By: Rachel McCarthy
The consumer litigation funding industry was built around a legitimate need: helping plaintiffs stay financially afloat while waiting for their cases to resolve. In theory, that support can level the playing field. In practice, however, many traditional funding companies have created a system that often prioritizes volume and profit over transparency and fairness.
At The Milestone Foundation, we believe plaintiffs deserve clarity, fairness, and ethical treatment throughout the funding process. Here are three major issues we see with the traditional consumer litigation funding model.
- Different Plaintiffs Receive Different Rates from the Same Funding Company
One of the least discussed problems in the industry is the way pricing can vary depending on the law firm involved and the funding company’s policies.
Many traditional litigation funding companies offer preferential interest rates or terms to firms that send them a high volume of cases or maintain long-standing business relationships. A plaintiff represented by a “preferred” law firm may receive significantly better terms than another plaintiff with a nearly identical case simply because their attorney does not generate as much business for the funding company, or they might be a lesser-known attorney.
That creates a troubling imbalance.
The cost of funding should be determined by objective factors tied to the case itself — not by backroom business relationships or referral volume. Plaintiffs are the ones ultimately repaying the funding, yet they often have no visibility into whether they are receiving competitive or equitable terms.
In any industry that serves vulnerable consumers, consistency and fairness matter. Litigation funding should be no exception.
- Ambiguous Fees, Unnecessary Charges, Compounding costs
Another major issue is the lack of transparency surrounding fees and compounding costs.
Many plaintiffs enter into funding agreements believing they understand the terms, only to discover additional servicing fees, processing fees, administrative charges, or recurring “case maintenance” fees buried in the contract. These costs can accumulate quickly over time and dramatically increase the repayment amount.
Modern litigation funding operations are overwhelmingly digital. Documents are transmitted electronically. Status updates are often automated. Payment systems are streamlined. The operational cost of maintaining a file today is dramatically lower than it was a decade ago.
So why are plaintiffs still being charged recurring servicing fees every six months?
For many consumers, these fees feel less like legitimate operational necessities and more like mechanisms designed to maximize returns. This is on top of already egregious interest rates that compound monthly, quarterly, or bi-annually, and usually not in clear terms.
Plaintiffs deserve straightforward pricing that clearly explains what they are paying for and why. Transparency should not be optional when someone is already navigating the financial and emotional stress of litigation.
- Aggressive Marketing to Plaintiffs Encourages Dependency Instead of Restraint
Litigation funding can serve an important purpose in the right circumstances. But it should be treated as a last resort — not a product aggressively pushed onto vulnerable individuals.
Unfortunately, many traditional funding companies market directly to plaintiffs with relentless persistence. Advertisements, targeted outreach, and repeated solicitations often frame funding as an easy solution rather than a serious financial decision with long-term consequences.
Some companies go even further, encouraging potential plaintiffs to view litigation funding as part of the normal litigation process from the very beginning.
That approach is deeply concerning.
Most plaintiffs are already dealing with financial pressure, medical treatment, uncertainty, and stress. Presenting funding as quick and effortless can incentivize borrowing before it is truly necessary. In some cases, plaintiffs may take advances they could have avoided entirely with better guidance or financial planning.
Responsible funding providers should educate plaintiffs, not pressure them. They should encourage restraint, transparency, and informed decision-making — even when that means a consumer chooses not to take funding at all.
A Better Standard for Litigation Funding
Consumer litigation funding is not inherently harmful. When structured ethically, it can provide meaningful support to plaintiffs who genuinely need temporary financial relief.
But the industry must evolve.
Fair and consistent pricing, transparent fee structures, and responsible consumer practices should be the baseline — not the exception.
Plaintiffs deserve a funding process built around their interests, not one driven primarily by referral relationships, hidden fees, or aggressive marketing tactics.
