What You Need to Know About Consumer Litigation Funding

What You Need to Know About Consumer Litigation Funding

Imagine you’ve been injured due to someone else’s negligence, and you’re facing mounting medical bills and lost wages. You deserve compensation, but the legal battle ahead seems daunting and expensive. This is where consumer litigation funding can step in, offering a lifeline to help you pursue justice. But what exactly is it, and is it the right choice for you?

What is Consumer Litigation Funding?

Consumer litigation funding (CLF) provides financial support to individuals involved in lawsuits, primarily personal injury claims, medical malpractice, and product liability cases. Unlike a traditional loan, CLF is a non-recourse transaction. This means the funding company purchases a portion of the potential proceeds from your case. If you win or settle, the funder gets paid from your settlement. If you lose, you owe nothing. According to a 2025 report, typical funding sizes range from $1,000 to $50,000, representing roughly 10-15% of the expected case value.

CLF helps cover essential living expenses while your case is pending, such as:

  • Rent or mortgage payments
  • Utilities
  • Transportation
  • Groceries
  • Medical bills

How Does Consumer Litigation Funding Work?

  1. Application: You apply for funding, providing details about your case.
  2. Review: The funding company assesses the merits of your case, often consulting with your attorney.
  3. Approval: If approved, you receive a contract outlining the funding amount, fees, and repayment terms.
  4. Funding: You receive the agreed-upon funds to use for your expenses.
  5. Resolution: When your case settles or wins, the funding company receives its agreed-upon portion of the settlement.

Benefits of Consumer Litigation Funding

  • Access to Justice: CLF enables you to pursue your claim, even if you lack the financial resources to cover legal and living expenses.
  • Leveling the Playing Field: It allows you to stand up against well-funded opponents, such as large corporations or insurance companies.
  • Financial Stability: CLF provides a financial cushion to avoid settling for less than your case is worth due to financial pressure.
  • Non-Recourse: You only repay the funding if you win or settle your case.
  • Control Over Litigation: Reputable funders do not interfere with your attorney’s legal strategy.

Risks and Considerations

  • Cost: CLF can be expensive, with fees and interest rates that can significantly reduce your final settlement amount. Rates between 25-35% are common for personal injury cases, but can reach 40-45% for more complex cases like patent litigation.
  • Regulation: The CLF industry is still evolving, and regulations vary by state. Some states have implemented consumer protection laws, while others have little to no oversight.
  • Transparency: It’s crucial to understand all the terms and conditions of the funding agreement, including fees, interest rates, and repayment schedules.
  • Potential Conflicts of Interest: Be wary of funders who try to influence your legal strategy or pressure you to settle.

Regulation and Consumer Protection

The legal landscape surrounding CLF is constantly changing. Some states have enacted laws to regulate the industry and protect consumers. These regulations may include:

  • Licensing requirements for litigation funders.
  • Disclosure requirements for funding agreements, including all fees and charges.
  • Interest rate caps to prevent predatory lending practices.
  • Restrictions on funder influence over legal strategy and settlement decisions.
  • A right to cancel the funding agreement within a certain timeframe.

New York recently enacted the Consumer Litigation Funding Act in December 2025, which goes into effect in mid-2026. This law establishes a comprehensive framework governing consumer legal funding transactions, mandating disclosures and conduct standards to prevent opaque pricing and undue influence over litigation strategy.

Is Consumer Litigation Funding Right for You?

CLF can be a valuable tool for individuals facing financial hardship while pursuing a legal claim. However, it’s essential to carefully weigh the pros and cons before making a decision.

Consider CLF if:

  • You have a strong legal case.
  • You need financial assistance to cover essential living expenses.
  • You understand the terms and conditions of the funding agreement.
  • You are comfortable with the potential costs and risks.

Explore alternatives first:

  • Discuss payment options with your attorney.
  • Consider other forms of financial assistance, such as loans or lines of credit.

Questions to Ask a Litigation Funder

  • What are the fees and interest rates?
  • What is the total amount I will have to repay if I win my case?
  • What happens if I lose my case?
  • Can I cancel the agreement if I change my mind?
  • Will you have any influence over my legal strategy or settlement decisions?
  • Are you licensed and regulated in my state?

The Future of Consumer Litigation Funding

The CLF market is expected to continue growing in the coming years. A recent report estimates the global litigation funding investment market will reach $56.2 billion by 2034, with a CAGR of 9.4% from 2025. As the industry matures, increased regulation and transparency will likely play a key role in protecting consumers and ensuring fair access to justice.

Disclaimer: This blog post is for informational purposes only and does not constitute legal or financial advice. Consult with a qualified attorney and financial advisor before making any decisions about consumer litigation funding.