Why Plaintiffs and Their Lawyers Should Never Work With Pre-Settlement Funding Brokers

When multiple brokers get involved, it only makes matters worse. Cases are shopped around, settlements are delayed, and attorneys are pressured to hold out for unrealistic numbers that jeopardize the outcome.

At ProLegal, we’ve seen the damage these brokers can do. In our early years, we partnered with a broker on a single deal. After watching the client’s proceeds vanish due to stacked fees, we reimbursed those excess costs out of our own pocket. That experience led us to implement a permanent policy: ProLegal will never work with brokers. We are a direct lender—always have been, always will be.

1. How Brokered Funding Hurts Plaintiffs

When a plaintiff uses a reputable direct funder, the case is reviewed quickly with the attorney, and terms are issued directly. With a broker, the file is often shopped to multiple funding desks, which delays approval and exposes sensitive medical and case data to unnecessary third parties.

Direct funders offer transparent fee schedules with clear disclosures. Brokers, on the other hand, often layer their own commission—typically 10% to 15% of the total advanced amount—on top of the funder’s rate, and in some cases, they also mark up the terms, leading to an extreme and often undisclosed total cost.

Contracts issued by direct funders are usually more plain and straightforward. Broker-prepared contracts may include hidden fees, arbitration clauses, or specific terms that plaintiffs and their attorneys often overlook.

Finally, in the event of a low settlement, a direct funder may negotiate a fair reduction. Brokers typically take their fee first—before the funder even begins negotiating—leaving little room to support the client’s financial outcome.

2. The Real Cost of Brokered Deals

• Broker Commissions: It’s typical for brokers to charge 10%–15% of the advance amount. For example, if the plaintiff is borrowing $10,000, the broker will typically add $1,500 as their fee.
  
  
• Excessive APRs: When broker fees are added to already-compounding rates, effective APRs often exceed 100%.
  
  
• Settlement Erosion: Broker fees can eat up a good chunk of the settlement or even wipe out the value altogether.
  
  
• Real-World Victims: The Consumer Financial Protection Bureau (CFPB) and the New York Attorney General sued RD Legal Funding for deceptive practices that targeted 9/11 responders and NFL concussion victims. Their cases are proof of how predatory and harmful this business model can be.

3. The Regulatory Climate Is Shifting Against Brokers

Several jurisdictions are stepping in to crack down on abusive broker practices in the pre-settlement funding industry.

• Colorado: HB 23-1162 authorizes the state to cap charges on advances backed by future settlements. This legislation is designed to cut out high-fee middlemen.
  
  
• New York: The NYC Bar’s Formal Opinion 2024-2 reminds attorneys that they have a duty to evaluate funding terms for fairness, transparency, and ethical integrity.
  
  
• Missouri: Broker fees can be prosecuted as criminal offenses, with certain violations classified as misdemeanors.
  
  
• Federal: The CFPB and NY Attorney General brought action against RD Legal Funding, citing deceptive and abusive practices in settlement‑advance offers.

4. How Brokers Create Problems for Attorneys

• Settlement Negotiation Becomes More Difficult: Inflated payoff amounts make defense attorneys less willing to settle, delaying resolution.
  
  
• Lien Prioritization Becomes Complex: Multiple layered agreements complicate the process of determining who gets paid first, increasing risk of legal exposure.
  
  
• Ethical Exposure Grows: Attorneys who allow clients to enter brokered deals may violate professional conduct rules if the terms are not fair and reasonable.

5. The ProLegal Difference

ProLegal stands apart in the pre-settlement funding industry because we are a direct lender. Here’s how our model protects consumers and their attorneys:

• We Use Our Own Capital: We do not rely on banks, brokers, or third-party syndicates. This removes unnecessary middlemen and eliminates mark-ups.
  
  
• We Provide Transparent Pricing Up Front: Our simple fee schedule is shared before any medical records are collected. No surprises.
  
  
• We Maintain Ethical Standards: Our pricing is structured to be fair and predictable from day one. We prioritize clarity over complexity and work closely with attorneys to ensure clients fully understand their obligations. We also reduce payoffs in cases of hardship.
  
  
• We Work With Your Legal Team: Our process is streamlined through a single point of contact, one simplified payoff letter, and a dedicated operations team that supports the case throughout its entire lifecycle.

In fact, in the only brokered deal we ever funded, we were so disturbed by the effect on the client that we reimbursed the difference ourselves. From that moment forward, ProLegal implemented a permanent zero-broker policy that is still in force today.

6. What Plaintiffs and Attorneys Should Know

If you are a plaintiff or attorney considering pre-settlement funding, here’s what you need to ask:

• Is the funder a direct lender or a broker? Brokers may not disclose their role unless explicitly asked.
  
  
• Can you see a single-page payoff summary? This helps clarify fees, commissions, and how interest is calculated.
  
  
• Will your attorney review and sign the funding agreement? This is required in most states and is a best practice nationwide.
  
  
• Are you evaluating the true cost of the advance? Low monthly rates can be deceiving when hidden fees or long durations drive up the total repayment far beyond what was expected.
  
  
• Have you explored other options? In some cases, credit cards, disability benefits, or help from friends or family may be more cost-effective.

7. Conclusion

Pre-settlement funding, when done ethically and directly, can be a powerful resource for plaintiffs. But when brokers are involved, the costs balloon, privacy is compromised, and outcomes suffer.

That’s why ProLegal has built a direct-only model that puts plaintiffs and their attorneys first. We don’t work with brokers. We don’t use banks. We focus solely on fair, transparent, and client-centered funding.

Bottom line:
If a broker is involved—walk away. Call ProLegal instead. Your client’s settlement—and their trust—is too valuable to put at risk.

— Patrick Babaian, CEO