8 New Year's Resolutions For Legal Funders in 2017

December 19, 2016
7min read

Straight from Wikipedia, so it must be true:

"Babylonians made promises to their gods at the start of each year that they would return borrowed objects and pay their debts. The Romans began each year by making promises to the god Janus, for whom the month of January is named. In the Medieval era, the knights took the "peacock vow" at the end of the Christmas season each year to re-affirm their commitment to chivalry."

And our great people, to continue in the great traditions of other great people, make resolutions to the legal funding gods every year.


 Here are eight ideas for resolutions you can make for a successful 2017.  

#1 I will review my funding agreements for clarity and accuracy

Legal funding is unique because every plaintiff who receives funding is represented by an attorney who signs the plaintiff's funding agreement, which says they have explained the rates and terms to their client. Nevertheless, a contract that is unambiguous is vitally important due to the variety protections and advantages it can provide you.

Legal funders should follow best practices and guidance as given by trade organizations like ALFA and ARC, and from attorney generals and court opinions that have discussed how to best enter into agreements with consumers.

Furthermore, funders should take this time of the year to double-check that their software systems and reporting formulas are calculating and outputting the correct rates and fees. You'd be surprised how many funders discover at some point that they've been under or over-charging plaintiffs against what they disclose!

At the end of the day, funding agreements are one of your most important assets. Not only do they allow you to collect on your investment, but they also serve as marketing material. Make sure they are clear and conspicuous.  

#2 I will write off investments that have lost before December 31st

Yes, some cases lose.

Or, they win, and you still can't collect because there are superior liens in front of you, or because the plaintiff was mistakenly paid directly and you can't track him down to collect the $2,000 you're due.

I used to be a funder, too. I know losing these cases can feel worse than winning even bigger cases.But clear them from your portfolio, write it off on your taxes, and move on with a clean slate.     ,.,llkl,ll;///////////6789opo['


#3 I will have up-to-date statuses on all cases in my portfolio by February 28th

Ask any funder who has been doing this for a while, and they'll tell you that case tracking is a vital part of being an effective funder. It's not enough to make an investment and expect a check to magically appear in 4 months. A regular cadence of check-ins with attorneys who can give you status updates is crucial.

Funders have different strategies for tracking their cases. Some do it every 90 days-no matter how much that pisses off an attorney who is only in year 1 of a case that isn't going to settle until year 5. Some use court records to guide how and when they track.

No matter your system, make sure you use the first couple months of 2017 to get caught up. You won't be sorry you did.  

#4 I will invest in more efficient operations

Decide who at your organization is responsible for documenting and improving your company's daily operations. Then, have that person take a moment to go step-by-step through your end-to-end funding process, all the way from intake to return, to critically assess and document what happens at each stage. Last, go through each part of your funding process and ask yourself:

  1. What could I do to make this more efficient?
  2. What could I eliminate completely?
  3. What might it cost us if I left this completely as-is?

Here are some resources to get you started:

  1. Ultimate Guide to Plaintiff Communication: Part 1 and Part 2
  2. 10 Ways to Transform Document Collection from an Art into a Science
  3. Why Failing to Build Underwriting Operations is Losing You Money
  4. Top 10 Ways to Level-Up Your Plaintiff Payments

#5 I will upgrade my technology stack

Yes, this is partly a shameless plug for our industry-leading legal funding software.

But even if you're not ready to invest in an upgraded core system to make your entire organization more efficient, there are still tons of ad hoc tools out there that could be helping your team. Here are 15 technologies that you could implement today that might make a big impact on your business.

For example, our team has been using Slack for over 2 years now, and it has transformed the way we communicate and work internally.  

#6 I will stop saying "loan" and "interest rate" just because it's easy

Legal funding is under attack from the insurance industry that sees the product as competing with their ability to get plaintiffs to accept low-ball settlement offers.

One of their attacks purports that legal funding is a loan even though it's a non-recourse purchase of an asset and most every legal scholar agrees it's not a loan. It's the same contingency-fee asset that attorneys attach when they sign a personal injury plaintiff to a retainer agreement.

The problem is legal funders have a habit of using the terms "loan" and "interest." Why? Because it's easier to explain to plaintiffs using everyday words than terms like "non-recourse financing" or "rate of return."

Yes, it's harder to explain, but worth it to protect your business.  

#7 I will join a trade organization

Legal funders are certainly competitive with one another, but there are common interests that can lead to beneficial collaboration.

A few years ago, DraftKings and FanDuel, which were bitter rivals in the daily sports world, decided to work together to fight regulation that states were proposing against the industry. The companies recently merged, and said that even though they were bitter rivals for so long, working together on behalf of the industry was prudent and warmed them up to combining their companies.

ALFA strives to represent the interests of its members to regulators, legislators, the media, and the public and is dedicated to ensuring fair, ethical, and transparent funding standards within the industry. Founded in 2004 by Harvey Hirschfeld, the founder of LawCash, today ALFA has over 45 legal funding companies on its membership roll.

ARC represents a coalition of providers, consumers, academics, community activists, policy-makers, financial education leaders, and other supporters with the purpose of promoting practices and regulations that preserve consumer choice. Although ARC has only existed for a few years since, it has instant credibility and experience from its roots in Oasis, one of the oldest and biggest funders in the U.S. ARC providers a number of resources online including recommended contract language and legislative history.  

#8 I will do my part to strengthen the industry

For our industry to thrive, we need contributions from everyone. It's easy to be a free ride, but dangerous in the end. Legal funding is an amazing equalizer of justice for plaintiffs, and it is a business for thousands of companies and people across the United States.

We've talked about making sure you follow best practices, join trade organizations, and be mindful of how you and your team talk about the product. But that's just table stakes.

Here are some other ideas on how to help build a healthy industry. Let us know if you have others.

  • Go out of your way to talk to your plaintiffs to determine where the money is being spent-for rent, food, medical expenses, or my favorite and the most ironic: to pay for car insurance. Then, record their answers in your system of record. This highlights the importance of the legal funding industry and may be important data in the future.

  • Reduce a lien to make sure the outcome is fair to all. When cases don't go as expected, everyone should "pay" a little.

  • Give back. Donate your proceeds to legal aid societies or other initiatives that support civil justice in America. Not only is it a good thing to do, charity is often seen as a way to improve business, too.

Post by

Joshua Schwadron

CEO & Founder of Mighty

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