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Looking Ahead in 2019

January 2, 2019

Looking Ahead in 2019

The following post was written by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). As the 2019 Legislative Session begins, we want to take a look at what is the best way to regulate Consumer Legal Funding. Over the past few years, the states have introduced several pieces of legislation with the aim of regulating Consumer Legal Funding. Rather than simply introduce capricious regulations, legislators should familiarize themselves both with the product, and the consumers who need it, before making rash decisions that will impact their constituents for life. For example, according to CNBC, 78% of full-time workers said they live paycheck to paycheck, up from 75% last year. In addition, 56% of those polled said they were in over their heads with debt and save less than $100 per month for emergencies. Even for those making over $100,000, nearly 10% live paycheck to paycheck, and 59% in that salary range claim to be in the red. That is why Consumer Legal Funding is so important. When an unexpected tragedy hits, and consumers lack the financial resources to make ends meet while their claim is dragging out, Consumer Legal makes its way through the legal process. Consumer Legal Funding assists consumers like Jack Daniels from Phoenix, who stated: “My budget was already tight, and the injury made things much worse.” Consumer Legal Funding allows consumers like Jack to receive the fair and just settlement they deserve, as opposed to one they are forced to accept just because they are living paycheck to paycheck. ARC supports proper regulation of the industry like those that have been enacted in Ohio, Maine, Vermont, Oklahoma and Nebraska. What we unequivocally do not support are severe restrictions that have been imposed on the industry, which prohibit the product from being offered. For example, in Arkansas, Consumer Legal Funding is no longer available because of the restrictions that were imposed by the Arkansas legislature in 2015. We welcome any and all legislators to reach out to us to help properly regulate this important product that allows consumers to keep a roof over their heads and food on the table while their legal claim is in process. As Cathy from Hannibal, Missouri states, “[Consumer Legal Funding] kept me from being homeless.” Eric Schuller President Alliance for Responsible Consumer Legal Funding

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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.