Michigan plaintiffs who need financial stability during a pending case, and the attorneys advising them, should distinguish current law from proposed legislation. Michigan does not currently have comprehensive statutes expressly regulating third-party litigation funding contracts, while House Bill 5281 has advanced as a proposed transparency framework. If funding may help a client manage essential expenses without pressuring an unfair settlement, reaching out early helps protect the client’s position.

Ready to get started? Apply for Funding and involve counsel early.

The practical question is how these existing conditions interact with the proposed bill and an attorney’s responsibility to protect the client. That starts with separating what Michigan requires today from what lawmakers may require next.

What Are the Current Michigan Litigation Funding Rules?

Michigan law does not currently expressly regulate third-party consumer litigation funding contracts. The arrangement generally involves a non-recourse transaction in which a plaintiff assigns a contingent right to potential proceeds from a settlement, judgment, award, or verdict. Because recovery depends on the outcome of the claim, the funder may recover only if the plaintiff wins, subject to the contract’s terms. Michigan legislative analysis describes these current-law definitions and limitations.

For attorneys and plaintiffs, the practical issue is not simply whether funding is available. It is whether the agreement is understandable, fairly priced, and handled in a way that protects the client’s interests while the case proceeds.

• Current status: Michigan has no comprehensive statute expressly governing these consumer funding contracts at present.
• Transaction type: Funding is generally non-recourse, meaning repayment depends on a successful recovery rather than an unconditional personal debt.
• Contingent proceeds: The funder’s contractual interest relates to potential future proceeds, not ownership of the plaintiff’s legal claim.
• Case control: A funding arrangement should not give a funder authority to direct litigation strategy, settlement decisions, or attorney-client communications.
• Client review: Plaintiffs should understand the advance amount, repayment calculation, timing, and circumstances in which repayment may be owed.
• Attorney involvement: Counsel should review whether the arrangement creates conflicts, affects settlement discussions, or raises fiduciary concerns.
• Transparency debate: Michigan’s policy discussion includes whether funding agreements should be disclosed and to whom.
• Disclosure purpose: Supporters of disclosure generally focus on transparency, potential conflicts, and the ability of courts or opposing parties to evaluate relevant interests.

The transparency debate reflects a broader question: how can Michigan preserve access to financial support without allowing opaque terms or compounding costs to undermine a plaintiff’s recovery? Those evaluating other state approaches can compare this background with Illinois litigation funding regulations, where the legal framework and disclosure considerations may differ. This section describes the current-law context only; proposed Michigan legislation and its potential requirements should be analyzed separately and should not be treated as existing law.

How a New Law Could Reshape Michigan Litigation Funding Rules

Answer capsule: House Bill 5281 could create the Third-Party Litigation Funding Transparency Act, but it is still proposed legislation, not current Michigan law. The Michigan House passed it on a bipartisan 60-45 vote in May 2026. And the bill remains pending in the Senate, so attorneys and plaintiffs should not treat its requirements as presently enforceable.

If enacted, HB 5281 would move Michigan toward formal oversight of consumer litigation funding companies. The proposed framework would regulate the funding transaction while preserving its basic non-recourse structure: the funder’s right to repayment would remain contingent on proceeds from a settlement. Judgment, award, or verdict. Engrossed bill text is the best source for the proposal’s precise language and should be reviewed as the legislation advances.

What would HB 5281 require?

The proposal would establish several compliance requirements for covered funding companies:

• Registration: Covered companies would register with the Michigan Department of Insurance and Financial Services, or DIFS.
• Registration fee: The bill text provides for a $10,000 initial registration and renewal fee.
• Renewal cycle: Registrations would renew every two years, subject to the proposal’s conditions.
• Financial security: The bill includes a bond requirement for covered companies.
• Charge ceiling: Total charges under a covered contract would be capped at 36% annually.
• Contract disclosure: Funding agreements would have to disclose material terms so consumers can understand the transaction.
• Cancellation period: Consumers would receive a 10-day period to cancel the contract.
• Non-recourse structure: The funding right would remain contingent on the consumer obtaining litigation proceeds.

The proposed 36% annual limit should be understood as a ceiling on total charges under the bill. Not as a statement that every funding arrangement would carry that rate. It also would not replace the need to compare how a contract calculates charges, whether interest compounds, and what the plaintiff ultimately repays.

Who could be outside the bill’s definition?

HB 5281 would not treat every person or organization providing money to a consumer as a regulated consumer litigation funding company. The proposed exclusions include:

• Family members: A family member of the consumer.
• Legal and accounting professionals: An attorney or accountant providing services to the consumer.
• Banks and lenders: Banks, lenders, and financing entities that finance the funding company.
• Pro bono nonprofits: A 501(c)(3) organization providing funding on a pro bono basis, as specified in the bill.

These exemptions would not make the proposal current law, and their application would depend on the final enacted language and implementing rules. Until the Senate acts and any measure is signed. Michigan attorneys should describe HB 5281 as pending and continue evaluating each agreement under existing law, professional duties, and the contract’s actual terms.

Simple vs Compound Interest: What Michigan Plaintiffs Pay

Michigan litigation funding rules are still developing, but plaintiffs can already compare the cost structure of a funding agreement carefully. The Milestone Foundation uses simple interest, so the charge is calculated on the original amount and does not grow by adding prior interest to the balance.

That distinction matters when a case takes longer than expected. With simple interest, the annual rate applies to the original advance. With compound interest, accrued interest can be added to the balance, allowing later charges to apply to both the original amount and earlier interest. A contract should make the calculation, repayment obligation, and any fees understandable before a plaintiff accepts funding.

How the funding cost structure compares

Milestone Foundation nonprofit model	For-profit compounding model
Interest method: Simple annual interest. The calculation is based on the original advance rather than a growing interest balance.	Interest method: A compounding structure may add accrued interest to the balance, increasing the amount on which future charges are calculated. The exact contract terms must be reviewed.
Pre-settlement rate: 15% simple annual interest, never compounding.	Pricing: Terms vary by funder and agreement. Plaintiffs should not assume a proposed legal ceiling is the funder’s actual rate.
Post-settlement rate: 10% simple interest, never compounding.	Balance growth: Compounding can make the repayment amount harder to predict without a clear payoff example showing how time affects the balance.
Transparency: No hidden fees, with terms designed to be clear before funding is accepted.	Due diligence: Ask whether fees, renewals, or accrued interest are added to the balance, and request the total repayment calculation in writing.

Michigan House Bill 5281, if enacted, has been described as proposing a 36% annual cap on total charges. That figure would be a ceiling under the proposed legislation, not The Milestone Foundation’s 15% pre-settlement or 10% post-settlement rate. The bill is proposed legislation, so it should not be presented as a current rate or a substitute for reviewing the funding contract.

Funding is also non-recourse: when a plaintiff loses the case, the plaintiff owes nothing under The Milestone Foundation’s model. Because attorney participation is required, plaintiffs should review the agreement with counsel and ask questions about the amount advanced. The simple-interest calculation, the expected payoff, and the effect of settlement timing before moving forward.

For a plain-language review of available options, visit Apply for Funding.

Ethical and Disclosure Duties for Michigan Attorneys

Michigan attorneys should treat litigation funding as a client-protection issue, not merely a financing decision. Attorney participation and acknowledgment are required for every Milestone funding application, and a transparent, non-recourse structure can support fiduciary duties while helping a client avoid settlement pressure.

Because Michigan’s statutory framework is developing, counsel should review each agreement carefully. Explain its practical effect to the client, and consider whether disclosure or approval is appropriate in the particular proceeding. Milestone’s process requires the attorney’s participation and acknowledgment, creating an opportunity to confirm that the proposed funding serves the client’s interests and does not interfere with litigation strategy.

What should counsel review before acknowledging funding?

• Client understanding: Confirm that the client understands the amount advanced, the repayment obligation, and how repayment relates to the case outcome.
• Non-recourse terms: Explain that a properly structured non-recourse advance is contingent on recovery. Milestone states that plaintiffs owe nothing if they lose their case.
• Cost structure: Identify the applicable rate and timing in plain language. Milestone describes pre-settlement funding at 15% simple annual interest and post-settlement funding at 10% simple annual interest, with interest that never compounds.
• Conflicts: Consider whether the funding relationship could affect advice, settlement authority, confidentiality, or the client’s ability to make an independent decision.
• Settlement pressure: Discuss whether access to fair funding may give the client more time to evaluate an offer rather than accepting an inadequate settlement solely because of financial hardship.
• Disclosure: Review the court rules, orders, and local practice that may apply. Attorneys can use this overview of general litigation funding disclosure rules as a starting point, not as a substitute for matter-specific analysis.
• Court supervision: When a court oversees a proceeding, court approval must govern any interest or funding cost passed through to the client. The Michigan ethics context includes RI-336 and MCR 8.121, so counsel should not assume a private agreement overrides a court’s authority.

Proposed House Bill 5281 would exclude an attorney providing services to the consumer from the bill’s definition of a consumer litigation funding company. That exemption distinguishes counsel’s professional role from the role of a third-party funder; it does not eliminate the attorney’s independent duties to the client. Until any proposal becomes law, attorneys should distinguish current requirements from proposed changes and document the basis for their advice.

Choosing a Nonprofit Funding Partner That Respects Michigan Rules

Answer capsule: The right funding partner should make the agreement understandable, keep the plaintiff’s interests central, and accept the risk that comes with non-recourse funding. The Milestone Foundation offers a mission-driven alternative for Michigan plaintiffs and attorneys as the United States’ first and only 501(c)(3) nonprofit consumer litigation funding organization.

Michigan’s funding framework is developing, so attorneys and plaintiffs should look beyond whether a provider can deliver an advance. They should also ask how the provider handles disclosure, repayment, attorney involvement, and the possibility that a case does not succeed. A nonprofit structure does not replace careful legal review, but it can offer a clearer, more plaintiff-aligned starting point.

• Nonprofit mission: The Milestone Foundation is designed as an ethical alternative to traditional for-profit litigation funders, with fairness, transparency, and access to justice at the center of its model.
• Non-recourse risk: Plaintiffs owe nothing if they lose their case. Repayment is tied to a successful recovery rather than a personal obligation unrelated to the outcome.
• Practical purpose: Funding can help with living expenses and needs such as medical bills while litigation is pending, reducing pressure to accept an unfair settlement simply because money is tight.
• Simple interest: Pre-settlement funding is offered at 15% simple annual interest, while post-settlement funding is offered at 10% simple annual interest. Interest never compounds.
• Fee clarity: The agreement should state the financial terms plainly. The Milestone Foundation does not charge hidden fees, giving plaintiffs and counsel a clearer basis for evaluating repayment.
• Attorney participation: Attorney participation and acknowledgment are required for funding applications. Counsel can therefore review the arrangement in light of the client’s case and interests.
• Informed review: Before signing, compare the amount advanced, the applicable simple-interest rate, repayment conditions, and any disclosures with the client’s expected needs and litigation outlook.

Plaintiffs who need help covering essential costs can Apply for Funding with their attorney’s participation. Attorneys seeking an ethical, mission-driven resource for clients can Join Our Membership Program.

Frequently Asked Questions

Is third-party litigation funding legal in Michigan?

Yes. Michigan law currently permits third-party funding arrangements, but it does not expressly regulate these contracts through a comprehensive, dedicated funding statute. Attorneys and plaintiffs should therefore review contract terms carefully, consider disclosure expectations, and protect the plaintiff’s informed decision-making. Michigan House Bill 5281 analysis describes the current-law gap.

What would Michigan House Bill 5281 change?

If enacted, HB 5281 would create the Third-Party Litigation Funding Transparency Act. Require certain funders to register with the Department of Insurance and Financial Services, and establish transaction disclosure requirements. The bill is proposed legislation, not current law, so its provisions should not be treated as binding rules until enacted. Read the legislative analysis.

How does pre-settlement funding work for a Michigan plaintiff?

A plaintiff receives a cash advance against potential future settlement or judgment proceeds while the case is pending. The advance is generally non-recourse, meaning repayment depends on a successful recovery under the contract. The plaintiff’s attorney should participate in the application and review the arrangement before funding is accepted.

Does litigation funding interest compound?

It depends on the funder and contract. The Milestone Foundation states that its pre-settlement funding uses 15% simple annual interest and its post-settlement funding uses 10% simple annual interest, with interest never compounding. Its published terms also state that plaintiffs owe nothing if they lose and that there are no hidden fees. Review the organization’s funding information.

Ready to Take the Next Step?

Clear information can help you choose a funding path that fits your circumstances and keeps the process attorney-aligned. Plaintiffs can apply for pre-settlement funding to begin a conversation about available support. Attorneys who want to discuss client referrals or membership options can use the same application page to connect with The Milestone Foundation.