Consumer Legal Funding (CLF) provides injured individuals with small amounts of money to cover everyday living expenses while their legal claims move through the system. It is a non-recourse transaction: if the consumer does not recover, they owe nothing. For many families, this is the only way to keep food on the table and the lights on while they wait for a fair settlement.
Yet despite its narrow scope and consumer-focused purpose, CLF has faced strong opposition. Insurance companies and defense interests frequently claim it drives up litigation costs, prolongs cases, exploits consumers, and inflates settlements. These objections are often presented as fact, but a closer look reveals that they are based on misconceptions, exaggerations, and, in some cases, deliberate conflation with other forms of litigation financing.
This article addresses the seven most common objections to Consumer Legal Funding and demonstrates why they are wrong.
Objection 1: “CLF Increases Litigation Costs”
Opponents argue that by giving consumers money to survive, CLF somehow causes lawsuits to become more expensive. The claim is that plaintiffs, no longer financially desperate, reject early settlement offers and demand more, which in turn drives up insurance payouts.
Why This Is Wrong:
– CLF funds are used for survival, not litigation. Consumers spend this money on rent, groceries, transportation, and utilities. It does not finance attorney fees, depositions, or expert witnesses.
– Settlements reflect case value, not funding. The only reason a settlement increases is because an insurer initially offered less than what the claim was worth. CLF enables consumers to wait for a fair resolution, not inflate claims.
– No empirical evidence supports the claim. In states that regulate CLF — including Ohio, Utah, and Oklahoma, insurance rates have followed national trends, with no spike attributable to CLF.
Reality: CLF doesn’t increase litigation costs; it prevents insurers from exploiting financial desperation to settle cases cheaply.
Objection 2: “CLF Prolongs Litigation”
Insurers claim that with CLF, plaintiffs can afford to “hold out,” causing unnecessary delays in court and prolonging the resolution of cases.
Why This Is Wrong:
– Delays come from the courts, not consumers. Court backlogs, discovery disputes, and insurer tactics are the leading causes of delay.
– Consumers want resolution. No injured person wants to stay in litigation longer than necessary. CLF allows them to pay their bills while the process unfolds.
– Data disproves the claim. To our knowledge states with regulated CLF have not seen longer case durations compared to states without it.
Reality: CLF doesn’t prolong litigation; it helps consumers survive while insurers and courts take the time they need to resolve cases.
Objection 3: “CLF Exploits Consumers”
Opponents often frame CLF as predatory, likening it to payday loans. They argue that fees and repayment amounts are high and unfair.
Why This Is Wrong:
– CLF is non-recourse. Unlike payday loans and other loans, if the consumer loses their case, they owe nothing. These shifts risk away from the consumer.
– Consumers choose CLF voluntarily. Individuals review the terms, with legal counsel, and decide if it’s the best option.
– The alternative is worse. Without CLF, consumers may face eviction, bankruptcy, or be forced to accept an inadequate settlement.
– Costs reflect high risk. Many cases result in no recovery for the funder, so pricing reflects that risk.
Reality: CLF empowers consumers by offering them a risk-free option. Far from being exploitative, it fills a gap where traditional credit products do not work.
Objection 4: “CLF Creates Conflicts of Interest”
Critics argue that third-party funders could influence litigation strategy, interfering with the attorney-client relationship.
Why This Is Wrong:
– CLF contracts prohibit interference. In states where CLF is regulated, statutes make clear that funders cannot direct or control litigation decisions.
– Consumers remain in charge. The plaintiff, with their lawyer, decides when to settle and for how much.
– This is a red herring. There are no documented cases of CLF interfering with attorney-client relationships under regulated frameworks.
Reality: CLF companies have no control over litigation. Decisions remain with the attorney and client.
Objection 5: “CLF Reduces Settlement Incentives”
The claim here is that because consumers can afford to wait, they are less inclined to settle, leading to unnecessary trials.
Why This Is Wrong:
– CLF corrects imbalance, it doesn’t distort it. Insurers routinely offer “lowball” settlements, knowing financial hardship forces people to accept them. CLF restores the consumer’s ability to reject unfair offers.
– Cases still settle. Over 90% of civil cases nationwide settle. CLF does not change this fact.
– Settlement is still in the plaintiff’s interest. Consumers and lawyers have no incentive to prolong litigation unnecessarily.
Reality: CLF doesn’t reduce incentives to settle; it reduces the leverage insurers hold over financially vulnerable people.
Objection 6: “CLF Lacks Transparency”
Opponents push for mandatory disclosure of CLF contracts, claiming defendants should know if a plaintiff has obtained funding.
Why This Is Wrong:
– Irrelevant to the case merits. Whether a consumer has received CLF has no bearing on liability or damages.
– Creates prejudice. Disclosure would allow insurers to use funding against consumers, arguing they are motivated by profit rather than justice.
– No similar disclosure exists. Consumers are not required to disclose their bank accounts as an example.
Reality: CLF contracts are private, irrelevant to case facts, and disclosure rules would only harm consumers.
Objection 7: “CLF Raises Insurance Premiums”
Perhaps the most common accusation is that CLF drives up insurance rates, increasing costs for all consumers.
Why This Is Wrong:
– No actuarial evidence supports this. In states with CLF statutes, insurance rates follow the same trajectory as states without CLF.
– Premiums rise due to other factors. Medical inflation, jury awards, and market conditions are the real cost drivers.
– Scapegoating at work. Blaming CLF is politically convenient but doesn’t reflect reality.
Reality: There is no evidence CLF raises premiums. Insurers use this claim as a distraction from real causes of cost increases.
Conclusion: Empowering Consumers, Not Burdening the System
Every objection raised against Consumer Legal Funding collapses under scrutiny. The product does not increase litigation costs, prolong cases, or inflate settlements. It does not exploit consumers or interfere with the attorney-client relationship. And it certainly does not raise insurance premiums.
What CLF does is provide vulnerable individuals with a measure of financial dignity. It helps them avoid forced settlements, stay afloat during litigation, and pursue justice without being crushed by economic hardship. Insurers oppose CLF not because it harms consumers, but because it limits their ability to exploit consumer vulnerability for profit.
As policymakers and regulators evaluate CLF, they should separate fact from fiction. The evidence is clear: Consumer Legal Funding is not the problem. It is part of the solution, a free-market, risk-sharing tool that helps ordinary people survive the long wait for justice.
Consumer Legal Funding: Funding Lives, Not Litigation