Investment or loan? Litigation funding’s ongoing debate…

A recurring theme in legislative debates over litigation funding is whether or not such agreements constitute loans and, as such, are subject to usury laws and other state regulations. Often that debate occurs in the legislature, yet in some states it spills over into the courts, with claims that litigation funding contracts are illegal and unenforceable because they violate state regulations on loans. One recent case, Cherokee Funding v. Ruth, saw the Georgia Court of Appeals refuse to extend the definition of a loan to litigation funding contracts, instead insisting that the legislature is the proper arena to expand two state laws intended to regulate payday lenders and other allegedly abusive lenders.

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