LITIGATION FUNDING

Definition 

The action of issuing cash advances to lawyers and plaintiffs in exchange for a portion of the financial recovery. A contingent transaction whereby funds are advanced based on the merits of a pending lawsuit and repaid upon successful settlement, verdict or otherwise. Funding obtained to assist in the litigation process to be used for purposes directly or indirectly related to the case.

Facts

3,500 people apply for litigation funding each day in the United States. Almost 60% of applicants are approved for funding. The majority of all litigation funding is for medical expenses of those that do not have health insurance and the remainder is for immediate and necessary living expenses. Those who have been severely injured in accidents caused by the negligent acts of another can be financially devastated during the process. Many will be put out of work for weeks or months and will not have income during their recovery period. Litigation Funding is sometimes the only access to funding as many of these victims do not have good credit and/or income to qualify them for a traditional loan. Traditional loans require monthly payments which can be difficult for plaintiffs that are injured and without income for a short or extended period of time. Most major accidents leave the victims either dead or injured so badly that it takes months or even years to recover. It is certain that more than 40,000 people would go homeless each year if it were not for access to litigation funding.

Things to Consider 

Those that criticize litigation funding cry of high fees charged to consumers that are in a desperate situation. It is argued that this type of funding actually takes money from the consumers pocket and the fees charged outweigh the benefits. Elliot Spitzer investigated the litigation funding industry and settled with them based on terms of fair disclosure. In other words, you can do business here in New York but be fair in your disclosure to terms and fees to the public. Some have even gone as far as to call litigation funding a form of predatory lending. It seems outrageous for allegations to be made about predatory lending when litigation funding is not actually lending bur rather investing. The presidents of funding companies that are criticized have been eager to speak out and defend the industry because they believe they are doing far more good than bad. Consumers should investigate each funding company by asking questions and determining their fees and conditions. Make sure the company you choose is a member of the American Litigation Finance Association also known as ALFA. This association has rules and best practices that members must follow when conducting business with consumers.

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