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Kansas Enacts Consumer Legal Funding Law, Offering a Bipartisan Regulatory Blueprint

By John Freund |
June 3, 2026

Kansas Enacts Consumer Legal Funding Law, Offering a Bipartisan Regulatory Blueprint

Kansas has adopted a comprehensive framework for regulating consumer legal funding, with Governor Laura Kelly signing the Transparency in Consumer Legal Funding Act, House Bill 2518, into law. Commentators have positioned the statute, which takes effect July 1, 2026, as a model for other states weighing how to oversee the fast-growing consumer funding sector.

As reported by the National Law Review, the measure passed unanimously in both chambers of the Republican-controlled legislature before earning the Democratic governor’s signature, a rare show of bipartisan consensus on an issue that has drawn sharp debate elsewhere. The law defines consumer legal funding as a non-recourse transaction in which a company purchases a contingent interest in the proceeds of a legal claim, and it expressly states that such funding is not a loan and is not subject to lending laws.

The statute builds in extensive consumer protections, including a 10-business-day rescission period without penalty, plain-language contract requirements, full disclosure of all charges and the maximum repayment amount, and mandatory attorney acknowledgment. It also bars referral fees and kickbacks, prohibits misleading advertising, and restricts funding companies from influencing litigation decisions.

On transparency, the law requires disclosure of funding agreements upon request by parties and insurers while shielding attorney-funder communications from discovery. Supporters describe that balance as the statute’s central achievement: protecting consumers through disclosure and accountability while preserving access to funding and safeguarding attorney independence, a template lawmakers in other states may look to replicate.

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John Freund

John Freund

Consumer

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Consumer

Independence Day Op-Ed Frames Consumer Legal Funding as the Freedom to Pursue Justice

In an Independence Day editorial, the Alliance for Responsible Consumer Legal Funding (ARC) argues that meaningful freedom includes the ability of injured Americans to pursue their legal claims without financial desperation forcing them into unfair settlements. The piece positions consumer legal funding as a practical tool for keeping the outcome of a case tied to its facts rather than to a plaintiff's bank balance.

Writing in the National Law Review, ARC president Eric Schuller contends that "justice delayed can quickly become justice denied when mounting bills force individuals into decisions they otherwise would never make." Defendants, he argues, understand this dynamic and can use the length of the civil justice process to pressure vulnerable plaintiffs into accepting less than their claims are worth.

Schuller distinguishes consumer legal funding from commercial litigation finance and traditional lending. These are typically small, non-recourse advances — often $3,000 to $5,000 — used for everyday necessities such as rent, groceries, and medical bills while a claim proceeds. Because the funding is non-recourse, a consumer who loses the underlying case owes nothing. ARC's guiding principle, he writes, is "Funding Lives, Not Litigation."

The editorial also makes the case for responsible oversight, endorsing disclosure requirements, attorney acknowledgment, and prohibitions on funders influencing litigation strategy — safeguards intended to protect consumers while preserving their access to the tool.

Consumer

In Jackson Hospital Bankruptcy, Funders and Lawyers Sit Ahead of the Hospital in Settlement Waterfall

A court filing in the bankruptcy of Montgomery-based Jackson Hospital reveals that, under a joint prosecution and funding agreement, litigation funders and lawyers would be paid ahead of the hospital itself if its lawsuit against Blue Cross and Blue Shield of Alabama produces a settlement. The arrangement offers an unusually clear public window into how a funded litigation recovery can be distributed.

As reported by Alabama Daily News, Jackson Hospital filed for bankruptcy and sued Blue Cross, arguing that only higher insurance reimbursement rates can keep the facility open. Its current operations are financed through a debtor-in-possession loan from Jackson Investment Group (JIG).

According to the agreement, any settlement proceeds would follow a strict waterfall: first, JIG's legal expenses; second, repayment of JIG's investment, including accrued and unpaid interest; and only then a split of what remains, with 70% directed to Jackson Hospital Corporation for its obligations to JIG and 30% to a nonprofit of JIG's choosing. The hospital itself effectively ranks third in the payment hierarchy.

The structure highlights a recurring tension in litigation finance: a courtroom victory does not always translate into the outcome a funded party most needs — here, the survival of the hospital. U.S. Bankruptcy Judge Christopher Hawkins has scheduled a status hearing for June 30, leaving the ultimate distribution, and the hospital's future, unresolved.

Consumer

As New York’s Litigation Lending Law Takes Effect, a Nonprofit Funder Pushes an Alternative Model

As New York's new consumer litigation lending law takes effect, a Buffalo-based nonprofit is positioning itself as an alternative to the traditional, for-profit funding model the legislation is designed to rein in. The Milestone Foundation, backed by a newly formed advisory council and a client base of roughly 1,000, says its approach is built around reshaping how plaintiffs access funds while their cases are pending.

As reported by Law.com, the foundation is seeking to differentiate itself from conventional consumer litigation lenders, which advance cash to plaintiffs in personal injury and other cases in exchange for a share of any eventual recovery. Critics of that model have long argued that compounding fees can consume an outsized portion of a plaintiff's award, a concern that helped drive New York's move toward tighter regulation.

The timing is notable. New York's law arrives amid a broader national reckoning over consumer legal funding, with several states weighing disclosure requirements, rate caps, and other guardrails on the practice. By advancing a nonprofit alternative as the regulatory landscape shifts, the Milestone Foundation is testing whether a mission-driven structure can coexist with — and compete against — established commercial funders.

The development underscores how regulation and market innovation are increasingly moving in tandem within consumer legal funding. For plaintiffs, lawyers, and funders alike, New York's experience may offer an early indication of how alternative models perform once stricter rules are in place.