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.

01/01/2019

Suggested Resources

Research
  • ILR Briefly COVID-19 Series: State Liability Problems and Solutions

    ILR Briefly COVID-19 Series: State Liability Problems and Solutions

    May 21, 2020

    As states reopen and continue to respond to the needs of their citizens and economies, it is important that they consider offering liability protections to prevent a wave of COVID-19 lawsuits at the state level. This edition of ILR Briefly documents major hot spots for COVID-19 litigation under state law and provides an array of policy solutions to prevent lawsuits from disrupting states' economic recoveries. Read More

  • 2019 Lawsuit Climate Survey: Ranking the States

    2019 Lawsuit Climate Survey: Ranking the States

    September 17, 2019

    The 2019 Lawsuit Climate Survey: Ranking the States was conducted for the U.S. Chamber Institute for Legal Reform by The Harris Poll to explore how fair and reasonable state liability systems are perceived to be by U.S. businesses Read More

All Results for Lawsuit Lending

  1. 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