It's done! After all that work, the funding agreement is finally signed, sealed, and delivered. Our team must have talked to the plaintiff Jill 30 times over the last week. Glad that's ov... Ring! Ring!
"Hi, Jill here. I just faxed my funding agreement to you five minutes ago. I'm at the bank and they say my money isn't in my account yet. What the hell is going on!?"
If you've been doing legal funding for more than, say, a few days, you've almost certainly spoken to a Jill before.
While receiving a signed agreement is always a relief, you haven't officially made your investment until the plaintiff receives their funds. Without appropriate checks and operational protocols, this seemingly straightforward process can be a big headache.
After reading this post, you will know the top 10 ways to improve your plaintiff payments process.
#1 Define clear roles and responsibilities
Clearly defined responsibilities creates the structure and accountability needed to ensure plaintiffs get their funds quickly and seamlessly. Make sure you have answers to at least these questions:
When a contract comes back fully executed, who checks it to make sure it's complete and authorizes payment?
Is that the same person who sends payment? Once the funds have been sent out, who lets the plaintiff know?
Is it someone's responsibility to monitor for bounced wires?
#2 Double check for incomplete and altered contracts
The plaintiff sent back the agreement, now it's time for a quick review.
Good funders know not to overlook this step, as an incomplete contract can stall the funding process or create collection problems down the line.
Here's a checklist for reviewing returned contracts:
- Are all the pages there, and are they readable?
- Are the signatures and/or initials there and in the right places?
- Did the plaintiff or attorney disclose any prior liens that you didn't know about beforehand?
- Are all supporting documents (e.g. driver's license photo) there?
- Is any contract language crossed out?
- Did the plaintiff change address, and is that address a different state?
#3 Use clear payment instructions
Most funders dedicate a page at the beginning or end of their contracts for plaintiffs to choose payment and delivery option. Seems simple enough.
Often, though, these pages are badly formatted or don't ask for the right information. Here are some tips to make payment selection easy.
- If the plaintiff requests physical mail delivery, make sure you explicitly ask where they want the mail sent. Driver's license address, or even permanent address, are often different from where the check needs to be delivered.
- If sending a wire, ask people to acknowledge that their bank can accept wires - and that they've confirmed with their bank directly. Certain banks or account types can't accept wires, leaving you and the plaintiff with a bounced wire fee.
- If you charge processing fees for certain payment options, make sure they're clearly and conspicuously itemized.
- Be clear as to whether you require the name of the plaintiff receiving the funds to match the name on the bank account.
- If you're sending a wire, double-check to make sure the plaintiff gave you the bank's ABA number, in addition to their account number.
#4 (Almost) Never send plaintiff payments to attorney escrow accounts
It's rarely a good idea to send funds to the attorney for him or her to then distribute to the plaintiff. Extenuating circumstances may apply, but with fraud being an unfortunate reality in the legal funding space, you want to ensure that you're sending payment directly to the intended recipient.
If you have to pursue this route, check in with the plaintiff beforehand to get their consent, and afterwards to make sure they received their payment in full.
#5 Make promises you can actually keep
Be conservative when estimating how long it will take for the plaintiff to receive their funds. If a client requested same-day payment and you plan to send payments at noon, just tell them that funds will be released by the end of the day.
By conservatively anchoring expectations, you buy yourself some wiggle room and set the client up to be surprised and delighted.
#6 Use clear, concise communication
If you've read The Legal Funder Handbook or the many articles on our blog, you know we're big fans of using text message. For no part of the funding process is this more true than for payments: the contract is signed and communication is purely transactional.
Here are a couple sample texts:
Upon receiving the fully executed contract:
"Hi Jill, We received your fully executed contract and will send your wire today. We usually do it close to 6pm but will text you as soon as it's done."
After you send the wire:
"Hi Jill, your wire has been sent. Hope you don't mind we sent it a couple hours earlier than expected :). It was a pleasure working with you."
#7 Batch payments
Payments take time and focus, so it's critical to create workflow to minimize switching costs.
Even though you'll be receiving executed contracts throughout the day, do not process payments as they come! Instead, designate certain parts of the day for sending funds. Clear deadlines for batching protect your time and helps your team manage client expectations.
#8 Track all physical checks
Best practice is to generate a tracking number and send it to the plaintiff as soon as the mail is shipped.
"Hi Jill, we sent your check via Fedex. The tracking number is 123456. If you have questions about when the check is going to arrive, enter your tracking number at fedex.com."
By offloading customer service to Fedex, you're eliminating every "when will my check get here?!" question.
Even if a customer chooses to receive payment via standard or regular mail, we suggest eating the $6.45 to send USPS Priority Mail, which includes a tracking number. It's a small price to pay for you and the plaintiff to both have peace of mind once the check is sent.
Note on physical checks:
Many plaintiffs who need lawsuit funding are underbanked - meaning they often don't have one.
When wire transfers or checking account deposits aren't an option, plaintiffs often resort to check cashing.
Check cashing facilities take active steps to protect themselves against fraudulent activity. To prevent the process from stalling, make sure your checks include:
- your company name
- a phone number that matches the phone number on your website
- Your physical address.
#9 Consider alternative payment options
This is a great option if you work with a few firms in particular. You can send the firm a large number of cards for them to distribute to plaintiffs who come to their office. Once funded, you can add funds to the card electronically, and it works just like a debit card.
Pre-paid cards are often refundable, so this makes follow-on fundings a breeze! The downside is sometimes fees. Depending on how quickly a plaintiff uses the funds, plaintiffs may be charged a monthly fee.
Praxell, KEEPS America, and Intercash are all popular issuers of prepaid debit cards. KEEPS America was founded by some of the same people affiliated with Esquire Bank and Law Cash for those who value keeping businesses within the legal funding community.
Safe, secure, and fast checks sent over email. Verify Valid Deluxe eChecks is a popular option. Electronic checks are cheaper than wires, but not a good option for a plaintiff without a bank account or a printer, as check-cashing facilities usually won’t recognize printed echecks as valid payment.
Western Union is the most popular of these and offers a variety of methods to both send and receive funds. Although the fees can be high, plaintiffs are familiar with the services offered, and they have locations throughout the US.
#10 Maintain payment records
No matter how you choose to get the plaintiff their funds, you should record all payment details.
For checks, this includes the check number, the beneficiary, and the tracking code for the shipping.
For wires, you should record the beneficiary name, routing number, and account number.
Logging payment data is essential for effective troubleshooting should any problems arise, and will speed up the process when the plaintiff comes back for additional funding.
By following these tips and best practices, you'll streamline your payments processes and ensure the plaintiff's final experience in the funding process is a positive one.
If left overlooked, payments can become a huge pain point. And you'll be the one paying for it.
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