The below is a guest blog post courtesy of Legal Funding Central:
At Legal Funding Central, we’re on a mission to educate the world about legal funding, which is why we created LFC360, an information site rich with news, guides and resources for all the many types of legal funding out there. We dedicate a significant portion of the site’s real estate to dispelling myths, falsehoods, and misconceptions about legal funding, the worst being when people think legal funding is a loan or use the misnomer lawsuit loan.
In fact, legal funding is not a loan – it’s an investment in a person, small business, or attorney’s legal case. And like all investments, if a case loses, there’s no further recourse against the person or entity that took the money.
The popularity of the term “lawsuit loans,” despite being a wholly inaccurate way to describe legal funding, provides insight into the different interested parties battling over legal funding. It’s been said that to name something is to own it. And that’s what opponents of legal funding are attempting.
Opponents of legal funding use the term lawsuit loan as a pejorative in order to make people feel like they may go into debt by obtaining it (which is never true since you never owe more than you get from your case, whether you’re a litigant or an attorney). Opponents also know that loans are subject to usury laws, something legal funding isn’t since the government typically doesn’t interfere with the rate of a return an investor gets on its investment.
However, detractors of legal funding aren’t the only guilty party to use the phrase “lawsuit loan.” Because lawsuit loan is a simple way to express something that consumers already have familiarity with (i.e. loans), proponents regularly abuse it, too. Admittedly, “Lawsuit loan” does succeed at painting a broad picture of what you’re getting – money against your lawsuit, so the problem is systemic. In fact, according to Google, lawsuit loan is one of the most frequent terms used by people searching for legal funding.
Legal funding can go by many names – lawsuit funding, legal finance, third-party funding, and many other permutations therein. Of course, at Legal Funding Central, we are partial to the term legal funding, but in reality there is no perfect term. However, there definitively is a wrong term, and that’s any that refers to legal funding as a loan. It does a disservice to the industry, mischaracterizes what legal funding is, and most of all provides ammunition to the people who are financially interested in seeing it die. It may be easier to refer to legal funding as lawsuit loans or legal loans, but it’s more dangerous, too, and it must stop.
This guest blog post was written by Dylan Beynon, co-founder of Legal Funding Central. Legal Funding Central helps litigants and attorneys find the best legal funding to fit their case and their needs. LFC also provides educational news, information, and resources through its standalone content portal LFC360.