Connecticut Litigation Funding: Our Commitment to You and Your Clients

We’ve always believed in doing right by you and your clients. As the rules have evolved, so have we—but we’ve maintained the same reliable partnership you’ve counted on, just with a few new licenses on our wall.

For nearly three decades, USClaims has helped plaintiffs nationwide get the financial breathing room they need, providing more than $1.35 billion in non-recourse funding. We’ve built our business standing shoulder to shoulder with attorneys like you, focusing on what matters most: ethical practices, straightforward terms, and helping your clients pursue justice without financial pressure derailing their cases.

We’ve been proud to work alongside attorneys since 1996, and we genuinely value the relationships we’ve built with you over the years. As fellow CTLA sponsors, we’re in this together—supporting your work and understanding the real challenges your clients face.

You may have noticed that Connecticut updated its approach to litigation funding through Public Act No. 23-126, which now explicitly includes lawsuit settlement advances under small loan licensing requirements.^[1] Nothing’s really changed about how we work with you—this legislation just puts on paper what we’ve always believed in: transparent terms including rates that can be charged for funding under $50,000 and proper oversight that protect your clients.

We’ve worked proactively with state regulators to ensure we’re aligned with the new language of the law—and while regulatory shifts always present challenges, the upside is crystal-clear rules that benefit everyone involved in the Connecticut litigation funding process.

The Regulatory Journey We’ve Shared

Before 2016

Prior to 2016, Connecticut’s regulatory framework excluded litigation funding from traditional banking oversight. Back then, without specific state regulations to guide our industry, USClaims voluntarily followed best practices established by industry leaders. We focused on doing things right—offering non-compounding interest rates, ensuring full attorney involvement in the funding process, providing clear contracts with transparent terms, and never putting your clients in over their heads with excessive funding.

The 2016 Shift

In 2016, Connecticut passed Public Act No. 16-65, which amended the small loan statute (the “Small Loan Act”) to establish that lenders providing small loans of $15,000 or less with annual percentage rates exceeding 12% would need a license from the Connecticut Department of Banking.^[2] The act also redefined “small loans” to include advances on “future income.”^[2]

For those who tracked the legislative process, you might recall the initial draft of the 2016 bill explicitly included “proceeds from lawsuits” in the proposed definition of “future income.” However, this phrase was removed from the bill after several members of the industry testified to delete that language in order to exclude litigation funding.^[3] Like many of you, we understood this to mean that the legislature intention was to exclude litigation funding from the Small Loan Act’s scope.

During this period, USClaims continued to operate with the same commitment to transparency and ethical practices that had always guided our business. We focused on reasonable rates, clear documentation, and ensuring attorneys were fully involved in the funding process—serving Connecticut plaintiffs with the same high standards we’ve upheld nationwide.

Where We Stand Today

In September 2022, we learned about the Department efforts to enforce its interpretation that litigation funding was scoped into the Small Loan Act in a case that is still pending to this date against another pre-settlement funding company.^[4] We didn’t wait for final rulings or formal guidance to take action, however—we immediately paused Connecticut advances that might require licensing under the Small Loan Act per the interpretation of the Department.

From September 2022 to September 2023, we suspended all new advances of $15,000 or less while continuing to fund assignments of more than $15,000. We further adjusted our practices on October 1, 2023, when another amendment to the Small Loan Act took effect, explicitly incorporating litigation funding and increasing the application of the statute to deals of up to $50,000. Specifically, we stopped funding assignments between $15,000 and $50,000, while continuing to fund those of more than $50,000.^[1] In addition, we moved quickly to obtain the multiple licenses required by the statute a process that was completed on December 4, 2023.

We’re particularly proud that throughout our nearly three decades of operation in Connecticut—both before and during this period of regulatory evolution—neither the Banking Commissioner nor USClaims has ever received a complaint from a Connecticut consumer about our funding services.

What This Means for Your Practice and your Clients

Litigation funding companies must be licensed as small loan providers in Connecticut.^[1] This creates additional protection for clients seeking financial support during litigation.

We encourage you to verify any funding company’s licensure status through NMLS Consumer Access portal before recommending them to clients and signing attorney acknowledgement. This quick step is critical and ensures your clients receive full protection under Connecticut’s regulatory framework.

As part of our commitment to transparency, we want you to know exactly what rates we offer under the new regulatory framework:

• For lawsuit loans up to $5,000, we charge 36% per year
• For lawsuit loans between $5,001-$50,000, we charge 25% per year
• For advances more than $50,000, we typically charge a fee of 36% per year

With these new rules of the road now clearly marked, we’re excited to keep working with you and your firm. After all, our job is simple: giving your clients financial breathing room while you negotiate a fair settlement. That’s a partnership worth preserving.

Sources:

1. Connecticut Department of Banking, Industry Guidance Regarding Public Act No. 23-126 (September 11, 2023), https://portal.ct.gov/-/media/dob/consumer-credit-division/09-11-23-department-issues-industry-guidance-reg-pa-23-126.pdf
2. Connecticut General Assembly, Public Act No. 16-65: An Act Concerning Banking and Consumer Protections (May 26, 2016), https://www.cga.ct.gov/2016/act/pa/pdf/2016PA-00065-R00HB-05571-PA.pdf
3. Testimony of Jack Kelly, American Legal Finance Association, Committee on Banks, March 8, 2016, https://www.cga.ct.gov/2016/BAdata/Tmy/2016HB-05572-R000308-Jack%20Kelly,%20American%20Legal%20Finance%20Association-TMY.PDF. See also https://www.cga.ct.gov/2016/JFR/h/2016HB-05572-R00BA-JFR.htm.
4. Legal Funding, LLC dba Crash Advance v. Connecticut Department of Banking, Case No. HHBCV236081708S, before the Appellate Court of the State of Connecticut; Connecticut Department of Banking, Findings of Fact, Conclusions of Law, and Order: Legal Funding, LLC (August 8, 2023), https://portal.ct.gov/-/media/dob/enforcement/consumer-credit/2023-cc-orders/legal-funding-final-ffclo.pdf;