Is legal funding a loan?
No, consumer legal funding is very different from a loan; it is a non-recourse transaction, there is no guarantee of repayment, consumers put up no collateral, and there is no credit impact if they aren’t able to pay the money back. Classifying CLF transactions as loans would have a negative impact on consumers. In the event that they were unable to pay the money back, the CLF company would be required to report the loss to the federal government creating and additional financial obligation and burden for the consumer.
What is the impact on consumers?
Legal funding fills a void in the financial products arena. It is a once in a lifetime product that never puts a consumer in a cycle of debt or impacts their credit. Consumers are never worse off after receiving legal funding.
Who uses consumer legal funding?
Consumer legal funding is used by victims of accidents who are struggling to make ends meet while they wait for a resolution in their case who have typically exhausted other financial options and often do not have access to traditional forms of credit such as home equity lines, bank loans, etc.
What is the money used for?
Consumers use legal funding to pay for basic life needs such as preventing a foreclosure, paying utility bills, or putting food on the table. The money is not used to pay for legal expenses.