Lawsuit Lending

Lawsuit lending is a financial practice that provides “up-front” cash to plaintiffs to cover immediate expenses during litigation. These loans typically come with sky-high interest rates and fees – as much as 200 percent – that can leave borrowers with little to no recovery. Repayment is dependent on the plaintiff recovering some sort of monetary compensation, through either a settlement or verdict. This unscrupulous business practice only leads to prolonged litigation and unjust recovery for a plaintiff and creates conflicts of interest that distort the fundamental nature of the civil justice system.  Read More...

Lawsuit lending can greatly alter a plaintiff’s decision-making process, leading them to reject a reasonable settlement offer for the chance at obtaining a higher verdict in court in order to pay off a high-interest loan. This 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 litigation.

There is also the ethical concern with inserting a third party into the case that compromises the interests of plaintiffs. It 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.

ILR works to pass legislation that would provide safeguards against abusive lawsuits, and aims to provide transparency to all associated parties during litigation. Funding arrangements are often kept out of the public eye and hidden from parties and judges involved in litigation. The Litigation Funding Transparency Act would not only require third party litigation funding arrangements be disclosed during litigation, but also promote adequate recovery for plaintiffs and provide an overall unbiased civil justice system.

Suggested Resources

Research

All Results for Lawsuit Lending

  1. Illinois: Stop the Unregulated March of the Lawsuit Lenders

    February 24, 2014 | News and Blog

    The Illinois General Assembly said 'No' to the lawsuit lending industry once before. They can again protect Illinois consumers by opposing the industry's latest proposal -- and then working to provide greater oversight and reasonable regulation of the lawsuit lenders.... Read More

  2. In the News Today - February 21, 2014

    February 21, 2014 | News and Blog

    Third-party litigation financing can lead to conflicts of interests and prolong litigation, Gerald Skoning warns in the Wall Street Journal.... Read More

  3. In the News Today - February 10, 2014

    February 10, 2014 | News and Blog

    Tennessee lawmakers can protect consumers by passing lawsuit lending regulations that are pending in both houses, writes Thurbert Baker in the Tennessean.... Read More

  4. In the News Today - February 6, 2014

    February 06, 2014 | News and Blog

    A judge's recent decision should be a wake-up call for the potential for fraud in asbestos litigation, ILR's Harold Kim told NPR. ... Read More

  5. Newspaper Highlights ILR Video Amid Passage of Lawsuit Lending Bill

    January 16, 2014 | News and Blog

    On Tuesday, the Tennessee Senate passed SB 1360, a bill to regulate the predatory practice of lawsuit lending.... Read More

  6. In the News Today - December 9, 2013

    December 09, 2013 | News and Blog

    Indiana lawmakers are considering regulations for lawsuit loans.... Read More

  7. In the News Today - October 24, 2013

    October 24, 2013 | News and Blog

    A federal appeals court has rejected the Delaware Court of Chancery's confidential arbitration process for resolving business disputes, ruling that the system violates the First Amendment.... Read More

  8. 101 Ways To Improve State Legal Systems

    September 13, 2012 | Research

    "101 Ways to Improve State Legal Systems in 2013 & Beyond" provides policymakers with a compilation of some of the many avenues available to foster a sound legal system that promotes states' economies. The reforms are organized into five areas. The first section highlights five reforms that have gained momentum and should be of particular interest to state legislators. The report then considers fair and effective measures that would improve the litigation process, improve product liability law, promote rational liability rules, and rein in excessive damage awards. While this report presents proposals for legal reform options in a conceptual manner, it directs readers to recently enacted laws that show how legislators can move the proposals described in this guide from theory into practice.... Read More



1969-12-31