Not all “legal funding” is the same. Consumer legal funding gives injured people a small, non-recourse advance to cover living expenses while a claim is pending. Commercial litigation finance funds business disputes. Attorney portfolio financing provides working capital to law firms against a pool of contingent matters. When these are lumped together, rules written for one product end up choking another. Clear definitions protect patients, keep providers in the game, and let markets price risk where it actually lives.
The problem with lumping everything together
I see too many summaries that treat all third-party capital as one thing. It is not. Caps designed for corporate financing get pasted onto consumer products. Reporting built for hedge-fund-style commercial deals gets dumped onto PI clinics and on families trying to keep the lights on. That is how you end up with fewer providers, longer waits for care, and more forced settlements.
Consumer legal funding exists to fund life needs. It does not pay lawyers, experts, or court costs, and statutes explicitly prohibit funders from controlling litigation choices.
The three models, clearly defined
1. Consumer legal funding (CLF)
Purpose. Provide small, non-recourse cash to an injured person with a pending claim so they can cover essentials like rent, food, childcare, or car payments while their case gets processed. Typical advances are a few thousand dollars. If the case loses, the consumer owes nothing. These funds are not for attorneys’ fees or litigation costs.
Control. Banned. CLF providers cannot direct strategy, select counsel, or veto settlement. The attorney–client relationship stays intact by statute and ethics rules.
Right policy lens. Consumer protection. Plain-language disclosures, cooling-off windows, and non-interference rules that are already common in state statutes.
Wrong policy lens. Treating CLF as a traditional loan with APR caps meant for credit cards. This is non-recourse risk pricing, not revolving debt.
2. Commercial litigation finance
Purpose. Fund high-cost business disputes. Parties are sophisticated. Terms are bespoke and often tied to recoveries and milestones. Capital frequently is non-recourse to the corporate client.
Control. Governance focuses on conflicts and confidentiality while preserving privilege. The policy frame here is transactional transparency for sophisticated parties, not consumer-style rules. (Different user. Different tool.)
3. Attorney portfolio financing
Purpose. Provide working capital to law firms secured by a basket of cases or receivables. Risk is diversified across the portfolio; structures vary and are often recourse to the firm. Capital may be drawn at intervals under negotiated covenants.
Right policy lens. Treat as firm-level finance with standard lending and disclosure norms, not as a consumer product.
Why the distinctions matter for patients and providers
- Access to care. In PI medicine, patients rely on lien-based care and often need a small bridge to stay in treatment. If rules aimed at commercial deals spill onto consumer funding, families lose that bridge and drop out of care. That hurts outcomes and compresses case value. CLF is designed to stabilize households, not bankroll lawsuits.
- Provider participation. Clinics accept denial risk and long timelines. If repayment pathways are constrained by mismatched rules, more providers exit PI, leaving fewer appointment slots and slower recovery velocity.
- Market integrity. Non-recourse capital prices loss risk. Forcing it into credit-style APR boxes does not make risk disappear. It just makes the product uneconomic and shifts pressure onto patients and small providers. CLF statutes already prohibit litigation control and require clear, plain-English terms. Keep that alignment.
What good policy looks like
Start with clear definitions. Name the products in statute or rulemaking: consumer legal funding, commercial litigation finance, and attorney portfolio financing. When each lane is defined, spillover harm is less likely.
Match protections to the user. Consumers need plain-language disclosures, cooling-off periods, and strict non-interference so legal decisions stay with the client and counsel. Businesses and law firms need conflict rules and targeted transparency that respect privilege and negotiated risk.
Keep the treatment lane open. Any bill that touches personal-injury cases should be vetted for its effect on provider participation and patient access. If a rule shrinks the care network or pressures families to settle early, it misses the mark.
Collect the right data. Encourage outcome and compliance reporting that informs policy. Avoid mandates that pierce privilege or chill legitimate financing models that keep the system functional.
Price risk where it lives. Non-recourse support for individuals is not a credit card. Portfolio financing is not a household product. Commercial litigation deals are corporate transactions. One label does not fit all.
Bottom line
Clear definitions with smart guardrails protect patients, keep providers in the game, and let markets work. If we stop mixing up three different tools, we can write rules that actually solve the problems in front of us and preserve access to care for the people who need it most.
Looking for more information? I highly recommend the following podcasts from The Alliance for Responsible Consumer Legal Funding (ARC), a nonprofit trade association.