WCJC is pursuing legislation to create reasonable consumer protections related to nonrecourse civil litigation advances, a practice sometimes colloquially called "lawsuit lending," despite such advances not being a loan in the traditional sense. In essence, the plaintiff in a civil lawsuit receives an advance on a portion of the claim from a financing firm, with repayment of the advance contingent on the outcome of the case.
This practice is largely unregulated in Wisconsin. The advances often have confusing terms and very high effective interest rates, meaning that successful plaintiffs may see nothing at the end of the case after repaying the financing firm. For this reason, plaintiffs who have received an advance commonly delay or prolong settlement negotiations, increasing the costs of litigation and legal services for all actors in the civil justice system.
Last session, a bipartisan group of legislators, led by Reps. Tusler and McGuire and Sens. Wimberger and Roys, introduced similar legislation at WCJC’s request and the bills were heard by committees in both houses. Unfortunately, we ran into headwinds on these bills as session drew to a close.
This session, WCJC will work hard to advance an improved version of our reform legislation, which will protect consumers and help to control litigation costs by capping finance charges, requiring clear and written agreements with specific provisions, and prohibiting these financiers from interfering with the legal process.
