Continuing in the discussion of regulation in litigation finance, many people have heard of the proposed monetary caps on funding agreements included in regulation such as the bill being considered in the Senate right now. However, that is not the only type of proposed regulation for the industry.
Some experts suggest rather that regulation should focus on the contract or agreement made between the funding company and the plaintiff. This is particularly on the forefront after the first ever large-scale study of consumer litigation funding in the United States was published. This survey was based on review of over 200,000 individual transactions between one of the largest consumer litigation finance companies in the country and individual litigants.
The survey revealed that the litigation finance company complicated all the variables that go into how much the plaintiff will have to repay the company after a favorable result in the written contract between the two. Thus, it was nearly impossible for the consumer to know what her contractual obligation was. In fact, the hidden terms and costs were so buried that even some legislatures have missed them when considering disclosure.
Additionally, the survey showed that about half the time the plaintiff’s attorney re-negotiated the agreement with the litigation finance company afterward. Even when the re-negotiations are meant to help the plaintiff get the best deal, it ultimately just added even more confusion for the plaintiff in the entire situation.
This is why ultimately people are calling for litigation finance reform that simplifies the process and clearly outlines the procedure and costs for the plaintiff. Additionally, it should call for attorneys to keep the best interest of their client in mind from the beginning and thus, not complicate the matters further.
Topics: litigation finance, alternative litigation finance, third-party funding, regulation, industry reform
Works Cited: Ronen Avraham and Anthony Sebok, Americans Should Have the Proper Protections When Bringing Lawsuits, The Hill (March 29, 2018).