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Consumer Legal Funding is Even More Necessary Post-Pandemic

July 19, 2021

Consumer Legal Funding is Even More Necessary Post-Pandemic

The following piece was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC).  Consumer Legal Funding is when a company provides funds to a consumer who has a pending legal claim, typically a car accident, while their case is making its way through the legal system. The funds are used for household needs such as mortgage, rent, car payments, keeping the light on and putting food on the table. The funds are not used to pay for legal fees associated with the claim or case. This financial product is needed now more than ever as we recover from the pandemic caused by COVID-19. According to MarketWatch, almost half of Americans have saved less than $500 in the past three months. The article goes on to state that 56% are living paycheck to paycheck, and that 48% have experienced an unexpected financial setback in the past three months. In early July of 2021, Wells Fargo shuttered all of its personal lines of credit. This cut off thousands of consumers from accessing funds that they might need in an emergency, such as being involved in a car accident. So where are these consumers to go when, by no fault of their own, they are involved in an accident and become injured and cannot work, and therefore have either no income or limited income. These individuals often fall behind in their financial obligations such as their rent and car payments, and with limited-to-no savings, they are stranded. Banks, such as Wells Fargo, are cutting off their access to financial assistance at a time when consumers need it the most. In addition, according to BankRate “nearly three times as many Americans say they have less emergency savings, versus more since the pandemic”. Consumer Legal Funding is a non-recourse financial product, meaning you only have to meet the obligation if you are successful in your legal claim. This affords consumers the ability to meet their everyday financial obligations, while they make their way through the legal system. Because of COVID-19, legal claims are taking longer to make their way through the process. Even insurance companies are saying that it will take longer to get ahold of them. Consumers should learn more about their options when they have a pending legal claim and not be forced to take the first offer that comes along, just because they are financially stressed. Consumer Legal Funding can serve as a source of financial protection and comfort for consumers with nowhere else to turn—and as we emerge from the Covid-19 pandemic, this type of product is needed now more than ever. Note: When dealing with a funding company, make sure to ask if they follow the industry set of Best Practices that have been set out by ARC and the ARC companies. Eric Schuller President Alliance for Responsible Consumer Legal Funding (ARC)

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Nonprofit Milestone Foundation Forms Advisory Council to Champion ‘Simple Interest’ Litigation Funding

By John Freund |

The Milestone Foundation, a western New York nonprofit that bills itself as the country's only organization dedicated to litigation funding for plaintiffs, has assembled a new advisory council to advance its mission and promote a funding model built on simple, non-compounding interest rates. The move marks an effort to position nonprofit funding as an alternative to the high-cost consumer products that have drawn regulatory scrutiny.

As reported by Law.com, the Buffalo-based foundation unveiled a multi-disciplinary council spanning the full litigation ecosystem, drawing together professionals from across the plaintiff, finance, and legal services landscape to guide its work and broaden its reach.

Founded in 2016 by John and Amy Bair, the Milestone Foundation operates as a 501(c)(3) nonprofit and offers pre-settlement funding at 15% simple interest and post-settlement funding at 10% simple interest, with interest that never compounds. Like commercial consumer legal funding, its advances are non-recourse, meaning plaintiffs owe nothing if their case is unsuccessful. The foundation says it has provided more than $6 million in funding to over 900 plaintiffs in partnership with more than 320 law firms nationwide.

The council's formation comes amid intensifying debate over how consumer legal funding should be priced and regulated, exemplified by recent state legislation such as the Kansas Transparency in Consumer Legal Funding Act. By emphasizing transparent, simple-interest terms, the foundation is staking out a distinct position in a market often criticized for opaque and compounding charges, offering a model that supporters argue better aligns funding costs with plaintiffs' interests.

Consumer

Illinois Moves to Restrict Private Equity and Hedge Fund Control of Law Firms

By John Freund |

Illinois has joined a growing list of states moving to rein in non-lawyer ownership and control of law firms, advancing legislation that restricts the influence of private equity, hedge funds, and outside investors over legal practice. The measure reflects mounting concern that capital-driven ownership structures, closely related to litigation finance, could compromise attorney independence.

As reported by Crain's Chicago Business, House Bill 5487 places new limits on alternative business structures (ABS) and management services organizations (MSOs). The bill prohibits non-lawyers and outside investors from interfering with attorneys' professional judgment, accessing client records, hiring or firing lawyers, or charging fees tied to a firm's revenues or profits. Firms must also disclose any MSO or ABS arrangement to their clients.

Rather than banning the structures outright, the legislation significantly curtails non-lawyer involvement in firm operations and decision-making. The bill drew an unusual coalition, with both the Illinois Trial Lawyers Association and Illinois Defense Counsel backing it, alongside State Rep. Jay Hoffman and House Speaker Emanuel "Chris" Welch.

Supporters framed the measure as a response to rising private equity and venture capital involvement in civil litigation, drawing explicit parallels to third-party litigation funding arrangements that finance cases in exchange for a share of recoveries. Illinois follows California and Colorado in tightening ABS rules, amid criticism that Arizona's permissive regime has allowed non-lawyer-owned firms to manage mass tort caseloads while funded through attorney-fee percentages. The trend signals growing legislative resistance to investor control of the litigation process.

Consumer

The Case for Nonlawyer-Owned Firms: Filling Consumer Justice Gaps Left by Big Law

By John Freund |

As states such as Illinois move to restrict non-lawyer ownership of law firms, defenders of alternative business structures are pushing back, arguing that ABS models expand access to justice for consumers and small businesses that traditional firms have little economic incentive to serve. The debate goes to the heart of how technology and outside capital should reshape the delivery of legal services.

As reported by Bloomberg Law, Matt Freund, co-founder and chief executive of Arizona ABS-licensed firm ClaimsHero, contends that conventional firms lack the incentive to handle consumer protection and wage-theft claims where clients cannot afford hourly billing. ABS firms, he argues, combine legal expertise with technology to operate on contingency at scale, serving more than 100,000 clients at no cost to consumers through automated onboarding, eligibility screening, and client communication.

Freund counters concerns that non-lawyer ownership weakens oversight, asserting that ABS firms face stricter regulation than traditional practices. Entity-level licensing, he notes, creates firm-wide accountability, with semi-annual audits, biennial renewals, compliance-attorney requirements, and the risk of firm-wide suspension for ethics violations. He cites a 2025 Stanford Law School study finding that 85% of Arizona ABS firms target individual consumers and that there was "de minimis evidence of consumer harm."

To address skeptics, Freund recommends entity-level regulation, feedback mechanisms, ownership transparency, and governance safeguards for attorney independence as a template for other states. The argument offers a direct counterpoint to the restrictive measures gaining traction in statehouses across the country.