Lawsuit Funding Myths Busted (part 2)

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Lawsuit Cash Advance Myths (part 2)


Myth # 6 – New Debt = More Bills

One common response for those against a lawsuit cash advance is “I don’t want more bills. I have enough already.” This could not be any more backwards. There are no monthly expenses associated with a lawsuit cash advance. An advance is only paid if and when your case is won or settled. If you lose your case you us nothing. Even if you win your case there are no monthly bills that you have to worry about. Your attorney will take care of paying us back.

Myth # 7 – Lawsuit Cash Advances Exploit Plaintiffs

Perhaps the most common misconception, more so with attorneys, is that this industry exploits plaintiffs when they are most vulnerable and least able to make informed decisions. This is probably the most difficult myth to disprove. We cannot say this enough… a lawsuit cash advance is not for everyone. Our typical client is a plaintiff that is suffering some sort of injury, is missing work and has bills piling up. A cash advance in this situation does not exploit a plaintiff it provides a financial safety net for them and can provide the peace of mind to live from day to day without worrying how bills are going to get paid.

Myth # 8 – A Lawsuit Cash advance is a Loan

Perhaps the most frequently heard myth from a client standpoint is that a lawsuit cash advance IS a loan. It looks like a loan and sounds like a loan but the fact is a lawsuit cash advance is non-recourse so if you don’t win your case or reach a settlement you don’t owe anything back. The other major difference between a lawsuit cash advance and a traditional loans is that most traditional loans require monthly or periodic payments.

Myth # 9 – The Industry is Unregulated and Open to Abuse

While it can be argued that in its infancy the lawsuit cash advance industry there was little state regulation and no federal oversight but the more time that passes the more regulated the industry becomes. The regulations of course are designed to keep the plaintiffs best interests in mind.

Furthermore, ALFA, or the American Legal Finance Association, is the industry’s primary trade association created to establish the highest standards and a set up business practice principles for the lawsuit cash advance industry.

Myth # 10 – Cash Advance Companies interfere with the Legal Process

Both attorneys and plaintiffs alike often fear that the company providing the lawsuit cash advance will interfere with the legal process. Some fear the litigation funding company will exert pressure on the attorney to settle the case quickly and repay the advance. The truth is 1) funding companies cannot get involved with the case. And 2) why would a funding company want you to settle the case quickly when profits are tied directly to the length of case. All legal strategies are between the attorney and the client.

ALFA, which is mentioned above reinforce the strict practice of non-interference, which is also being codified into an emerging legislative framework for regulating legal funding companies.

Click to view Myths 1-5