According to Burford Capital, litigation financing could be worth using in employment lawsuits. This involves a lender financing the cost of pursuing legal action in exchange for a percentage of any award received. It may be most beneficial for those who may not otherwise convince an attorney to take a case that could take a long time to resolve.
It may also prevent plaintiffs from taking a settlement that isn't in their best interest because of a lack of financial resources. However, a litigation finance company will only take it believes it can win because it will not require an individual to repay the loan if he or she isn't successful in court. Those who decide to use a litigation funding company should also be aware that rates and fees could be high.
The average interest rate for a litigation loan is in the range of 12 to 19 percent, which is on par with what an individual would pay for a credit card. As litigation companies generally sign nondisclosure agreements, it is not clear how often such companies are used. Furthermore, financing is generally not made part of a case record. It could also be part of attorney-client privilege if it is deemed to be a core work product.
This type of approach could prove to be valuable in a multi-plaintiff lawsuit involving unpaid overtime or similar wage dispute claims. It could in many cases enable plaintiffs to obtain representation that would otherwise not be available to them. An attorney can provide advice to a prospective plaintiff in this regard.