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As the litigation funding industry continues to flourish, consumer litigation finance is the subject of increasing legislative and regulatory action at the state and federal level. And some commercial litigation funders worry they could be swept up in the backlash.

Groups such as the U.S. Chamber Institute for Legal Reform, a business lobbying group, the Lawsuit Reform Alliance of New York, and members of the insurance industry including the National Association of Mutual Insurance Companies (NAMIC) have the lawsuit lending industry in the crosshairs. They argue that lawsuit investment could distort the civil justice system, spur more lawsuits and encourage claimants to press for unreasonable settlements. NAMIC declined a request for comment for this story.

Opponents of third-party litigation finance want the industry outlawed or, at a minimum, strictly regulated with consumer disclosures, disclosures of funding arrangements in civil litigation and interest rate caps to guard against predatory rates and terms. Litigation funding trade groups want state regulations that don’t define cash advances as loans, and don’t set interest-rate caps.

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