How Litigation Funding And Lawsuit Loans First Entered The Legal World
For anyone who is regularly involved in the world of litigation, it’s easy to forget there was a time when Lawsuit Loans were not an option. During this time, it would be common to see Plaintiffs with no financial grounding defending themselves against their defendants. But if you want to truly understand the impact that Lawsuit Loans have had on the legal community – and how a company like RapidLawsuitFunding.com has become a leader in the market – you need to know the history of how the lawsuit loan industry. And if you want to learn all about the industry’s humble beginnings, we have to travel back in time to Australia in the early 1990s…
Lawsuit Loans Began As A Way For Australian Businesses To Defend Themselves
If you wanted to look back to where the history of lawsuit loans began, you would need to go back to Australia in the 1990s, although at that time the focus was more about helping corporate entities, and less about giving a hand to the average person. You see, in the early 90s the Australian parliament recognized that there was a large legal issue that was being completely ignored regarding corporate bankruptcy cases; mainly, if a corporation or company was bankrupt, they would be completely unable to financially defend themselves in any litigious battles with unscrupulous creditors or banks. After all, if a company was trying to legally defend itself against the fact it had no financial stability, how could it possibly afford to hire any legal representation?
It was at this point that the Australian Parliament took a necessary step and recognized that legal claims (especially legitimate legal claims) were more than just lawful actions – lawsuits are, in fact, financial assets. It was with this move of recognizing litigious claims as financial assets that the doors were opened for third-party interests to invest those claims. With this allowance for third-party funding to step in and finance these bankruptcy proceedings (and finally allowing bankrupt companies to fight litigation against creditors), the first steps toward lawsuit loans were born!
English Parliament Led The Way For Litigation Funding Around The Same Time
Around the same time as Australia was enacting the reform of their litigation funding system, the United Kingdom also recognized that there were major issues in the ability for plaintiffs to fairly represent themselves in a court of law as well. Although, unlike their cousins on the other side of the globe, the factor that instigated change in the UK system was not corporate needs, but the needs of regular, working class people who couldn’t afford to take their litigation to trail.
At the time the UK Parliament had a ban on Conditional Fee Arrangements between lawyers and their plaintiffs. For those unfamiliar, Conditional Fee Arrangements are agreements between solicitors and plaintiffs in which the plaintiff is only required to pay for the solicitors services on the condition that a successful judgment is awarded to them (for more information on how Conditional Fee Arrangements work, please check out our other blog entry on Why Lawsuit Loans Are The Best Type Of Litigation Financing). For whatever reason, the UK government thought there was an issue with allowing solicitors to engage in a private contract with their plaintiffs – and that was the only roadblock in the way of allowing non-recourse funding (simply put – ‘pay-if-you-win’ funding) to enter the world of litigation financing.
Lawsuit Loans Became Very Important To The UK Middle Class
This change in law was incredibly important to the UK middle class, as many of them were in a position where they were not qualified to apply for legal aid. At the same time, they did not have the finances to hire a proper solicitor. The importance and usefulness of Lawsuit Loans became painfully clear to the British public in 1999 when Legal Aid for personal injury plaintiff was abolished altogether.
The United States Quickly Adapted To UK and Australian Lawsuit Loan Practices
Noticing what was going on in both Australia and the United Kingdom, financial investors in America were quick to see the potential for growth in both Justice and their investment portfolios. With that in mind, American investors found that they were not saddled with the same regulations of their commonwealth counterparts, and were able to set up shop almost immediately. These financiers looked at a map of the country and went to the areas that they found would need third-party funding (lawsuit loans) more than others. The reaction was almost immediate. In courtrooms throughout the areas where lawsuit loans were provided to plaintiffs in need, there was a sharp and significant change in the outcome of those trials. Now finally able to properly defend themselves for the first time, these plaintiffs and their solicitors were able to fight against insurance companies and their immense legal teams.
The Path To Making Lawsuit Loans An Ethical Choice
When the various litigation financing companies on the market in the 90s saw the impact lawsuit loans were having in courtrooms throughout the United States, it was hard to keep up with the demand. Mirroring the beginnings of the country itself, the early days of Lawsuit Loans in the USA was something akin to a Wild West period. It was soon very evident that there needed to be some sort of governance over the litigation finance industry.
However, the Litigation Finance industry was also well aware of the dangers of having government regulations enter the field – especially when considering the number of cases where the plaintiffs have to go up against municipal, state, and federal governments. With that in mind, the industry decided it would be best if they regulated it themselves – without the intrusion of political influence.
The Self-Regulating Lawsuit Loan Industry
Knowing that in order to be taken seriously and looked upon in high regard by both the legal and financial world, the litigation finance industry decided to self-regulate and formed a American Legal Finance Association (AFLA) in 2004. The association quickly got to work and by the following year (in 2005) they had established a code of conduct for themselves. This code of conduct was written as a way to standardize their practices across different regions and states; also, the code of conduct was a way for the AFLA to clearly state their rules, ethical standards, and methods of disclosure/transparency. One of the main reasons for this was to ensure cases were not over-funded when plaintiffs applied for lawsuit loans. The AFLA quickly established its importance as the industry rapidly expanded. Currently, the AFLA represents over 50 different litigation financing companies.
Immediate Recognition For The Importance Of The Lawsuit Loans Industry
If you wanted to know the real impact of the litigation finance industry since it first began in Australia, all you need to understand is that currently, over half of all class-action lawsuits in Australia are backed by Lawsuit Loans. The market for Lawsuit Loans in Australia has grown to over three billion dollars, and the pre-settlement funding industry was even endorsed by the Australian High Court in 2009. In the United Kingdom, the industry has put over two billion dollars into the legal market, and the UK Court Of Appeal has referred to Lawsuit Loans as “The Future Of Modern Litigation”.
But the ripple effect of lawsuit loans can be seen in the standard operating procedures of every industry. As plaintiffs are finally able to properly defend themselves thanks to Lawsuit Loans, the knowledge that there will be firm legal repercussions for risky and negligent corporate behavior has led to business standards that cater more to customer-oriented security to become more attractive to investment companies.
Apply Now And Find Out How Lawsuit Loans Will Work For You!
From the relatively short time that lawsuit loans have been available for use by both corporate and consumer plaintiffs, they have quickly become one of the most useful financial tools used to pursue a successful lawsuit. Presently, it is now widely considered that the lawsuit loan industry is not just an option for litigation financing – lawsuit loans are a cornerstone of litigation financing! Settlement funding should be regarded as something greater than just a loan: it is a clear path to justice for plaintiffs who find themselves out-financed and dwarfed by the much larger defendants who initially made them victims of injury. To find out for yourself how a lawsuit loan can help, APPLY TODAY with Rapid Lawsuit Funding.