Abstract
Litigation financing companies ("LFCs") provide nonrecourse cash advances to plaintiffs in exchange for a portion of their lawsuits' potential future proceeds. While this arrangement allows individuals to continue to litigate without having to accept unjust settlement offers, desperate consumers are often forced to pay inequitable interest rates for the cases they finance. Because there is no absolute obligation to repay the LFC, the industry manages to avoid regulation under state interest rate ceilings for consumer loans. The few existing litigation financing laws do not restrict the interest rates that LFCs may charge, and even if some courts are willing to strike down egregiously unfair litigation financing agreements on a case-by-case basis, existing regulation fails to sufficiently protect consumers. On the other hand, overly strict interest rate ceilings on litigation financing agreements may foreclose the practice altogether. In order to preserve the benefits of litigation financing while protecting those who are desperate enough to need it, this Comment prescribes measures that would prevent predatory behavior and ensure reasonable profits for LFCs. Express statutory restrictions would prevent LFCs from reaping unreasonable profits, especially for the financing of lawsuits that practically guarantee sufficient settlements. States should also develop an online litigation financing "marketplace" that would offer updated business information, interest rate data, and customer reviews for each LFC. With transparent access to the industry, this centralized resource would promote consumer choice, expand access to litigation financing, and organically stimulate market competition
Recommended Citation
Martin J. Estevao,
The Litigation Financing Industry: Regulation to Protect and Inform Consumers,
84
U. Colo. L. Rev.
467
(2013).
Available at:
https://scholar.law.colorado.edu/lawreview/vol84/iss2/6