Lawsuit Funding Best Practices Help Plaintiffs
Successful businesses are those who put the needs of their customers first. If the customers’ needs are met, then all parties to the transaction benefit. Lawsuit funding companies also share in this philosophy. This idea manifests itself in the adoption of lawsuit loan best practices designed for transparency in the business. In this post, we explore lawsuit loan best practices, give certain examples and explain the impact of these policies upon the industry.
Lawsuit Loans – A Niche Idea
Lawsuit plaintiffs often have an immediate need for financial support during the litigation process. This need is sometimes exasperated due to delays present in the legal system. Personal injury victims often have to face insurance companies and their team of defense lawyers in court. Cases can drag on for years and because plaintiffs may not be earning what they were prior to the accident, many accept low ball settlement offers simply because they cannot hold on financially.
Often unable to work due to injury, plaintiffs turn to plaintiff attorneys for cash. Unfortunately, attorneys in many jurisdictions cannot advance clients money under ethics rules.
Lawsuit loans are relatively new specialty finance products in which lawsuit “lenders” advance money to plaintiffs involved in civil litigation. Although referred to as “loans”, lawsuit loans are actually advances of potential recoveries.
Also known as settlement loans or lawsuit funding, these deals solve plaintiffs’ immediate financial concerns. Many clients utilize lawsuit funding to pay for groceries, utilities, rent, mortgage payments, insurance premiums, and medical treatment. Lawsuit loans are a flexible option for plaintiffs in their time of need. Lawsuit loan best practices are a set of protocols which guide the best lawsuit funding companies.
Lawsuit Loan Customers
Potential customers include all civil plaintiffs since they face a long, drawn out litigation process. By far the most common lawsuit loan customer seek personal injury loans. Whether injured in an automobile accident, as a business invitee, or injured at the workplace, injured plaintiffs make up the majority of lawsuit loan customers.
Personal injury law firms target certain demographics with their marketing efforts. One personal injury demographic study estimates the annual household income of those most likely to call an injury attorney is $50,000 or less. The same estimate ranges ages from 35-59 years old, and educational backgrounds at a high school level or less.
Such information helps law firms tailor their marketing messages. It also illustrates the importance of lawsuit loan best practices because most personal injury plaintiffs are not lawyers. Funding company best practices, as discussed below, are designed for easy understanding and are an essential ingredient into the search for a reputable lawsuit funding company.
Lawsuit Loan Transactions
Lawsuit loans are also known as settlement funding and are advances on a potential future settlement. They are structured as asset purchase agreements. That is, the funding company purchases a portion of the future lawsuit recovery. In return, the plaintiff pledges to repay the advance when the case is concluded and according to the contract terms. Repayment is dependent upon the amount of time which elapses from the contract date and settlement. Repayment is also contingent upon a successful outcome. If the lawsuit is lost, the advance is not repaid since what was purchased (portion of the recovery) no longer exists.
Many plaintiffs are familiar with traditional loans through car loans, credit cards, home loans, etc. Lawsuit loans are different than traditional loans in that repayment is contingent upon winning the case. If there is no recovery, there is no repayment. For this reason, lawsuit funding contracts can be confusing. Lawsuit loan best practices seek to end this confusion.
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Lawsuit Loan Best Practices
Lawsuit loan best practices are not entirely uniform in their acceptance. In most jurisdictions, lawsuit funding exists in an unregulated marketplace leaving funding companies free to draft contracts as they wish. However, understanding that repeat and honest business is the best business, many companies clearly disclose important information on their contracts.
What consumer disclosures are appropriate is still left to the companies themselves but there is some governmental guidance on the subject. In 2005 for example, certain lawsuit funders approached the New York Attorney General for clarification regarding what disclosures would be appropriate on a lawsuit funding contract. Lawsuit loan best practices were essentially outlined as a result.
Best Practices in Contracts
Examples of lawsuit loan best practices are found on most lawsuit funding agreements. These include disclosure of the following:
- The total amount advanced to the consumer.
- An itemization of one-time fees broken down by item (e.g., application, processing, attorney review, broker, etc.).
- Percentage fee or rate of return, stated on an annualized basis, including frequency of compounding.
- Total amount to be repaid by the consumer, broken out by six-month intervals, carried forward to 36 months, and including all fees as well as any minimum required payment amount.
Another best practice example includes a 5 day right of cancellation. This means that a plaintiff can cancel the contract within 5 days following receipt of the funding advance. Most right of cancellation provisions are without penalty and outline the exact steps to end the transaction. Another common provision includes notifying the plaintiff of their ability to consult an attorney regarding the transaction.
Best Practices in Customer Interaction
Customer engagement best practices are also important. Although no regulatory authority outlines lawsuit loan best practices with regard to customer/company interactions, common sense dictates transparency and fair dealing are a good idea if lawsuit funding enterprises want to grow their businesses.
For example, clear communication is desirable for those seeking immediate cash advances while their lawsuit is pending. When plaintiffs are in financial trouble, the last thing they want is to get the “runaround”. Lawsuit loan best practices dictate clear and prompt attention to the customers’ needs and are an essential component to client satisfaction. In fact, google lawsuit loan reviews often deal with the ability of lawsuit lenders to effectively communicate with their customers.
How Lawsuit Loan Best Practices Help Plaintiffs
Best practices help plaintiffs by clearly identifying and defining material contract terms, outlining a plaintiff’s rights under the agreement and opening mutually beneficial communication channels between funders and plaintiffs. They form the bond from which plaintiffs can receive much needed financial support and funders opportunities for investment. Through lawsuit loan best practices, all parties to the transaction benefit.
If you wish to learn more about how to get started with lawsuit loans, please contact us online or give us a call. You will reach a live operator who can answer your questions quickly and clearly. After all, that’s what lawsuit loan best practices are all about.
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