The pre-settlement funding industry has grown significantly enough to include providers ranging from established, reputable companies with transparent pricing to opportunistic operators whose terms are structured to be difficult to understand and expensive to repay. Knowing what to look for when evaluating providers helps plaintiffs in difficult financial circumstances access the funding they need without accepting terms that make a difficult situation worse.
1. Transparent Fee Structure
The most important single factor in evaluating a pre-settlement funding company is the transparency and simplicity of the fee structure. Companies that clearly explain how their fees work, provide written disclosure of the total repayment amount under different timeline scenarios, and do not have hidden fees or compounding charges that make the total cost difficult to calculate are operating more transparently than those whose fee structures require legal or financial expertise to understand.
Request a written breakdown of the total repayment amount at thirty, sixty, ninety, and one hundred eighty day intervals for any funding offer before accepting it.
2. Non-Recourse Structure
Legitimate pre-settlement funding is structured as non-recourse, meaning repayment is contingent on the case outcome and the funding company cannot pursue the plaintiff personally if the case fails. Confirming in writing that the funding is non-recourse before signing is a basic protection that reputable companies will readily provide.
3. Can I Get a Loan Against My Structured Settlement?
This is a different transaction from pre-settlement funding and involves different regulations. A structured settlement is a payment arrangement that already exists, typically from a previous personal injury settlement. Selling or borrowing against future structured settlement payments involves court approval requirements in most states under structured settlement protection acts.
USClaims’ structured settlement funding companies guide addresses both pre-settlement funding for pending cases and the structured settlement factoring process for existing payment streams, noting that the regulatory and process requirements differ between the two.
4. Attorney Communication and Cooperation
Reputable funding companies communicate professionally with the plaintiff’s attorney, provide clear documentation of what is requested from the attorney, and do not pressure attorneys or plaintiffs to move faster than the attorney is comfortable with. Funding companies that create adversarial relationships with attorneys are showing signs worth taking seriously.
5. Speed Without Pressure
A company that can fund quickly when appropriate is genuinely valuable for plaintiffs facing financial hardship. A company that creates artificial urgency, discourages comparison shopping, or pressures plaintiffs to accept offers without taking time to understand the terms is using that urgency against the plaintiff’s interests.
6. Company History and Reputation
Companies with a multi-year track record, verifiable reviews from prior clients, and professional affiliations with industry associations have established credibility that newer or less visible companies have not. The American Legal Finance Association sets ethical standards for member companies, and membership is a positive signal.
7. No Upfront Fees
Legitimate pre-settlement funding companies collect their fees from the settlement proceeds when the case resolves rather than charging upfront fees. Companies that request fees before funding is provided or before the case resolves are not operating according to standard industry practice.
8. Clear Contract Language
The funding agreement should be written in plain language that explains the terms clearly without requiring legal expertise to understand. Agreements with extensive fine print, vague or undefined terms, or provisions that are difficult to interpret should be reviewed by the plaintiff’s attorney before signing.