Third party litigation funding (TPLF) — or lawsuit lending — is a growing and extremely concerning trend in litigation that enhances the possibility of frivolous lawsuits and threatens to drive up the costs of products like gas and groceries, services and insurance across Minnesota.
Lawsuit lending is when an unrelated third-party funder finances a lawsuit. It essentially turns our court system into a money-making machine—likely leading to increased litigation, driven by lenders who are only looking to get a high rate of return on their “investment.”
The TPLF industry operates largely in the shadows, with no transparency requirements in Minnesota, leaving defendants and courts unaware of who is driving litigation. This lack of regulation means that lenders—often hedge funds or private equity firms—can and do charge interest rates of up to 100% or more. In this example, if a judge or jury finds in a litigant’s favor, the lender will walk away with the entire award, distorting the intent of litigation to make a litigant ‘whole’ while making a mockery of our justice system by turning it into an investment scheme.
On top of that, third party funders prey on vulnerable Minnesotans who are desperate for a quick infusion of cash. If a judge or jury finds in their favor, litigants may often see little to no award because the lender may take it all. This undermines the intent of litigation and makes a mockery of our justice system.
The Minnesota Consumers in Crisis Protection Act (HF 2677 and SF 2929) has been introduced and would bring transparency to TPLF in our state. This practice has gone unregulated for far too long.
Bottom Line
Please institute accountability, transparency, and disclosure to third party-litigation funding in our state by supporting HF 2677 and SF 2929.