ARCs Response to US Chamber of Commerce Institute for Legal Reform newsletter titled: Lifting the Shadows: Restating the Case for Reforming Third-Party Litigation Funding (TPLF)

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ARCs Response to US Chamber of Commerce Institute for Legal Reform newsletter titled: Lifting the Shadows: Restating the Case for Reforming Third-Party Litigation Funding (TPLF)

Conflating Two Distinct Concepts

The ILR newsletter opens by presenting Third-Party Litigation Funding (TPLF) as an opaque, investor-driven industry whose hidden influence corrupts the civil justice system. It argues that hidden funders may control litigation, funnel foreign influence into U.S. courts, and leave plaintiffs with diminished recoveries.

However, ILR’s narrative critically blurs the line between commercial litigation financing (funding law firms or corporate claims) and consumer legal funding (funds to individual plaintiffs for personal expenses). The result is a misleading portrayal that paints CLF, used by individuals to pay rent, medical bills, or utilities, as if it were the same beast as high-stakes hedge-fund backed litigation finance. A fair analysis requires distinguishing between the two.

Academic and industry sources consistently emphasize that Consumer Legal Funding is not litigation financing in the sense targeted by ILR’s reforms. In CLF, the funds are provided to the consumer (plaintiff) rather than the law firm or the litigation entity, and are intended for living-expense support, not for paying case costs or influencing strategy. Many state statutes and rules likewise carve out CLF from ordinary litigation funding regimes.

Thus, any effort to regulate “TPLF” broadly cannot simply be applied to CLF without risking regulatory overreach. ILR’s failure to make that distinction undercuts the logic of its proposals.

Key Differences: Why CLF Doesn’t Fit ILR’s Framing

(1) Purpose and Use of Funds

  • Commercial litigation finance / TPLF is typically directed to law firms or legal entities, to pay litigation costs, attorney fees, expert witnesses, discovery, and even to underwrite risk in large-scale claims. These funding agreements often include strategic control rights over settlement terms.
  • Consumer Legal Funding (pre-settlement funding), by contrast, is used by individual plaintiffs to meet personal, non-legal expenses (housing, utilities, groceries) while their case is pending. The funds do not directly pay for litigation costs or legal strategies. State regulators have repeatedly emphasized that CLF is not intended to be used for case costs.

Because CLF funds are for consumption or survival, not to influence or fund litigation, many of ILR’s concerns about “control over case” or “funder coercion” simply do not apply in the CLF context.

(2) Risk and Repayment Structure

  • In TPLF deals, the funder often receives a share of recovery, and if the claim fails, the funder loses its entire investment. This non-recourse structure aligns risk allocation with litigation outcomes.
  • Similarly, CLF is non-recourse: the plaintiff owes nothing if the case fails, and the obligation is extinguished. The difference is that in CLF, the funding is modest and personal, not at the scale of institutional litigation.

Because CLF is not a classic “investment in litigation,” the typical concerns about aligning funder incentives with case strategy or excessive control do not carry over cleanly.

(3) Absence of Funder Control Over Litigation

One of ILR’s key alarmist claims is that funders can veto settlement offers or assert control over litigation direction. Those stories largely come from commercial litigation funding, especially high-stakes cases (e.g. Burford and Sysco) not the realm of small dollar CLF.

In CLF, most contracts and statutory frameworks explicitly prohibit funder control or direction of litigation decisions. Because the funds are for personal needs and the case is managed by the plaintiff’s attorney, there is no structural basis for funders to act as litigation co-counsel or veto strategies.

Thus, ILR’s narrative about funder “control” is largely irrelevant to CLF and at risk of bad inference if applied indiscriminately.

(4) Scale, Secrecy, and Foreign Influence

ILR warns about foreign actors injecting secret funds into U.S. litigation and manipulating outcomes. A consumer legal funder providing $5,000 to an individual plaintiff is not a foreign sovereign, and the amount of influence such an arrangement exerts is minimal.

Moreover, ILR premises much of its fear of opacity: undisclosed funders, hidden agreements, and lack of transparency. But CLF firms contract directly with consumers, often with clear disclosures, and many states already demand reporting or consumer protections. The general call for uniform disclosure rules for TPLF, then, risks unintended consequences if overbroad enough to sweep in CLF.

(5) Access to Justice and Power Imbalances

One of ILR’s weaker strands is the claim that “the U.S. legal system already gives plaintiffs contingency-fee counsel, so TPLF is unnecessary.” But that overlooks the very real liquidity that constraints individual plaintiffs face. Contingency lawyers advance costs, but they do not provide for living expenses while a case is pending, rent, food, all of which may push a plaintiff to settle prematurely. CLF addresses exactly that gap.

If ILR’s reforms sweep CLF into TPLF regulation, plaintiffs with meritorious claims could lose a financial lifeline, constraining access to justice, especially for low-income individuals.

Specific Weaknesses and Logical Gaps in ILR’s Argument

1. Overbroad Framing and Slippery Slope

ILR treats “third-party litigation funding” as a monolithic practice. But as scholars highlight, legal funding is a broad category with multiple subtypes (commercial, consumer, attorney portfolio financing). By conflating all under TPLF, ILR’s reforms risk a slippery slope regulatory incursion into legitimate consumer support mechanisms.

2. Anecdotes from Commercial Cases Do Not Generalize

ILR’s examples, e.g. Burford’s veto power over Sysco settlement offers, are drawn from million-dollar commercial litigation. It does not follow that the same structural risks exist in CLF for small individual plaintiffs. The incentives, scale, and contractual levers differ.

3. Insufficient Evidence or Quantitative Data

ILR’s argument leans heavily on moral panic and selected cases rather than broad empirical study. It cites “ILR’s 2024 research” and other anecdotal studies. But reviews by GAO and other observers note serious data limitations in even measuring TPLF activity. Moreover, GAO itself recognizes “consumer arrangements” as distinct and less understood and does not recommend a one-size-fits-all regulatory regime.

Without robust empirical backing, ILR’s call for sweeping reforms appears premature, especially if misapplied to CLF.

4. Ignores State-Level Safeguards and Carve-Outs

Some U.S. states have already adopted statutes or rules that explicitly exclude consumer legal funding from their definitions of litigation funding or regulate it separately. In Arizona, civil procedure rules carve out consumer funding from procedural obligations for litigation financing. By ignoring these distinctions, ILR’s national push threatens to erase state innovation and create conflict.

5. Defaulting on Access to Justice Tradeoffs

By framing TPLF as corrupting justice, ILR neglects that restricting CLF access might cause injustices. For people without savings, high medical debt, or inability to borrow conventional credit, CLF is the only viable path to survive while pursuing claims. If ILR’s proposals chill CLF, many legitimate claims may go unpursued, weakening enforcement of rights and undermining the plaintiff side of the balance of justice.

What Responsible Policy Should Do

Given the above, a more nuanced approach is warranted a precisely defined regulation is needed. Any regulation of litigation funding should use narrow, context-sensitive definitions that exclude consumer funds used for living expenses. Legislatures and courts must draw lines so that CLF is not caught inadvertently in TPLF regimes.

By contrast, ILR’s proposal appears to push for a blanket “transparency + control restraints” regime without regard to the enormous functional differences between CLF and commercial litigation funding.

Conclusion

Consumer Legal Funding is a distinct financial tool, with different incentives, beneficiaries, and safeguards. ILR’s failure to distinguish CLF from TPLF leads it to overstate risks and proposes reforms that could unduly harm consumers with meritorious claims.

Any serious policy must start with clear definitions, carve out CLF from core TPLF regulation, and calibrate oversight to risk. A one-size-fits-all regulatory attack on “third-party funding” is neither just nor wise.

The Access-to-Justice Gap

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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.

Consumer Legal Funding empowers individuals with financial stability and choice—funding lives, not litigation

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Consumer Legal Funding (CLF) is a free-market solution designed to give individuals financial stability during difficult times. When people are injured or involved in legal claims, they often face pressure to accept unfairly low settlement offers just to cover basic expenses like rent, food, and utilities. CLF steps in with small-dollar advances, enabling consumers to meet essential household needs without taxpayer support or government bureaucracy. Unlike litigation financing for corporations, CLF funds lives—not lawsuits—by providing independence, choice, and stability while cases progress through the courts CLF Free Market Solution.

In states where CLF is regulated, evidence shows that it protects consumers while strengthening fairness in the legal system. Regulations prohibit funders from influencing legal strategies, require plain-language contracts, and safeguard consumer control over settlement decisions. Far from driving up insurance costs or harming the economy, CLF empowers individuals to withstand pressure from large insurers, avoid coerced settlements, and achieve more just outcomes. At its core, CLF embodies the best of free enterprise—voluntary exchange, risk-based pricing, and consumer empowerment—helping families survive and maintain dignity while pursuing justice.

Learn more by accessing ARCs Position Paper on how Consumer Legal Funding is a Free Market Solution

Consumer Legal Funding Didn’t Add $4 Billion to Malpractice Losses

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The claim and why it matters

A recent Medical Economics story reports that inflation, “economic and social”, added $4 billion to medical-malpractice insurer losses over the last decade, based on a study by The Doctors Company (with Moore Actuarial). The article highlights “large verdicts” and “litigation financing” among contributing forces. The press release and accompanying analysis from The Doctors Company say the $4 billion figure equals roughly 11% of booked losses for the decade ending in 2024, up from the company’s prior estimate for the decade ending in 2021.[1]

First principles: what CLF is (and isn’t)

Consumer legal funding (CLF) provides small, non-recourse funds to individuals with pending claims to help with living expenses (rent, utilities, groceries) while their case proceeds. Repayment, if any, comes from the claimant’s recovery; if the case fails, the consumer owes nothing. Critically, CLF does not finance the litigation itselfit is not a war chest for lawyers, discovery, or expert fees. That distinction is reflected in statutes, such as those in Oklahoma and Utah, which prohibit funders from paying court costs, filing fees, or attorney fees.[2]

What the $4 billion estimate actually says

The Doctors Company attributes the $4 billion to a mix of economic inflation (rising medical costs, wages, and services) and social inflation (jury attitudes, verdict norms, legal environment). Its materials mention “litigation financing” as one item among many within social inflation; they do not quantify the share attributable to financing, let alone to consumer funding specifically. The estimate is a blended actuarial inference, not a direct causal measurement.[3]

The data gap problem: we can’t blame what we can’t measure

Even for commercial litigation finance—where transactions are larger—the U.S. Government Accountability Office (GAO) has emphasized data gaps. GAO’s 2022 report found limited visibility into total funding volumes, returns, and the extent of financing across case types. If policymakers lack robust market data even for institutional funding, it is implausible that anyone can credibly ascribe a precise portion of malpractice losses to consumer funding, which is smaller, more diffuse, and often regulated at the state level.[4]

Causation vs. correlation—and why CLF’s mechanics matter

To say that “financing exists and verdicts are higher” confuses correlation with causation. CLF does not finance litigation activities, it operates at a small, individual scale, and any apparent association with higher payouts reflects selection bias—funders prefer meritorious cases, which would likely recover more regardless.[2]

What plausibly explains the $4 billion

If CLF isn’t the driver, what is? The Doctors Company itself points to economic inflation in health care, large verdicts and changing valuation norms, rising defense costs, and demographic pressures as the main causes. Each has a direct actuarial footprint, while none requires CLF to explain the 11% uplift.[3]

Don’t conflate markets: commercial funding ≠ consumer funding

When headlines mention “litigation financing,” they often track commercial activity—law-firm portfolio deals or corporate disputes worth billions annually. That is a separate market for a few thousand dollars to injured individuals. Rolling those into one bucket and blaming consumer funding for malpractice loss trends is misleading.[5]

Policy takeaway: precision beats generalizations

Good policy requires accurate taxonomy and evidence. If studies believe commercial funding contributes to higher awards, they should measure that and not attribute it to CLF. The GAO flagged the scarcity of reliable data, and until we have case-level evidence, attributing malpractice cost increases to CLF is unjustified.[4]

Bottom line

The $4 billion estimate is about inflation in general, not about consumer legal funding. CLF doesn’t pay attorneys, experts, or filing fees; it helps individuals cover basic needs. The real drivers are medical price inflation, jury award norms, and systemic cost growth. Until researchers isolate consumer funding and prove a causal link, the fair conclusion is that CLF did not add $4 billion to malpractice losses.[1][2][3][4][5]

References

[1] Medical Economics; The Doctors Company press release and actuarial analysis.

[2] State statutes and legislative materials (Oklahoma, Kentucky) defining and limiting consumer legal funding.

[3] The Doctors Company, ‘Social Inflation and Loss Development’ reports.

[4] U.S. Government Accountability Office, 2022 report on Third-Party Litigation Finance.

[5] Westfleet Advisors, ‘Litigation Finance Market Snapshot’ (commercial funding data).

Does Consumer Legal Funding Put Consumers in Debt?

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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.

Let’s Set The Record Straight: Consumer Legal Funding is Not Litigation Finance

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Consumer Legal Funding, in its various forms, is pretty mundane. It covers living expenses, such as rent, food, clothes and keeping the lights on. It might even enable a family to provide Christmas or birthday gifts for their children. In every case, its sole purpose is to help individuals and families alleviate the cash-flow problems that arise in the wake of an accident or other tragic circumstances, while the individuals and families are seeking compensation for their situation. It has nothing to do with financing of the litigation.

What is happing is that groups and individuals who are not taking the time and effort to know the differences between the two different products and are lumping them together. They are saying all transactions where a party to litigation receives any monetary resources from a non-party are considered Third Party-Litigation- Financing (TPLF). It paints a bleak picture of “foreign adversaries . . . undermining U.S. national economic and security interests through the infiltration of the American litigation system,” and it is the end of the free world as we know it.

Consumer Legal Funding is nothing like that, it helps a consumer meet their financial obligations while their legal claim is making its way through the justice system. It does not pay for deposition cost. It does not pay for legal fees or expenses.

Most of the time the funds go to help a consumer who has had a car accident bridge the financial gap, but there are other times where it goes to help a person who was wrongfully convicted and spent nearly two decades of their life in prison for a crime they did not commit. Consumer legal funding helped them get their life back in assisting with living expenses while they got the justice they so justly deserved.

It helped a Police Officer pay to keep a roof over their family’s head while they had their day in court after being wrongfully discharged.

Then the case of a single mother of three who was going back to college to make a better life for her children and had to move out of their home because of a toxic mold infestation. She used consumer legal funding to pay for a mobile home so she and her three children could live in a safe, toxic-free, environment while the situation was fixed.

There is the case when a 16-year-old was made a quadriplegic due to medical negligence. The family had to modify their home to make accommodations to care for their loved one. Consumer legal funding was the only way they were able to take care of their teenager while the case made its way through the long legal system.

Another was a woman was involved in a car accident and her teeth were shattered because of the accident. She used consumer legal funding to get a new set of teeth. She said, “it gave me my smile back”.

Finally, there have been times where consumer legal funding was used to help pay for funeral expenses of a loved one that was tragically killed in an accident. Sadly, some families had no other means of taking their loved one to their final resting place if it had not been for consumer legal funding.

But what is happening are those groups and individuals that do not take the time, or want to take the time, to learn what consumer legal funding really is. They hear terms like, “corrupting the legal system”, “leads to filing frivolous litigation” and the latest is “foreign governments are leading to international sabotage of our courts”. Then charge ahead saying “the sky is falling; the sky is falling”.

  • How does giving money to a single mother so she can have her children live in a toxic free environment lead to “international sabotage”?
  • How does allowing a person who spent nearly 2 decades of their life living in 48 square foot space corrupting the legal system?
  • How does allowing a person to get their smile back lead to frivolous litigation?

Litigation Financing is just that “financing of the litigation”. It is used to pay for lawyers. It is used to pay for depositions. It is used to pay for expert witnesses. It is used to pay court costs. None of which consumer legal funding does.

In fact, in the legislation that we have promoted we specifically state the funds we provide to a consumer cannot be used for those purposes. Don’t be fooled by someone who is throwing out buzz words that make one think we are on the brink of judicial destruction by confusing Consumer Legal Funding with Litigation Financing.

They both may be fruit. But one is an apple and one is an orange.

Missouri Governor Parson signs comprehensive legislation regulating Consumer Legal Funding

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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.”

The Alliance for Responsible Consumer Legal Funding (ARC) Statement Regarding the Minnesota Supreme Court Decision Maslowski v. Prospect Funding Partners, LLC, et al. v. James Schwebel, Esq., et al.

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“We are very pleased that the Minnesota Supreme Court took its time in rendering a thoughtful decision in this matter and, once again, held that the consumer legal funding contract at issue was enforceable. The decision is consistent with what courts and legislatures have said across the country, that this product is not a loan and should not be treated as such,” stated Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding. “Following the Court’s logic in its June 2020 opinion that the transaction did not violate the common law prohibition on champerty, the Court today correctly recognized that, “A repurchase rate in a litigation financing agreement is not subject to Minnesota’s usury law” This well-reasoned decision joins others across the country in the growing consensus that consumer legal funding transactions are not loans and should not be treated like loans.”

OPA211338-082323.pdf (mncourts.gov)

What does Artificial Intelligence (AI) say about Consumer Legal Funding?

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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?

Equal Justice Under Law

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In a recent 60 Minutes piece on Litigation Funding they discussed both Commercial Litigation Funding; where the funds are used to pay for the legal/litigation process, and Consumer Legal Funding; where the funds are provided to the consumer for their household needs, such as rent, mortgage and putting food on the table.

One of the issues that was brought out in the story is that the industry is largely unregulated. What is interesting is that from 2005 to 2022 thirty-seven (37) states have introduced legislation to regulate the Litigation Funding.

But whenever the industry tries to introduce such legislation, we are hit with major opposition from our detractors. They oppose any regulation because it “legitimized the industry”. Are they saying that an industry that allows consumers to financially survive while their legal claim makes its way through the legal process is illegitimate?   Or are they saying that a company that is trying to level the playing field for consumers should not be allowed to operate?

In fact they have tried to outright ban the practice in several states. How is a ban regulation?

The Alliance for Responsible Consumer Legal Funding (ARC), and its member companies, have always supported, and in fact encouraged, proper regulation of the industry. From the beginning ARC has set up a strong set of Best Practices that ensured the both the consumer and the companies are protected. We have strived to have those Best Practices put into legislation in states like in Nebraska, Ohio, Oklahoma, Utah, and Vermont to name a few.

Consumer Legal Funding allows everyday citizens to get the fair value of their legal claims while they are making their way through the complicated legal process.

Access to Justice should not depend upon who has the deepest pocket. It should be on the merits of the legal claim.

Remember what is written on the entrance to the United State Supreme Court

 “EQUAL JUSTICE UNDER LAW“