Consumer Legal Funding Empowers Individuals not Litigation

The Alliance for Responsible Consumer Legal Funding (ARC) has recently published an enlightening article “Consumer Legal Funding: A Free Market Solution to Financial Freedom” that helps explain the difference between Consumer Legal Funding (CLF) and Commercial Litigation Funding. So similar sounding, but so different in purpose. We at HMR Servicing prefer the term Pre-Settlement Funding to further differentiate the purpose of the funding.

Consumer Legal Funding (CLF) is a private-sector financial service that provides small-dollar advances to individuals with pending legal claims, enabling them to cover essential living expenses while their cases proceed through the courts. Plaintiffs often face pressure to accept unfairly low settlement offers just to cover basic expenses like rent, food, and utilities. CLF funds lives—not lawsuits—by providing independence, choice, and stability.

Key Benefits

Financial Stability During Legal Proceedings

• Prevents “forced settlements” where consumers accept inadequate offers due to financial pressure
• Provides funds for rent, utilities, groceries, and other household necessities
• Typically involves advances of a few thousand dollars against potential settlements

Free Market Principles

• Voluntary transactions with no coercion
• Risk-based pricing that reflects case uncertainty and duration
• Multiple providers create competition, driving innovation and consumer choice
• Operates without taxpayer funding or government subsidies

Distinction from Commercial Litigation Funding

CLF differs significantly from commercial litigation financing:

• Consumer Legal Funding: Small amounts for individual living expenses
• Commercial Litigation Funding: Multi-million dollar investments to fund lawsuit costs

Economic Justice Impact

CLF promotes economic justice by:

• Leveling the playing field between individual consumers and large insurance companies
• Enabling fairer settlement outcomes
• Preventing distressed sales of legal claims
• Empowering consumer autonomy over government dependency

In summary

Consumer Legal Funding represents an effective free-market solution that provides financial freedom to vulnerable plaintiffs without taxpayer burden, litigation interference, or coercive elements. It embodies capitalist principles while serving a critical social need during times of personal crisis. For a deeper dive into this topic please read the Alliance for Responsible Consumer Legal Funding’s article titled “Consumer Legal Funding: A Free Market Solution to Financial Freedom.”