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. 

Suggested Resources


All Results for Lawsuit Lending

  1. 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

  2. Lawsuit Loans Put Victims Last, Vendors First in Alabama

    February 07, 2017 | News and Blog

    Lawsuit lenders are "lurking behind the scenes" in Alabama court cases writes ILR President Lisa Rickard and William Canary, CEO of the Business Council of Alabama, in an opinion piece for The Gadsden Times.... Read More

  3. In the News Today- June 30, 2016

    June 30, 2016 | News and Blog

    ILR pushed back on the lawsuit lending industry's claims that it is promoting "self-regulation" legislation in states around the country. "They are running around the country 'lobbying' to put a frame of legitimacy on their business," said Bryan Quigley, ILR senior vice president of communications.... Read More

  4. In the News Today - April 8, 2016

    April 08, 2016 | News and Blog

    Abbott Labs Prevails in Texas FCA Case: Abbott Laboratories has prevailed in a False Claims Act case over allegations of the company's off-label stent marketing. ... Read More

  5. In the News Today - March 30, 2016

    March 30, 2016 | News and Blog

    A Surge in Dollar Amount of Securities Class Action Settlements: A new report by Cornerstone Research found that the "total dollar value of securities class-action settlements approved last year nearly tripled compared with the previous year, growth largely driven by an uptick in 'mega-settlements' of $100 million or more."... Read More

  6. ILR State Allies Blog Series: Tennessee Chamber of Commerce

    March 29, 2016 | News and Blog

    Tennessee is best known for its barbeque and country music, but the state is home to much more than that. To make sure that the state remains a friendly place for businesses to start and grow, the Tennessee Chamber of Commerce works to keep Elvis, not litigation, king.... Read More

  7. U.S. Chamber Applauds Signing of Indiana Law to Curb Lawsuit Lending Abuses

    March 23, 2016 | Press Release

    ... Read More

  8. U.S. Chamber Applauds Indiana Bill to Curb Lawsuit Lending Abuses, Urges Governor to Sign

    March 11, 2016 | Press Release

    ... Read More

  9. In the News Today - March 11, 2016

    March 11, 2016 | News and Blog

    Where Did All the Federal Mortgage Settlement/Find Money Go? From a new horse barn at the New York State Fair to subsidized email accounts for Delaware police officers, the Wall Street Journal provides an analysis of where the $110 billion in mortgage-related federal settlements and fines paid by big banks has been spent.... Read More

  10. Indiana Bill Could Protect Hoosiers from Deceptive Lawsuit Loans

    March 10, 2016 | News and Blog

    Lawsuit loans are Trojan Horses. They appear at face value to be a great deal for plaintiffs – money to cover their costs during litigation that they don't have to pay back unless they win an award from the suit. But sky-high interest rates and hidden payment schedules lie beneath the surface, misleading and deceiving plaintiffs who ultimately are forced to pay back more money to the lender than they often receive from the lawsuit. A bill currently being debated by the Indiana Legislature would provide some oversight of the unchecked lawsuit lending industry and prevent this legalized looting.... Read More