Lawsuit Lending

Lawsuit lending is a financial practice that provides “up-front” cash to individual plaintiffs to cover immediate living or medical expenses during litigation. These loans are typically attached to sky-high interest rates, fees, and charges – as much as 200 percent – that can leave borrowers with little to no recovery. In addition, lawsuit lending prolongs litigation and distorts the fundamental nature of the civil justice system.

In lawsuit lending, repayment is contingent on the plaintiff recovering some sort of monetary compensation, either through a settlement or verdict. In fact, the lawsuit lending industry goes to great lengths to tell the public that consumer lawsuit loans are not really loans at all, but are instead “nonrecourse financing.” This rationale is how lawsuit lenders have managed to avoid regulation in many states. Read More...

Unfortunately, lawsuit lending is far from harmless. It hurts consumers while undermining the integrity of the justice system.

The practice hurts consumers by eating into their recoveries in litigation. The New York Law Journal reported on the case of a Brooklyn man who borrowed $27,000 from a lawsuit lender for a slip-and-fall lawsuit. His case was settled five years later, but the lender demanded $100,000 – two-thirds of the total settlement and more than three times the amount of the original loan. To add insult to injury, the plaintiff’s lawyers pocketed an additional one-third of the settlement – leaving the plaintiff with just $111 out of a $150,000 settlement. In another case reported by the New York Times, a plaintiff actually lost money. After winning nearly $170,000 at trial, the plaintiff’s lender claimed it was owed $221,000 – an amount 30 percent larger than the total recovery.

Moreover, lawsuit lending distorts the civil justice process by altering a plaintiff’s decision making process. For example, a plaintiff may reject a reasonable settlement offer for the chance of obtaining a higher verdict in court because they will need to pay off a high-interest loan. This choice jeopardizes the chance of any recovery, as litigation could result in a lower than expected verdict or a judgment in favor of the defendant. It also increases costs for defendants, who are forced to endure prolonged and costlier litigation.

Finally, lawsuit lending undermines the integrity of the civil justice system. By inserting a third party into the case, lawsuit lending compromises the interests of litigants – upsetting a primary bedrock of the justice system. It also creates conflicts of interests for plaintiffs’ lawyers, who may develop referral relationships with certain lawsuit lenders and be expected to “steer” clients to those lenders.


Lawsuit lending should be regulated like any other consumer financial product. In November 2015, the Colorado State Supreme Court unanimously decided that lawsuit lending is subject to the state's existing consumer lending law. The ruling established an important legal precedent that lawsuit lenders must play by the same rules as other lenders in the state. Several bills have also been introduced in state legislatures to do exactly that. Oklahoma became the first state to pass such legislation in 2013. In 2014 Tennessee passed a law that provides meaningful regulation to lawsuit lending, and in 2015, Arkansas followed suit. Indiana joined the community of states regulating this product under state consumer lending laws in 2016. 

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All Results for Lawsuit Lending

  1. In the News Today - January 16, 2018

    January 16, 2018 | News

    Lawmakers square off over profitable cottage industry; The Latest on Third-Party Litigation Financing... Read More

  2. In the News Today - January 12, 2018

    January 12, 2018 | News

    Lawsuit Lenders Hope N.Y. Ignores Pa. Lending Ban in NFL Concussion Case; $8.5 Million Settlement in Google Class Action to be Contested... Read More

  3. WV's "State of the State" on Legal Reform: Improving

    January 10, 2018 | Blogs

    Ahead of West Virginia Governor Jim Justice's "State of the State" address on Wednesday night, new research from the U.S. Chamber Institute for Legal Reform (ILR) provides a snapshot of the state's past accomplishments and future opportunities on legal reform.... Read More

  4. West Virginia's Climb: Lawsuit Climate Progress in the Mountain State and the Path Ahead

    January 10, 2018 | Research

    West Virginia has begun shedding its reputation for having one of the worst civil justice systems in the nation. The state's lawsuit climate ranked dead last or second to last in surveys of business executives and attorneys conducted eleven times over the past fifteen years--until 2017. This report explores the beginning of the state's encouraging transformation and highlights areas where it may continue this progress.... Read More

  5. "Litigation Funder Spending Cash on Political Candidates"

    January 05, 2018 | News

    Executives of LawCash, a firm that offers loans to plaintiffs' attorneys and their clients, have contributed at least $215,000 to political candidates across the country, reports Legal Newsline.... Read More

  6. In the News Today - January 4, 2018

    January 04, 2018 | News

    The Opioid Crisis Has Plaintiff Lawyers Smelling Cash; LawCash execs showering Schneiderman with campaign contributions ... Read More

  7. Lawsuit Lending Can "Clear the Way for Bogus Claims" in New York, City Comptroller Says

    January 03, 2018 | News

    The New York City comptroller said that the growing lawsuit lending industry can lead to more "bogus claims" against the city, reports the New York Post.... Read More

  8. "Unregulated lawsuit loans are a costly way to raise holiday cash"

    December 18, 2017 | News

    Lawsuit lending firms, which loan cash to plaintiffs before they receive settlement money, see a boost in business during the holiday season, but the loans come with interest rates that are more expensive than credit card debt, reports CNBC.... Read More

  9. Judge Blocks Lawsuit Lenders from NFL Settlement

    December 11, 2017 | News

    U.S. District Judge Anita Brody of the Eastern District of Pennsylvania said third party funders and lawsuit lenders who "failed to perform proper due diligence" are "prohibited from now reaping the benefit" of their loans, reports The Legal Intelligencer.... Read More

  10. In the News Today - December 4, 2017

    December 04, 2017 | News

    Wisconsin Legislators Push to Simplify Litigation Process; Class Counsel Responds to Criticism Over Disclosure of Ties to Litigation Funder... Read More