Connecticut funding questions often turn on details that are easy to miss: the amount advanced. The APR, the contract terms, and who is performing the lending or servicing activity. For plaintiff counsel, the first step is to separate a case-specific funding agreement from the state’s broader small-loan and licensing framework. Connecticut Department of Banking guidance explains that Public Act 23-126 increased the small-loan threshold to $50,000 and addressed APR calculations, finance charges, licensing, and related activities.

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This guide is educational, not legal advice. It begins with what Connecticut’s current framework actually covers, then explains the practical questions attorneys should review before discussing funding with a client.

What Connecticut Litigation Funding Regulations Cover

Connecticut litigation funding regulations do not operate as a single, stand-alone rule labeled for every lawsuit advance. Instead, the legal analysis may involve the state’s small-loan statutes, licensing requirements, interest rules, and the actual structure of the agreement. Attorneys should therefore evaluate the transaction’s substance and terms rather than rely only on the label used by a provider.

The small-loan framework

Connecticut’s Department of Banking explains that Public Act 23-126 raised the small-loan regulatory threshold from $15,000 to $50,000. The statutory definition includes a loan, extension of credit, purchase of. Or advance against a borrower’s future potential source of money when the amount is within the statutory threshold and the annual percentage rate is greater than 12 percent. The definition also includes income share agreements. See the Department’s guidance at Public Act 23-126 small-loan guidance and the current definition in Connecticut General Statutes chapter 668.

That framework matters because a transaction connected to a legal claim may still require a careful small-loan analysis if its payment structure resembles an advance against a future source of money. This does not, by itself, resolve how every non-recourse agreement should be classified. Classification can depend on the contract, the parties, the payment obligation, and other facts.

Licensing, exemptions, and finance charges

Section 36a-556 identifies making or offering a small loan as a licensable activity unless a license or exemption applies. Section 36a-557 addresses exemptions, while section 36a-558 addresses prohibited conduct and related activities, including lead generation. Connecticut’s licensing information directs applicants to review sections 36a-555 through 36a-573 and applicable regulations, as amended over time. The Department’s small-loan licensing information provides that starting point.

For a covered small loan, APR analysis may include more than stated interest. Connecticut guidance identifies fees, amounts paid to obtain credit, and charges for ancillary products, memberships, or services sold with the loan as finance-charge considerations. The Department also says tips and donations may count when determining APR. Because these rules address statutory small-loan concepts, counsel should review the current law and agreement facts before drawing conclusions about a particular funding arrangement. This article is educational information, not legal advice.

How Does Connecticut Treat Non-Recourse Funding Agreements?

Connecticut does not appear to resolve every non-recourse funding agreement through a single, categorical rule. The legal analysis can depend on the transaction’s economic substance, the parties involved, the amount advanced, the repayment terms, and the language used in the agreement. A non-recourse provision may mean the plaintiff does not repay the advance if the case is lost. But that feature alone does not determine whether other Connecticut lending or licensing requirements apply.

The threshold question is often classification. Connecticut’s small-loan framework defines a small loan to include certain loans, extensions of credit, purchases. Or advances against a borrower’s future potential source of money when the amount is within the statutory threshold and the APR is above 12 percent. The Department of Banking identifies this framework in its guidance on Public Act 23-126 and notes that the act includes advances against future potential sources of money in the definition. That language makes it important to examine how the agreement actually operates, rather than relying only on labels such as “advance,” “investment,” or “non-recourse funding.” Connecticut Department of Banking guidance.

Licensing is a separate issue from classification. Section 36a-556 of the Connecticut General Statutes addresses small-loan lending and related activities without a license or exemption, while section 36a-557 addresses exemptions. Section 36a-558 addresses additional prohibitions and permitted provisions. The Department of Banking directs applicants to review sections 36a-555 through 36a-573 and the applicable regulations. Accordingly, counsel should identify who is making, acquiring, servicing, collecting, or arranging the transaction and then assess whether a license or exemption is relevant. Connecticut General Statutes, chapter 668

Interest analysis also requires care. Chapter 673 includes a provision titled “Loans at greater rate than twelve per cent prohibited,” provisions identifying exemptions. And a default legal-interest rule of 8 percent per year absent an agreement to the contrary. Those provisions should not be reduced to a universal cap for every litigation funding arrangement. Whether they apply can turn on the transaction’s characterization, terms, and statutory exceptions. Connecticut General Statutes, chapter 673

For attorneys, the practical takeaway is to review the complete agreement, calculate the effective cost under the applicable framework. Confirm licensing or exemption status, and check the current statutory text before advising a client. Connecticut’s published chapters direct readers to the 2026 Supplement for updates, so older summaries may not be enough. This section is educational and is not legal advice. Counsel should independently evaluate each agreement and the client’s circumstances.

Which Licensing and APR Questions Should Attorneys Ask?

Before discussing funding with a client, counsel should identify the provider, understand the agreement’s economic terms, and confirm which Connecticut rules may apply. The review should address the transaction as structured, not rely on a label such as “advance” or “litigation funding.” This checklist is educational, not legal advice.

1. Who is the actual lender or funder? Record the legal entity providing, purchasing, or receiving principal and interest on the transaction. Connecticut identifies making or offering a small loan, receiving principal and interest, acquiring a small loan, and generating leads as potentially licensable activities. Ask whether a bank is involved, who the “true lender” is, and which entity is responsible for compliance. The Department of Banking’s guidance specifically addresses licensing of true lenders partnering with banks. Read the Department of Banking guidance.
2. What classification and exemption analysis supports the transaction? Ask whether the arrangement could fall within Connecticut’s small-loan framework, including the statutory definition in section 36a-555, and request the provider’s written basis for any claimed exemption. Section 36a-556 addresses small-loan activity without a license or exemption, while section 36a-557 lists exemptions. Do not assume that a non-recourse structure automatically avoids these questions. Review the current text of Chapter 668 and the applicable regulations.
3. How was the APR calculated? Request the calculation method, repayment assumptions, term, and every amount included. Connecticut Department of Banking guidance says Public Act 23-126 changed the APR calculation method from TILA to MLA for the relevant small-loan framework. The 12% figure appears in the statutory small-loan definition as an APR threshold, not as a universal litigation-funding cap. Similarly, Connecticut’s 8% default legal interest rate is not a universal cap for every funding arrangement. Check the APR guidance and Chapter 673.
4. What finance charges and ancillary products are included? Ask for a complete fee schedule, including origination charges, administrative fees, memberships, services, tips, donations, or other amounts connected with credit. Department guidance treats fees, amounts paid for use of money, and ancillary products or memberships sold with a small loan as relevant finance-charge issues. Request a written total repayment illustration rather than reviewing the nominal rate alone.
5. Who generates the lead, services the account, and handles collection? Identify lead generators, servicers, purchasers, and any collection entity. Ask which party holds each license or exemption and how communications with the client will be handled. Connecticut’s 2025 enforcement bulletin described a consent order involving alleged small loans to a Connecticut borrower without the required license. Illustrating why these roles should be documented rather than assumed. Review the 2025 enforcement bulletin.
6. What was checked, and when? Save the agreement, licensing records, APR worksheet, exemption analysis, disclosures, and written answers to counsel’s questions. Recheck the current statutes, regulations, and Department guidance before recommending a transaction. Connecticut’s licensing page directs applicants to sections 36a-555 through 36a-573 and applicable regulations, and the statutory chapters direct readers to current supplements. Use the Department’s licensing resource.

What Should a Connecticut Funding Agreement Disclose?

A careful agreement review should answer two separate questions: what does Connecticut law require for the transaction, and what terms is the funder voluntarily offering? Those questions should not be blended. Connecticut’s Department of Banking identifies licensing, APR methodology, finance charges, and related activities within the state’s small-loan framework. The current statutory text should be checked before relying on an older summary, because the General Statutes direct readers to the applicable supplement for recent legislative changes.

Agreement-review questions for Connecticut counsel

Ask whether the agreement discloses.	Why the answer matters.
The APR, finance charge, payment calculation, and every amount due	Connecticut guidance addresses APR calculations and treats amounts connected to obtaining credit or compensating the use of money as relevant finance-charge questions. See the Department of Banking guidance.
Fees, memberships, tips, donations, and ancillary products or services	These items should not be treated as harmless add-ons without review. Connecticut materials specifically address ancillary products, memberships, services, fees, tips, and donations in the APR and finance-charge analysis. See the Department’s Public Act 23-126 summary.
When repayment is triggered, including settlement, judgment, case dismissal, or another event	The client and attorney should be able to identify exactly when an obligation becomes payable. How the balance is calculated, and what happens if the expected recovery does not occur.
Whether the advance is expressly non-recourse	Non-recourse language should be easy to find and should explain whether the plaintiff owes nothing if the case is lost or does not settle. Do not assume that a label alone resolves every legal classification issue.
The funder’s identity, licensing basis, exemptions, servicing role, and lead-generation relationships	Connecticut law addresses licensing and exemptions. Department of Banking guidance identifies activities such as making, acquiring, servicing, and generating leads for certain small loans. Review Chapter 668 and the small-loan licensing information.
How the attorney and client receive notices, review the terms, and communicate about the case	Clear communication supports informed consent and attorney oversight. The Foundation requires attorney representation and attorney acknowledgment or approval, as described in its funding application information.

The Milestone Foundation’s stated terms are its own terms, not Connecticut legal limits. It describes pre-settlement funding at 15% simple annual interest and post-settlement funding at 10% simple interest, with interest that does not compound. It also describes funding as non-recourse. Those terms should be read in the actual agreement and should not be presented as a statutory cap. Universal Connecticut requirement, or conclusion about how every funding arrangement is classified. This article is educational information, not legal advice.

Simple Interest, Non-Recourse Terms, and Attorney Alignment

Connecticut counsel reviewing a funding arrangement should separate the agreement’s financial terms from the state’s regulatory framework. The Milestone Foundation’s terms are its own product terms. They are not Connecticut statutory caps, a statement of what every funder charges, or a conclusion about how a particular agreement may be classified under state law.

Simple interest is calculated on the original principal. Interest is calculated from that starting amount rather than from a growing balance. Compound interest, by contrast, adds accrued interest to the balance and then calculates additional interest on that larger amount. The Foundation describes pre-settlement funding as carrying 15% simple annual interest and post-settlement funding as carrying 10% simple interest. Its materials also state that interest never compounds. Attorneys should confirm the applicable terms, timing, and total repayment amount in the actual agreement rather than relying on a general description.

Those rates should not be presented as Connecticut interest limits. Connecticut statutes address several legal concepts, including restrictions and exemptions relating to loans, and the correct analysis can depend on the transaction and its structure. Counsel should review current authority and the agreement itself before drawing a compliance conclusion.

Non-recourse means the plaintiff does not have to repay the funding if the case is lost or does not settle, as described in the Foundation’s materials. That provision does not eliminate the need to understand any conditions, payment mechanics, or obligations stated in the contract. Transparency also matters: The Foundation states that it does not charge hidden fees. Any fee, deduction, or other charge should be identified clearly before the client accepts funding.

Attorney participation is required. Plaintiff funding applications require attorney representation and attorney acknowledgment or approval, so the process is designed to include counsel rather than bypass the attorney-client relationship. Counsel can review whether the proposed advance fits the client’s circumstances and discuss how financial pressure may affect settlement decisions. Attorneys can review the Foundation’s pre-settlement and post-settlement funding terms and confirm current eligibility directly. This educational discussion is not legal advice.

A Practical Review Process for Plaintiff Counsel

A careful review helps counsel separate a funding arrangement’s business terms from Connecticut’s licensing and lending requirements. Use this six-step workflow before discussing an advance with a client.

• Check the current law first. Read the current Connecticut General Statutes, including Chapters 668 and 673, rather than relying on an older summary. Both chapters direct readers to the 2026 Supplement for updates from the 2025 legislative sessions: Chapter 668 and Chapter 673. Review the Department of Banking’s current guidance as well, including its explanation of Public Act 23-126 and the Small Loan Lending and Related Activities Act: Department of Banking guidance.
• Identify who receives repayment. Map the parties in the agreement and the payment flow. Ask who advances the money, who is entitled to repayment, and who services or collects principal and interest. The Department of Banking identifies several activities as potentially licensable, including receiving principal and interest, acquiring a small loan, and generating leads.
• Review licensing and exemptions. Determine whether the provider’s activities fit Connecticut’s licensing framework and whether a claimed exemption actually applies. Section 36a-556 addresses lending and related activities without a license or exemption, while Section 36a-557 addresses exemptions. Confirm the provider’s position directly and consult qualified Connecticut counsel when the classification is uncertain.
• Scrutinize the APR and every charge. Do not review only the headline rate. Identify fees, memberships, ancillary services, donations, or other amounts connected with the transaction. Department of Banking guidance treats connected charges as relevant to finance-charge and APR analysis.
• Document the client discussion. Record the amount, repayment trigger, total repayment mechanics, consequences if the case does not resolve, and the client’s questions. Explain the terms in plain language and give the client an opportunity to consider them without pressure.
• Confirm attorney participation. Verify that counsel’s acknowledgment or approval is part of the process and that the arrangement remains consistent with professional responsibilities. The Milestone Foundation states that its plaintiff funding requires attorney representation and attorney acknowledgment or approval: funding application requirements.

This workflow is educational, not legal advice. Statutes, guidance, and a specific agreement should be reviewed with qualified Connecticut counsel before a decision is made.

Questions Attorneys Ask About Connecticut Litigation Funding Regulations

Is there one Connecticut statute devoted exclusively to litigation funding? The relevant framework is broader than a single litigation-funding law. Connecticut’s Department of Banking identifies the Small Loan Lending and Related Activities Act, General Statutes sections 36a-555 through 36a-573, as the governing small-loan framework. The statutory definition and the transaction’s structure still require careful review before counsel reaches a compliance conclusion. Department of Banking guidance describes its purpose as helping participants evaluate licensing needs and Public Act 23-126 requirements.

Does calling an agreement non-recourse settle its legal classification? No. “Non-recourse” describes a repayment term, not a complete legal analysis. Attorneys should examine the substance of the transaction, including whether it involves an advance against a future source of money. The amount, the APR, finance charges, and the parties performing lending, servicing, acquisition, or lead-generation functions. Connecticut’s guidance says the small-loan definition can include an advance against a borrower’s future potential source of money within the statutory threshold when the APR exceeds 12%. See the current Connecticut small-loan statutes and applicable exemptions.

What should counsel review before a client signs? Review the provider’s identity and licensing position, the full finance-charge calculation, every fee or ancillary service, how interest is calculated, repayment triggers, and the client’s disclosures. Connecticut guidance states that fees and charges connected with a small loan may affect finance-charge and APR analysis. Counsel should also confirm the current statutory text and regulations, including the state’s 2026 Supplement, rather than relying on an older summary.

Are The Milestone Foundation’s terms statutory caps? No. The Foundation’s stated terms are its own program terms, not Connecticut-wide limits. Its materials describe 15% simple annual interest for pre-settlement funding and 10% simple interest for post-settlement funding, with interest never compounding. Funding is non-recourse and requires attorney representation and acknowledgment or approval. Attorneys can review additional non-recourse funding questions. This article is educational information, not legal advice.

Frequently Asked Questions

Does Connecticut have one statute specifically for litigation funding?

Connecticut does not reduce every funding arrangement to one simple rule. Depending on the transaction’s structure, amount, APR, and parties, counsel may need to review the Small Loan Lending and Related Activities Act. Including Sections 36a-555 through 36a-573, along with other applicable statutes. The Connecticut Department of Banking recommends reviewing current statutes and regulations when evaluating licensing obligations. Read the Department of Banking licensing guidance.

Is litigation funding automatically prohibited in Connecticut?

No blanket conclusion should be drawn without reviewing the specific agreement and funding model. Connecticut law addresses small-loan licensing, exemptions, finance charges, and related activities. For example, Section 36a-556 generally addresses small-loan lending and related activities without a license or exemption, while Section 36a-557 identifies exemptions. Classification is a fact-specific legal question. Review the current statutory text.

What should plaintiff attorneys review before referring a client?

Review the funder’s identity and licensing position, the amount advanced, APR calculation. All fees and ancillary charges, repayment triggers, servicing arrangements, and whether lead-generation or referral activity is involved. Confirm that the agreement clearly explains the client’s obligations and that the arrangement fits the client’s circumstances. Connecticut Department of Banking guidance treats fees and charges connected with a small loan as relevant to finance-charge analysis. See the Department of Banking guidance.

Are The Milestone Foundation’s interest rates Connecticut statutory caps?

No. The Foundation’s stated terms are its own program terms, not a representation of a Connecticut statutory cap or a universal market rule. Its materials state 15% simple annual interest for pre-settlement funding and 10% simple interest for post-settlement funding, with interest that does not compound. Attorneys should separately analyze the governing law and the specific agreement.

Does an attorney need to participate in a funding application?

Yes, for plaintiff funding through The Milestone Foundation, attorney representation and attorney acknowledgment or approval are required. Attorney participation helps keep the process aligned with the client’s case, obligations, and informed decision-making. It does not replace independent legal analysis of Connecticut law or the agreement’s terms. Review the application requirements.

Contact us to discuss next steps

When a represented client needs support during a Connecticut case, a careful review can help counsel evaluate funding terms alongside the client’s interests and responsibilities. The Milestone Foundation can discuss attorney-aligned, transparent options and clarify how its terms differ from Connecticut law or a statutory cap.

Contact the Foundation to discuss funding options for your represented client.