In personal-injury care, small decisions in statute and rulemaking have big, real-world consequences. The right guardrails protect patients, keep providers participating, and improve transparency. The wrong provisions can choke off access to treatment, pressure early settlements, and reduce fairness in outcomes. We do not need sweeping, complicated frameworks to get this right. We need a narrow set of protections that match how consumer legal funding (CLF) actually works. CLF gives injured people modest, non-recourse support for living expenses while a claim is pending. It does not pay attorneys or experts. It does not control litigation decisions. It keeps families afloat so they can follow counsel’s advice rather than settle out of financial desperation.
What CLF really is – and why that matters
Start with the design. CLF is small and non-recourse. Typical advances are a few thousand dollars, used for rent, food, utilities, childcare, or car payments while a case moves through the process. If the consumer does not recover settlement funds, they owe nothing. That structure removes leverage. There are no monthly payments to threaten, no assets to seize, and no switch to flip on discovery or trial prep because CLF does not fund the litigation itself. The client and lawyer keep control of strategy and settlement. That is not just an industry norm. It is the standard in state statutes that regulate CLF and in the ethics rules that protect the attorney–client relationship.
ARC’s recent explainer captures the point in plain language: CLF “funds lives, not lawsuits,” giving people stability and choice without taxpayer support or bureaucratic delay. The model relies on voluntary exchange and risk-based pricing, with plain-language contracts and explicit no-influence clauses where regulated. Those features are the right policy foundation.
Guardrails that help
1. No influence, no interference. Put the line in black and white. Funders may not direct strategy, select counsel, or veto settlement. Only the client—guided by counsel—makes litigation decisions. This is already the standard in regulated states, and it is the most important protection in the system because it preserves independence while leaving consumers free to cover essential costs.
2. Standardized cooling-off period. Give consumers a short window to rescind without penalty. It increases confidence and reduces complaints while maintaining the speed that makes CLF useful in the first place. A uniform rescission window complements the non-recourse design and plain-language contracting allows consumers to maintain control.
3. One-page disclosures that people can actually read. Require a simple summary with examples: non-recourse nature, total payoff illustrations, fees, and a clear statement that legal decisions belong to the client and counsel. The goal is informed choice, not paperwork for its own sake.
4. Verify representation and case status without piercing privilege. Compliance checks should confirm there is a bona fide claim and active counsel, then stop. We do not need discovery-style reporting to protect consumers. We need targeted verification that keeps the legal lane separate from the household-support lane.
5. Outcome-focused oversight. Collect narrow, privacy-safe metrics that inform policy—think rescission rates and complaint rates. Regulated states already balance consumer protection with market function. We should copy what works.
Barriers that harm
- Collateral source logic in disguise. When rules treat CLF like an insurance offset or import “phantom damages” rhetoric, recoveries get clipped for reasons unrelated to fault or evidence. CLF covers groceries and rent. It is not buying experts or paying trial counsel. Blending these concepts pushes families toward distress settlements and does nothing to improve case accuracy.
- Blanket APR caps on a non-recourse product. CLF prices real loss risk. If a case loses, the consumer owes nothing. Forcing credit-card style APR caps onto a non-recourse product does not make risk disappear. It removes lawful, private-market support at the exact moment families need it, which reduces provider participation and harms outcomes. Evidence from regulated states shows you can protect consumers without collapsing supply.
- Recovery allocation formulas that backfire. Well-meant guarantees can interact with liens, fees, and medical charges in ways that make participation uneconomical for small clinics. If providers cannot see a path to reimbursement across typical case values, they exit PI. The test is simple: if a provision shrinks the network of clinicians willing to treat on lien, it harms patients.
- Overbroad disclosures that chill representation. Demanding granular deal terms or privileged communications turns a consumer protection rule into a discovery tool. Keep disclosures focused on the consumer. Protect privilege. Preserve independence.
The practical standard for lawmakers
Define the lanes. Consumer legal funding supports individuals and their households. Commercial litigation finance is corporate capital for business disputes. Attorney portfolio finance is working capital to law firms across a basket of cases. One label does not fit all. The right rule is the one matched to the user in that lane. The result is simple. Consumers get clarity and control. Counsel keeps independence. Providers can keep treating patients without shouldering unrecoverable risk. Markets continue to price risk where it lives.
Bottom line
Smart guardrails are narrow and human-scale. No-influence clauses. A standardized cooling-off period. Plain-English disclosures. Targeted verification. Outcome-focused oversight. Hidden barriers are blunt instruments that treat a non-recourse household product like a credit card or an insurance offset. If we keep the lanes clear and the protections tight, we can defend patients and preserve access to care at the same time.
Want to read more? Our nonprofit industry partner, ARC, recently published an explainer on CLF as a free-market solution. Eric Schuller, President of ARC, also recently published a piece in Litigation Finance Journal on how the law prohibits any funder control over strategy or settlements. Be sure to check them out.