a legal case.

What is Consumer Legal Funding used for?

Consumer Legal Funding is a type of financial product used to provide immediate cash to individuals who are pursuing legal claims. It is typically used to cover the costs of legal expenses such as attorney fees, expert witness fees, and other court-related costs. The funding is typically secured against the potential settlement or award from the legal case.

Does the Property and Causality insurance industry like Consumer Legal Funding?

The property and casualty insurance industry generally does not have a favorable view of Consumer Legal Funding. They see it as a potential obstacle to their goal of resolving claims as quickly and efficiently as possible. By providing funding for individuals to pursue legal action, Consumer Legal Funding can prolong the legal process and increase the overall cost of settling claims. The insurance industry may also view Consumer Legal Funding as a threat to their bottom line, as it can make it more difficult for them to settle claims quickly and inexpensively.

What is the difference between consumer legal funding and litigation financing?

Consumer Legal Funding and Litigation Financing are similar in that they both provide funding to individuals pursuing legal claims. However, there are some key differences between the two.

Consumer Legal Funding is specifically targeted towards individual consumers, while Litigation Financing is available to both individuals and businesses.

Consumer Legal Funding is typically secured against the potential settlement or award from the legal case, while Litigation Financing can involve a more complex financial arrangement, such as a stake in the outcome of the case.

Consumer Legal Funding is usually more expensive than traditional forms of lending, due to the higher risk involved. Litigation Financing can be even more expensive, as it typically involves a higher degree of risk and a more complex financial arrangement.

In summary, Consumer Legal Funding and Litigation Financing both provide funding for legal cases, but Consumer Legal Funding is targeted towards individual consumers and is typically secured against the potential settlement or award from the case, while Litigation Financing can be available to both individuals and businesses and can involve a more complex financial arrangement.

If an Artificial Intelligence Robot knows the truth behind Consumer Legal Funding and how it works.

Then why don’t those who try to put major restrictions on it and even try to put it out of business do?

Personal injury accidents create a lot of problems beyond just the physical damage that you can see on the automobile that was involved in the accident. If you or a loved one have ever been seriously injured in a car crash or other type of personal injury accident, you understand the toll and hardship this can have on you, your family, and your friends. As a result of a personal injury, you may be dealing with both physical injuries and emotional anguish. To make matters worse, your injuries may be preventing you from working and leave you in a bind financially and at risk of permanently losing your job.

It isn’t fair to be dealing with physical, emotional, and financial challenges as a result of an accident that wasn’t your fault. Although it isn’t fair, unfortunately, this is the situation too many victims find themselves in.

If this is the situation you find yourself in, your first step should be to hire the best personal injury lawyer possible and see if you qualify to file a lawsuit against the person(s) or company that should be held financially responsible for your injuries. Fortunately, most personal injury law firms do not charge you for a consultation, and if they decide to take on your case, they typically will only charge you if they win a financial settlement for your case.

The Key to Your Financial Freedom

Getting a lawyer or legal firm to represent you as part of your personal injury lawsuit is key because it lets the insurance companies know you are serious about getting the compensation you deserve. Insurance companies will do their best to pay out as little as possible in the event of a claim, regardless of the severity or the extent of the damage. Hiring a personal injury attorney allows you to have someone advocating on your behalf, provide you with advice about your best treatment options, as well as help you get the response you need from an unresponsive insurance company.

Additionally, hiring an attorney to represent you in your personal injury accident claim opens the door for you to be eligible for pre-settlement funding. In order to qualify to receive an advance against your future settlement, most pre-settlement funding companies require you to have active representation by a personal injury law firm.

What is Pre-Settlement Funding?

Pre-settlement funding provides a plaintiff or injury victim with an advance against their future settlement. Unfortunately, insurance companies representing the at-fault parties in an accident typically will look after their financial interest first, rather than seeking to help the injured victim. As a result, getting a settlement can be a tedious and lengthy process leaving you responsible for managing the financial impacts of the accident on your own. This is where pre-settlement funding can be a tremendous asset and help.

In pre-settlement funding, the only item of benefit is the value of your pending personal injury lawsuit. As a result, pre-settlement funding companies do not require background checks, credit checks or any proof of ongoing income. This is a tremendous benefit considering being able to provide assets as collateral or a stable financial background can be a major stumbling block for many individuals seeking traditional bank financing.

It is important to know that pre-settlement funding is non-recourse, meaning you only have to repay the money advanced against your lawsuit if your attorney successfully wins your lawsuit. Additionally, when you win your case, your attorney handles paying back the funding provider out of your settlement, so you don’t have to worry about making the payment back to the funding company. If approved for funding, the process is very quick, and most pre-settlement funding companies will provide you with money within 24 to 48 hours.

More Time Means More Money

Pre-settlement legal funding provides you and your lawyer additional benefits outside of providing the money you need to pay your bills. As previously mentioned, insurance companies are often not looking out for your best interest. Not to mention, one of the many tactics at-fault insurance companies will try is to stall settling the case for as long as possible in hopes of the claimant taking a lower settlement amount to just get the case resolved and cash in their pocket. When personal injury victims are unable to withstand the financial pressures of an insurance company, clients are forced to settle prematurely and for less money than they deserve.

Getting pre-settlement funding provides financial relief for plaintiffs while giving their attorneys more time to work their case, ultimately increasing the payout amount. Data from the National Center for State Courts and the United States Department of Justice shows that most personal injury cases are resolved within 1-3 years. You may be able to make it financially for 12 months, but if forced to wait 24 -36 months for a settlement, depending on your situation, it could be unbearable.

The Benefits Are Clear

The benefits of pre-settlement legal funding for you as the victim and your lawyer are very clear. Pre-settlement legal funding provides the money you need right now to cover your ongoing expenses and provides your attorney the additional time they need to work your case, do the proper investigation, negotiate with the insurance company, or even possibly take your case to trial in order to maximize your payout amount, so you get the most money possible. Insurance companies frequently utilize financial pressures to get you to accept a settlement that is less than the case’s true value. Pre-settlement legal funding provides instant relief to your financial strains, allowing you and your attorney the proper amount of time needed to either continue negotiating with the insurance company or proceed to trial and get the highest payout amount for you.

Charles Price, CEO of Capital Now Funding

The opponents of consumer legal funding often say that consumers do not need this product. That they have several other options which they can tap into, and as such, are trying to put up barriers through the legislative process in limiting consumers’ ability to have access to this vital piece of financial stability.

What is interesting is that the barriers that are being put up are designed so that consumers will not have access to this product at a time when they need it most. There are pieces of legislation being introduced across the country that would fully ban the product. Other pieces of legislation would make it cost-prohibitive for companies to offer the product, thereby banning the product and not making it available to those who need it most.

A recent CNBC.com report it found the following:

• 20% of American workers run out of money between checks
• 68% do not have money set aside for emergencies
• 51% have no emergency savings at all
• 45% financially stressed

And, thanks to inflation, the average family will need $5,200 more this year than last just to meet basic needs. This is on top of the fact that the average personal injury case takes between 1 to 3 years to settle.

So I ask again, with the need for this product greater than ever, why are the opponents of the industry being so aggressive in wanting to limit this product? It is to do one thing: force consumers to accept low-ball settlements so they can increase their bottom line.

U.S. Supreme Court Justice Lewis Powell, Jr. once said, “Equal justice under law…it is perhaps the most inspiring ideal of our society. It is one of the ends for which our entire legal system exists…it is fundamental that justice should be the same, in substance and availability, without regard to economic status.”

Consumer legal funding gives consumers the ability to receive “Equal justice under law,” and get a fair and just settlement, as opposed to one that is forced upon them because of their financial circumstances.