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Montani semper liberi — “Mountaineers are Always Free”

April 1, 2019

Montani semper liberi — “Mountaineers are Always Free”

This article was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding.  Montani semper liberi; “Mountaineers are Always Free” is the motto of the State of West Virginia, but apparently the motto only applies to a select group of Mountaineers. The Legislature of West Virginia passed – and the Governor signed into law – Senate Bill 360 which sets out to regulate Consumer Legal Funding in the state. Unfortunately, SB 360 is a set of meaningless regulations, given that the legislation implements rate restrictions on the Consumer Legal Funding Industry which restrict the product from even being offered to the citizens of the state. So in essence, SB 360 bans the product altogether. A similar rate was introduced and enacted in Arkansas in 2017, and the product has not been offered there since. What is interesting is that Arkansas and West Virginia are among the top 10 poorest states in the country, meaning their citizens are consumers who can least afford to lose a significant source of financial support that would otherwise be available to them. Then again, perhaps that’s the Insurance industry’s reason for targeting these states in the first place. Consumer Legal Funding is a lifeline for people who have a pending legal claim, such as a car accident. It allows them to put food on the table while their case is making its way through the legal system. Like Alice from West Union, WV who stated, “I am unable to work and having a really hard time providing for my kids, and this is a major help.” Or Mary from Follansbee, WV who said “It helped prevent shut off notices, and paid my rent”. Unfortunately, consumers like Mary and Alice will no longer have the ability to help make ends meet thanks to the enactment of SB 360. This legislation was driven by the Insurance industry and the US Chamber of Commerce, with the sole purpose of eliminating access to this vital financial resource. The industry tried to work with the legislature in reaching a compromise that would allow for proper regulation and oversight, yet still permit the industry to operate. But at every turn, the US Chamber of Commerce, the Insurance Industry and their lobbyists swooped in and leveraged their might against consumers in order to prevent this product from being offered. Montani semper liberi – “Mountaineers are Always Free” – that motto is supposed to apply to all citizens of West Virginia. Unfortunately, those with enough clout and influence can relinquish the freedom of citizens to access a financial product which allows them to make ends meet, while the multibillion-dollar insurance industry increases profits and squeezes out the very consumers that SB 360 is ostensibly trying to help. Eric Schuller President Alliance for Responsible Consumer Legal Funding

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Consumer Legal Funding Is Not a Loan, Courts and Economists Agree

By John Freund |

The debate over whether consumer legal funding should be classified as a loan continues to surface in regulatory and policy circles, but legal doctrine and economic analysis consistently point in the opposite direction. Consumer legal funding is a non-recourse financial transaction tied to the outcome of a legal claim. If the consumer does not recover in their case, they owe nothing. This defining feature alone places the product outside the traditional boundaries of consumer lending, which requires repayment regardless of outcome and typically involves credit underwriting, collateral, and enforceable debt obligations.

An article in the National Law Review explains that courts and legislatures across the United States have repeatedly recognized this distinction. Rather than viewing consumer legal funding as borrowed money, courts have treated these arrangements as the purchase of a contingent interest in a future settlement or judgment. Because repayment is entirely dependent on case success, judges have found that the economic substance of the transaction does not resemble a loan, nor does it fit neatly within existing consumer credit frameworks.

Judicial decisions from multiple jurisdictions underscore this point. Courts have emphasized that consumers face no personal liability, no collection efforts, and no obligation to repay from their own assets. These factors are incompatible with the legal definition of a loan, which presumes a fixed obligation to repay principal and interest. As a result, attempts to recharacterize consumer legal funding as lending have largely failed when scrutinized under established legal standards.

From an economic perspective, consumer legal funding plays a distinct role in the civil justice system. It provides liquidity to plaintiffs who may be facing prolonged litigation and financial pressure, often helping them avoid accepting premature or undervalued settlements. Treating these transactions as loans could impose regulatory requirements that are poorly suited to non-recourse funding and risk limiting consumer access to a product designed to mitigate imbalance between individual plaintiffs and well-resourced defendants.

Consumer

Legal-Bay Hails New York Litigation Funding Act as Industry Milestone

By John Freund |

Legal Bay has praised New York Governor Kathy Hochul for signing the New York Litigation Funding Act into law, describing the legislation as a landmark step that finally provides a clear regulatory framework for consumer litigation funding in the state. The new law represents a significant development for an industry that has operated for years amid legal uncertainty in one of the country’s most active litigation markets.

A Legal Bay press release notes that the legislation establishes a comprehensive set of consumer protections and regulatory standards governing litigation funding transactions in New York. Legal Bay characterized the law as the product of more than two decades of policy development and sustained advocacy efforts by industry participants and consumer access to justice groups. The company emphasized that the statute provides long needed clarity by formally recognizing consumer litigation funding as a non recourse financial transaction rather than a traditional loan.

Under the new framework, funded plaintiffs are only required to repay advances if they obtain a recovery in their legal claims. Supporters of the law argue that this distinction is critical in protecting consumers from additional financial risk while ensuring that individuals with meritorious claims are able to cover basic living expenses during the often lengthy litigation process. Legal Bay highlighted that litigation funding can help plaintiffs avoid accepting early settlements driven by financial pressure rather than the merits of their cases.

Legal Bay also acknowledged the role played by New York lawmakers in advancing the legislation through the state legislature, noting that the law strikes a balance between consumer protection and preserving access to funding. According to the company, the statute promotes transparency, fairness, and stability in a market that continues to grow in both size and sophistication.

Consumer

New York Enacts Consumer Litigation Funding Act Impacting Litigation Finance

By John Freund |

New York has enacted a new Consumer Litigation Funding Act, establishing a formal regulatory framework for third party litigation funding transactions involving consumers. The law, signed by Governor Kathy Hochul in December, introduces new registration requirements, disclosure obligations, and pricing restrictions aimed at increasing transparency and limiting costs for funded claimants.

As reported in Be Insure, litigation funders must register with the state and comply with detailed consumer protection rules. Funding agreements are required to clearly disclose the amount advanced, all fees and charges, and the total amount that may be owed if the case is successful.

Consumers must initial each page of the agreement and are granted a ten day cooling off period during which they may cancel the transaction without penalty. The law also prohibits funders from directing litigation strategy or interfering with the professional judgment of attorneys, preserving claimant and counsel independence.

One of the most significant provisions is a cap on the total charges a funder may collect, which is limited to 25 percent of the gross recovery. Prepayment penalties are unenforceable, and attorneys representing funded plaintiffs are prohibited from holding a financial interest in a litigation funding company. For the first time, consumer litigation funding in New York is brought under the state’s General Business Law, replacing years of relatively limited oversight with a comprehensive statutory regime.

Supporters of the legislation argue that the law addresses concerns about excessive costs and abusive practices while providing clarity for an industry that has operated in a regulatory gray area. Industry critics, however, have raised questions about whether pricing caps could restrict access to funding for higher risk claims.