Third party litigation funding (TPLF) has quickly grown into a $15.2 billion industry. However, consumers trying to access the legal system can often find themselves buried in debt when their case ends. Though numerous examples exist, legal documents show how one client in New York was left with nothing after signing $5 million in litigation financing agreements throughout their case. 

In November 2005, a person sued the City of New York after a trip and fall in a hole “four to five feet long and four to five feet wide” near their home after exiting a taxicab, suffering severe injuries.

Like many consumers, to remain financially afloat during the litigation process, the elderly plaintiff signed multiple litigation financing agreements at the direction of their attorney. According to court documents, the agreements stipulated the client had to return the loans they received back to the third party litigation funding company “directly from claim proceeds,” or the money out of their future settlement. 

In 2017, the judge found the City of New York was at fault, awarding the plaintiff $2,025,600 for “future medical expenses.” Following attorneys’ fees, Medicare and Medicaid deductions, this should have left the client with over $1 million for medical care. 

Despite the $2,025,600 payout for the client, according to court documents, their TPLF contracts left the plaintiff owing money to the very firms that had loaned them the money. By the time the case had closed, the loan had compounded at 98.95% interest annually to $5,000,000. Whatever money the plaintiff made in their case was to be paid back to the litigation funding company. 

The client passed away shortly after the case was settled. 

This is all too common for victims. TPLF firms “operate in the shadows” as a silhouetted figure waiting to strike on the unsuspecting plaintiff. Clients, often left without a way to generate income after their accidents, sign litigation finance agreements thinking the money is a means of support to keep their case going. Unbeknownst to most plaintiffs, these funding agreements are loans on their final settlement, often paired with massive interest rates. Without disclosure requirements, courts and opposing parties are often unaware of the financial interests influencing cases from third party litigation firms. 

Third party litigation firms cannot go unchecked. More transparency and accountability is needed to protect consumers.