By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.
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How funding companies set the price
Contracts use a few pricing methods, sometimes mixed together.
- One-time fee: A fixed charge that does not grow with time. Ohio now limits a one-time service fee to 7% of the initial funded amount.
- Simple monthly charge: A set percentage of the original advance is added for each month the case stays open.
- Compounding monthly charge: Each month’s charge is figured on the advance plus the charges already added, so the balance grows faster the longer the case runs.
- Stepped or tiered payoff: The contract lists fixed payoff amounts that rise at set dates. In a contract described by the Ohio Supreme Court, a $6,000 advance called for $16,800 if the case resolved within 12 months, $22,200 within 18 months and $27,600 within 24 months (Rancman v. Interim Settlement Funding Corp., 2003-Ohio-2721).
- Caps on the total: Some contracts stop growing at a ceiling. In a Minnesota case, the amount owed on a $6,000 advance grew 30% every six months up to a cap of $25,245 (Maslowski v. Prospect Funding Partners (Minn. 2020)).
Many contracts add minimum charge periods, so you pay for a set number of months even if the case settles sooner, along with processing, underwriting or delivery fees.
What the research found
The most detailed public study of consumer funding prices is Ronen Avraham and Anthony Sebok’s review of one large funder’s records (104 Cornell L. Rev. 1133 (2019)). Their medians, from that one company’s data, were:
- a posted monthly rate of 3.2%, with charges compounded monthly in most completed cases;
- a contractual return to the funder of 115% a year, and an actual collected return of about 43% a year, because some clients lost and many payoffs were cut at the end;
- total fees equal to 12.5% of the amount funded, on top of the rate;
- about fourteen months from funding to completion.
In 10% of the completed cases, the client paid nothing. The authors also found that a little more than half of the transactions were subject to a “haircut,” meaning the funder accepted less than the contract allowed. These figures describe one company’s past cases. They are not a quote or a prediction of what any reader will be charged.
The federal government has not filled the gap. The GAO reported in 2022 that there is no public data on the size of the consumer funding market and that the industry “is not specifically regulated under federal law” (GAO-23-105210).
Example only: how simple and compounding charges grow
This table uses a $5,000 advance and a hypothetical charge of 3% a month, picked only because it makes the math easy to follow. It is not any company’s rate, and it would exceed the caps in several states listed below. Your contract’s terms decide what you would owe.
| Months the case stays open | Simple charge (3% of $5,000 per month) | Compounding charge (3% a month on the running balance) |
|---|---|---|
| 12 | $6,800 | $7,129 |
| 24 | $8,600 | $10,164 |
| 36 | $10,400 | $14,491 |
The gap between the columns widens every year. At 36 months, compounding adds about $4,100 more than simple charges on the same rate. A one-time fee, a minimum charge period or a cap would change every number in the table, which is why a written payoff schedule matters more than the advertised rate.
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States that cap or shape the price
| State | What the law allows | Source |
|---|---|---|
| Arkansas | State maximum rate applies (17% a year, per GAO); every dollar paid above the amount actually advanced counts as interest | Ark. Code § 4-57-109; GAO-23-105210 |
| Illinois | Charges up to 18% of the funded amount for each six-month period; document fee up to $75; no charges after 42 months | 815 ILCS 121/25 |
| Indiana | Fee up to 36% a year of the funded amount, plus a servicing charge up to 7% a year and document charges up to $500 per case | IC 24-12-4.5-2 (DFI advisory) |
| Nevada | Charges up to 40% a year; one-time document fee up to $500; charges may not be a percentage of the recovery | NRS 604C.310, 604C.110 |
| West Virginia | Annual fee up to 18% of the original amount, charged once a year per claim; compounding no more often than every six months; no fees after 42 months | W. Va. Code § 46A-6N-9 |
| Tennessee | Annual fee up to 10% of the original amount; other charges up to $360 a year per $1,000; no transaction longer than three years | Tenn. Code § 47-16-110 |
| Montana | Funder may not receive more than 25% of the recovery; interest limited to the state usury rate | Mont. Code § 31-4-104 |
| New York | Charges may not exceed 25% of the gross recovered amount, on top of the amount funded | L. 2026, ch. 11 (A.9442) |
| Ohio | One-time service fee up to 7% of the initial funded amount; no prepayment penalty (effective Oct. 6, 2026) | R.C. 1357.04(J) |
| California | No rate cap; charges may not run past 36 months from funding; the payoff must be set by time intervals and may not be a percentage of the recovery | Bus. & Prof. Code §§ 6250(a), 6253 |
California’s rules took effect January 1, 2026. Our California page covers the rest of that law, and the state law table lists every state, including the many with no cap at all.
What to ask before you sign
- What will I owe, in dollars, at 6, 12, 18, 24 and 36 months?
- Is the charge simple or compounding, and how often does it compound?
- Is there a minimum charge period, and what one-time fees come out of the advance or get added to the balance?
- Is there a cap on the total I can owe, and is there a penalty for paying early?
- What annual rate do all the charges add up to?
Our page on red flags in funding contracts lists other terms to check, and the page on how an advance is paid back explains where the payoff comes from at settlement.
Common questions
Is a lower monthly rate always cheaper?
No. A lower rate that compounds, carries a long minimum charge period or adds large fees can cost more than a higher simple rate. Compare the dollar payoff at the same month.
Why does the length of my case matter so much?
Most charges grow with time. In the Avraham and Sebok data the median case took about fourteen months, and many injury cases take longer. Ask your lawyer for a realistic time estimate before you choose an amount.
What does "annual percentage rate" mean on a funding contract?
It should express every charge as a yearly rate. West Virginia, for example, requires the annual percentage fee or rate of return to include all charges the consumer pays directly or indirectly (W. Va. Code § 46A-6N-9(d)).
Can I lower the cost by paying early?
Often, since the balance stops growing when it is paid. Ohio bans prepayment penalties outright. Check the contract for a minimum charge period that applies even if you pay early.
How do the charges affect what I keep from my settlement?
The payoff comes out of your share after attorney fees, costs and liens. Our page on how much you can get from an advance and the FAQ on how much of a $50,000 settlement you keep walk through that math. The lawsuit cash advance guide covers the rest of this topic. Beverly Law does not offer or arrange lawsuit funding and receives no payment from funding companies. Beverly Law offers a free case review in English or Spanish at (310) 552-6959 if you have questions about your injury case. You owe no fees or costs unless we win.
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Related pages
Cash advance on a lawsuit · Laws by state · Injury law FAQs
Sources
- Avraham & Sebok, An Empirical Investigation of Third Party Consumer Litigant Funding, 104 Cornell L. Rev. 1133 (2019) (publications.lawschool.cornell.edu)
- GAO-23-105210, Third-Party Litigation Financing (Dec. 2022) (gao.gov)
- Rancman v. Interim Settlement Funding Corp., 99 Ohio St.3d 121, 2003-Ohio-2721 (cases.justia.com)
- Maslowski v. Prospect Funding Partners LLC, No. A18-1906 (Minn. 2020) (law.justia.com)
- Arkansas Code 4-57-109 (law.justia.com)
- Illinois Consumer Legal Funding Act, 815 ILCS 121 (ilga.gov)
- Indiana DFI advisory on Civil Proceeding Advance Payments (IC 24-12-4.5-2) (secure.in.gov)
- Nevada NRS Chapter 604C (leg.state.nv.us)
- West Virginia Code 46A-6N-9 (code.wvlegislature.gov)
- Tennessee Code 47-16-110 (law.justia.com)
- Montana Code 31-4-104 (mca.legmt.gov)
- New York A.9442 / S.8808 (L. 2026, ch. 11) (nysenate.gov)
- Ohio Revised Code 1357.04 (codes.ohio.gov)
- California AB 931 chaptered text (Bus. & Prof. Code 6250) (calmatters.digitaldemocracy.org)
- California Bus. & Prof. Code 6253 (law.justia.com)
Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.