PHILADELPHIA, May 13, 2016 /PRNewswire/ -- The New York Times published an article on Monday, May 9th, highlighting the relationships that legal funding companies, such as Thrivest Funding, LLC ("Thrivest"), and retired NFL players have established in response to the NFL concussion lawsuits. While the author offered balanced views, featuring input from critics, retired players, and representatives of the legal finance industry alike, some of the commentary unfairly suggested that legal funding is a predatory industry.
At its core, legal funding serves the important function of helping plaintiffs who are sick, have been injured, or are experiencing other unfortunate life circumstances. Funding can provide plaintiffs with the ability to pay bills, keep up with rent or mortgage payments, or cover healthcare expenses and other essential family obligations.
"Just like any other industry there are some bad apples out there, and some of them may charge exorbitant fees," explained Joseph Genovesi, President of Thrivest, "but you'll find bad apples in any industry."
The article also presented some inaccurate information. The author referred to legal funding transactions as loans, but they are not: in most cases, they are non-recourse advances. This means that if the plaintiff is advanced a certain amount of money but the NFL does not pay the promised settlement amount (for example, if the award was readjusted during an appeal, or if the plaintiff no longer qualified for an award under new settlement conditions), the plaintiff would keep the advanced amount and the funding company would lose money. Loans, however, must be paid back with interest regardless of the case outcome.
Genovesi further explained that although legal finance firms, including Thrivest, do charge higher rates than many traditional banking institutions, they do so with good reason. Because repayment is not guaranteed, as shown in the examples above, there is significant risk to the funding company, hence the higher rates.
Another risk associated with legal funding is that the duration of a case is never certain. A typical personal injury case might last anywhere from one to three years. However, once a case is appealed, it essentially brings the litigation process back to square one. As the NFL case has demonstrated, appeals can cause cases to extend longer than anticipated. Sometimes, the appeals process can completely reverse a settlement decision.
Though the NFL players applied for post-settlement funding, which is the type of funding available only after a settlement has been decided, the appeal made the terms of the settlement uncertain. This increased the risk of a lower settlement, or even no settlement, being awarded, which in turn increased the rates of legal funding advances offered to the players.
Risk levels change over time, and it is important for legal funding companies to account for that. "Thrivest aims to be flexible and quickly adjust the terms of an agreement if there is ever a change in a settlement," offered Genovesi. Thrivest always strives to be fair and transparent in every transaction, so it carefully monitors the status of all ongoing cases to make sure all of its clients are given the best possible offer.
For example, once the NFL settlement was affirmed, the risk associated with the case was reduced, and all future funding offers were adjusted accordingly. There is still risk involved, of course; players still must be evaluated by medical staff to see whether or not they qualify for a settlement award under the conditions laid out by the court, and funding companies must then reevaluate the players to see if the award amount is high enough to qualify a player for funding.
Legal funding is typically a last resort measure. Because of the high costs associated with taking out an advance, Thrivest advises potential clients to seek other financial options before opting for legal funding. If a client does choose to take out an advance, it is recommended to only advance the amount that is needed for immediate circumstances.
For most of the retired NFL players seeking legal funding, it is indeed a last resort. Many are players who never made the multi-million dollar salaries that today's players are accustomed to receiving. Many are in need of medical care and lack sufficient funds to cover the associated costs, or they are not sustainably employed due to their medical conditions and are thus in need of capital. Most of these players also cannot qualify for traditional financing.
It is not through deception or manipulation that these retired NFL players have opted for legal funding. Instead, they have consulted with their attorneys and their families and, after careful review of the available options, have chosen legal funding. It may be more expensive than other types of capital assistance, but for those with limited choices, legal funding is a high-value option.
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SOURCE Thrivest Funding, LLC