Trending Now
  • Consumer Legal Funding Is a Lifeline for Americans Living Paycheck to Paycheck
Commercial Deals

High-Volume Claims Funding: Strategies for Efficiency and Risk Management

By Louisa Klouda |
May 13, 2024

High-Volume Claims Funding: Strategies for Efficiency and Risk Management

The following is a contributed piece by Louisa Klouda, CEO at Fenchurch Legal.

Litigation funding is a well-established concept that provides essential financial support for legal claims. While financing for high-value lawsuits is commonplace, small-ticket funding, especially at high volumes, remains a niche area.

This article explores the challenges and opportunities of funding high volumes of small-ticket claims. It outlines the strategies employed by some small-ticket litigation funders to efficiently manage these claims while ensuring investor confidence.

The Challenge of High-Volume Claims

While a single small claim might seem manageable, the sheer volume of “no win, no fee” cases can overwhelm a law firm’s financial and operational resources. Each claim demands substantial time and effort for investigation, evidence gathering, and legal representation.

Without additional funding, managing multiple cases simultaneously becomes a significant financial burden. This can limit a firm’s ability to take on new clients or dedicate sufficient resources to each claim.

Litigation funding bridges this gap by providing the resources law firms need to handle a high volume of claims effectively. Securing funding to cover the costs of these claims allows law firms to build strong processes and procedures, ultimately benefiting from economies of scale.

Strategies for Success

Firms specialising in high-volume claim funding can achieve success through a combination of technology, experienced teams, and robust processes.

  • Technology: State-of-the-art software isn’t just an advantage – it’s an imperative. It can streamline every aspect of the operations, automating repetitive tasks and facilitating efficient case vetting through rigorous risk management, ensuring efficient and reliable funding solutions.
  • Experienced Team: A knowledgeable team plays a crucial role in assessing claims, managing risk, and ensuring compliance with regulations. A team must go beyond just general experience – they should possess deep market knowledge and a nuanced understanding of the specific claim types.
  • Robust Processes: Clearly defined processes for loan approval, monitoring, and repayments are essential for maintaining transparency and accountability.

The Importance of Software

Limitations of manual processes can hinder efficiency. Software solutions can streamline the loan process, enhance risk management, and provide robust audit trails. This software should:

  • Facilitate Efficient Case Vetting: Streamline the process of assessing claims for eligibility.
  • Enhance Risk Management: Built-in safety measures can prevent errors like double-funding and identify potential risks.
  • Ensure Transparency and Accountability: Robust audit trails provide a clear picture of the funding process.

Funders like Fenchurch Legal have gone further. Recognising the limitations of off-the-shelf loan management software, they have built their own bespoke software, which serves as the backbone of their operations and enables them to manage a high volume of claims efficiently. It eliminates manual errors and incorporates built-in safety measures, such as preventing double-funded cases and cross-referencing duplicate data across the platform. This seamless approach is essential for managing drawdowns and repayments and ensuring the integrity of their funding processes.

A Streamlined Funding Process

An efficient funding process benefits both law firms and funders.  Here’s a simplified example of how it might work:

  1. Clear Eligibility Criteria: Law firms understand the types of cases that qualify for funding based on pre-agreed criteria (i.e., success rate thresholds).
  2. Batch Uploads: Law firms can easily request funding by uploading batches of cases to a secure online platform.
  3. Auditing and Approval: A sample of cases is audited to ensure they meet agreed upon terms. If approved, funding is released in a single lump sum.
  4. Monitoring and Repayment: Software facilitates seamless monitoring of the loans and the repayment status, ensuring efficient management of repayment schedules.

Managing Risk in High-Volume Funding

Risk management is vital in high-volume funding. Here are some strategies that can be employed to mitigate risk effectively:

  • Diversification: Spreading funding across different law firms and case types is a crucial strategy for mitigating risk in high-volume claim funding. It minimises overexposure and creates a well-balanced portfolio.
  • After the Event (ATE) Insurance: Provides an extra layer of protection for investments in high-volume claim funding. It specifically covers the legal costs if a funded claim is unsuccessful.
  • Rigorous Due Diligence: Thorough assessment of cases and the law firm’s capacity to handle them ensures informed decision-making.
  • Continuous Monitoring: Proactive risk identification and mitigation safeguard investments. This includes requesting regular updates and performance data from law firms.

Conclusion

By leveraging technology, team expertise, and robust processes, funders can efficiently manage high-volume small claims, presenting a compelling investment opportunity. This approach can minimise risk and ensure transparency throughout the funding process.

Fenchurch Legal specialises in this niche area, efficiently managing and supporting a high volume of small-ticket consumer claims with an average loan value of £3,000 each. They handle diverse areas such as housing disrepair and personal contract payment claims. Their proven track record of funding over 12,000 cases is driven by their bespoke software, knowledgeable team, and robust processes.

Secure Your Funding Below
Secure Your Funding Sidebar

About the author

Louisa Klouda

Louisa Klouda

Commercial

View All
Case Developments Commercial

Pogust Goodhead Secures Landmark Win Against BHP in Brazil Dam Case

By John Freund |

In a major breakthrough for cross-border group litigation, Pogust Goodhead has secured a resounding victory in its long-running claim against mining giant BHP over the 2015 collapse of the Fundão tailings dam in Mariana, Brazil. The UK High Court has ruled BHP liable for the disaster, which killed 19 people and unleashed a wave of toxic sludge through the Rio Doce basin, displacing entire communities and leaving lasting environmental damage.

According to Non-Billable, the ruling confirms BHP’s liability under both Brazilian environmental law and the Brazilian Civil Code. In rejecting the company’s jurisdictional and limitation defenses, the court made clear that English law recognizes the right of over 600,000 Brazilian claimants to pursue redress in UK courts. The judgment underscores BHP’s operational and strategic control over the Samarco joint venture and found that the company was aware of critical dam defects more than a year before the collapse. The attempt to distance itself through the argument of being an indirect polluter was also dismissed.

This outcome is a critical milestone in one of the largest group actions ever brought in the UK. A trial on damages is now scheduled for October 2026, with case management proceedings set to resume in December.

The win comes amid internal turbulence at Pogust Goodhead, including recent leadership changes and reported tensions with its litigation finance backers, but the firm remains on course to press forward with what could be a multibillion-dollar compensation phase.

Commercial

Incentive Payments Not Essential for Named Plaintiffs, Study Finds

By John Freund |

A new empirical study by Brian Fitzpatrick of Vanderbilt Law School challenges a widely held assumption in class action litigation: that incentive payments are necessary to recruit named plaintiffs. The research, published in the Journal of Empirical Legal Studies, analyzed federal class-action filings from January 2017 through May 2024, using data drawn from the legal-tech platform Lex Machina. It leveraged a natural experiment created by the United States Court of Appeals for the Eleventh Circuit’s 2020 ruling that barred incentive payments in the 11th Circuit (Florida, Georgia, Alabama) while other circuits continued permitting them.

An article in Reuters states that according to the analysis, the volume of class-actions filed in the 11th Circuit did not meaningfully decline relative to other circuits after the ban on incentive payments. In other words, the absence of such payments did not appear to impair the ability of plaintiffs’ counsel to find willing named plaintiffs.

Fitzpatrick and his co-author, graduate student Colton Cronin, observed that although courts routinely approve modest incentive awards (averaging about $7,500 in non-securities class actions) to compensate the named plaintiff’s extra effort post-settlement, the data suggest that payments may not be a driving factor in recruitment.

Fitzpatrick emphasizes that this is not to say incentive payments have no role. He notes that there remains a moral argument for compensating named plaintiffs who shoulder additional burdens. These include depositions, discovery responses, trial participation, and public exposure. Yet the study’s finding is notable. Motivation for class-representation may be rooted more in altruism, reputation or justice-seeking than in straightforward financial gain.

For the legal-funding industry and class-action litigators, the findings are significant. They suggest that reliance on incentive payments to secure named plaintiffs may be less critical than previously assumed, potentially lowering a transactional cost input in structuring class settlements. On the other hand, third-party funders and litigation financiers should consider how the supply of willing named plaintiffs might remain stable even in jurisdictions restricting such payments.

Commercial Regulatory Issues

Merricks Calls for Ban on Secret Arbitrations in Funded Claims

By John Freund |

Walter Merricks, the class representative behind the landmark Mastercard case, has publicly criticized the use of confidential arbitration clauses in litigation funding agreements tied to collective proceedings.

According to Legal Futures, Merricks spoke at an event where he argued that such clauses can leave class representatives exposed and unsupported, particularly when disputes arise with funders. He emphasized that disagreements between funders and class representatives should be heard in open proceedings before the Competition Appeal Tribunal (CAT), not behind closed doors.

His comments come in the wake of the £200 million settlement in the Mastercard claim—significantly lower than the original £14 billion figure cited in early filings. During the settlement process, Merricks became the target of an arbitration initiated by his funder, Innsworth Capital. The arbitration named him personally, prompting Mastercard to offer an indemnity of up to £10 million to shield him from personal financial risk.

Merricks warned that the confidentiality of arbitration allows funders to exert undue pressure on class representatives, who often lack institutional backing or leverage. He called on the CAT to scrutinize and reject funding agreements that designate arbitration as the sole forum for dispute resolution. In his view, transparency and public accountability are vital in collective actions, especially when funders and claimants diverge on strategy or settlement terms.

His remarks highlight a growing debate in the legal funding industry over the proper governance of funder-representative relationships. If regulators move to curtail arbitration clauses, it could force funders to navigate public scrutiny and recalibrate their contractual protections in UK group litigation.