Emerging Litigation Podcast

Bridge Funding for Injured Plaintiffs with Milestone Foundation's Rachel McCarthy

• Tom Hagy • Season 1 • Episode 123

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In this episode, I speak with Rachel McCarthy, Executive Director of the Milestone Foundation, about a challenge that often sits quietly in the background of personal injury litigation: how injured plaintiffs manage financially while waiting for their cases to resolve.

Litigation can take months or years to reach a settlement or verdict. During that time, plaintiffs may face mounting medical bills, housing expenses, transportation costs, and lost income. Financial pressure can create significant hardship and, in some cases, influence settlement decisions. Rachel explains how the Milestone Foundation was created to address this issue through a nonprofit model that provides low-interest, non-recourse advances designed to help plaintiffs cover essential living expenses while their cases proceed.

We discuss how plaintiff funding differs from litigation finance, why many attorneys remain skeptical of the industry, and what makes nonprofit funding models different from traditional providers. Rachel also explains the mechanics of simple versus compounding interest, the importance of understanding funding agreements, and the questions attorneys should ask before recommending funding options to clients.

In addition, we explore emerging regulatory efforts, including new state-level consumer protection measures, and discuss the broader access-to-justice implications of helping plaintiffs withstand the financial pressures that can arise during lengthy litigation.

Whether you are a plaintiff attorney, litigation professional, consumer advocate, or simply interested in how economic realities intersect with the civil justice system, this conversation offers valuable insight into a topic that affects thousands of litigants every year.

Jump in to hear Rachel's perspective on ethical plaintiff funding, consumer protection, and how financial support can help plaintiffs and their attorneys see cases through to a more appropriate resolution.

Tom Hagy
Host of The Emerging Litigation Podcast

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Thanks for listening! 

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If you have questions for Tom or would like to participate, you can reach him at Editor@LitigationConferences.com.

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Why Injured Plaintiffs Need Cash

Tom Hagy

Hello and welcome to the Emerging Litigation Podcast. I'm your host, Tom Hagy. So anybody who deals with litigation involving injured parties, they know that litigation can go on for years before an injured person collects a dime. Meanwhile, they've got bills to pay, they've got medical expenses, groceries, they've got, you know, rent or a mortgage to pay. And so sometimes if people are under this kind of pressure, first of all, a lot of their life lives can fall apart because they are not able to make ends meet. They're disabled. They can't work, for example. The other consequence of that is that sometimes they can get forced into an early settlement that maybe is not as fair or adequate for their needs. So today I get to talk to somebody who does something about that. Her name is Rachel McCarthy. She is executive director of the Milestone Foundation. They're the only lender of their kind. They provide non-recourse, low-interest loans specifically targeted for the kind of expenses I'm talking about. This is very different from things like litigation funding. So this is consumer lending to injured parties in litigation who need to make ends meet. So with that, here is Rachel McCarthy from the Milestone Foundation. They're doing good works there. I hope you enjoy it. And I am aware that while I've been talking, it's it's it's as though somebody has a question behind me. Uh you know, raising their hand is like that's the least they could do, I suppose, but it's it's frankly annoying. We're not taking questions yet. If you have questions, email me at editor at litigationconferences.com. You can put your hand down.

How Milestone Foundation Began

Tom Hagy

Rachel McCarthy, thank you very much for talking with me about this today.

Rachel McCarthy

Thank you for having me, Tom.

Tom Hagy

You bet. And I always say you bet, and I always cut that out. So we're going to talk about the Milestone Foundation. And now you guys just had a uh 10-year anniversary. So congratulations. Thank you. And then I guess I want to go back to what was the impetus for the Milestone Foundation. Did what gap did you all observe or your founder observe that led to the establishment of a nonprofit like this? Yeah. So our founder was a settlement planner and he would work with families helping them set up their future post-settlement. So whether that be a structured settlement or annuity or what have you. And oftentimes he kept observing that these plaintiffs would owe a significant portion of their settlement to a funding company. And it happened time and time again, and he just couldn't believe that this was allowed to be the way that it was. And so I think him and his wife thought about it for a while. And finally in 2016, so 10 years ago, was when they decided we're going to try to launch this as a nonprofit model and see if it is possible and see if it's sustainable, if there's an appetite for it among the trial, trial lawyer community. And so they incorporated the Milestone Foundation in 2016. And then in 2017, which is when I started, I began in the early 2017 as the first executive director. I call that my first term. We started getting everything going with becoming a 51c3 and getting all the foundation laid there. So it was it was the the whole fact that there's this industry that does something one way and it hasn't really ever been challenged, and no one's tried to do it a different way in a less harmful way to plaintiffs. So let's see if we can do it as a nonprofit. Yeah. Makes good sense. So what is the what is the founder's name? Just so we can give that person around. John and Amy Bear. John and Amy? Yes. Okay. Yeah. I'm sorry. What was the last name? Bear. I skipped right. Yeah. Okay. I skipped right back. It was originally called the Bears Foundation. The Bears. Yeah. Yeah, that would be confusing in Chicago, I guess. I know. So and also Bears Foundation sounds like it is um medical company. Well, it sounds like it's a private endowment, like the Bill and Melinda Gates Foundation. Sure. And it's not. So from a fundraising perspective, it was more advantageous to move away from that naming. Yeah. How are Bill and Melinda these days? Well, you know, they've parted ways. They were so nice. I was rooting for them. She is thriving. Yeah, I know she is. Yeah, she's awesome. She's like one of the biggest giver. Um, what do you call it? I was gonna say anthropologists. No, she's not into that. What's the word I'm looking for? Philanthropist. Philanthropist, thank you. I'm very smart. So uh thank you. Yeah, thank you for that. And what a you know I think it's very cool when uh people have when they have resources and they choose to use those for good. Absolutely. They should. Is that corny? And I don't care if it is. But no, it's it's very cool when people take a look at that and say, you know what, here's a need and here's something that people can use. So for people who aren't familiar with the foundation, so what what do you all do?

What Plaintiff Funding Covers

Tom Hagy

Sure. What do you cover? How does it work for claimants?

Rachel McCarthy

Yeah, so we provide plaintiff funding. What that means is we give financial assistance to plaintiffs while they're going through litigation and to help them cover their basic living expenses. So it could be early on in their litigation journey, it could be close to the end, and you know, there's a settlement in site, but they don't have the funds yet, and they're struggling to pay their rent or their their vehicle broke down and they need to get a new vehicle, or they're struggling to keep up with their utility bills. So they're in this really tough situation where they're dealing with a catastrophic accident or a trauma or a tragedy. And on top of that, they're in a financial bind and they need resources to help get them through to the end of their lawsuit where they will hopefully receive a settlement of some sort. So it's sort of just a bridge to help them get through to the end of their litigation, but it also allows their attorney to see the case through to its proper end as well. So it's also sort of an access to justice issue because these insurance companies or these corporations or whomever the defendants are tend to have a lot of resources and a lot of money at their disposal. And the average citizen does not. So it becomes like a waiting game. And the insurance companies know that the longer that they draw things out, the more hard-pressed folks are going to become. And so, you know, ultimately they might be willing to accept a smaller settlement amount. So it's sort of a waiting game. And that's obviously that's unfair. So the way that this industry was designed was to help level the playing field for plaintiffs and their lawyers to give them more resources to see the case through to its just end. Unfortunately, the industry has sort of changed a bit because the the origin story is a great idea, but there's a lot of players out there, there are a lot of players out there who um have seen this as an opportunity to make a significant profit. And so where it gets a little bit wobbled. You're not saying people would take advantage. No, I said that. So just so people who aren't familiar, and as I was confused when I first heard about the Milestone Foundation, this isn't litigation funding, this isn't litigation finance, you're not funding cases and litigation. You're also not, you're not also advancing the entirety of a estimated outlay or settlement or verdict or anything. So um so just if you clarify that for folks. If a if a plaintiff has, go ahead. Yeah, there's no so the funding that we provide is it's considered an advance on the future settlement. It doesn't influence the case outcome at all. It doesn't influence anything. It's just to go cover those basic needs. And I think if anything, we try to talk people down from taking out too much money or more money than they need, than they than they just need at that moment. Because we have seen instances where the case settles and the client does end up owing a significant portion of their settlement and they're mad and they're mad at their attorney and they're mad at everyone

Why Traditional Funding Turns Predatory

Rachel McCarthy

because they don't understand what they really had originally signed themselves up for, or they didn't fully understand the implications and what that might look like. And so at the end of this, this whole litigation journey, if they're only coming home with a teeny portion of what they thought they were going to receive, you know, that could be really frustrating for a plaintiff. I think I would think there'd just be a lot of education needed up front. Absolutely. I mean, first of all, the way that these agreements in the traditional industry are are written are really confusing from the jump. I'll look at some of them sometimes and and have a hard time discerning what the actual payment schedule looks like or what the actual final costs could be. And I consider myself pretty well educated in this industry. So if you are a plaintiff who hopefully this is your first time being a plaintiff, and so you're not really familiar with this, this whole litigation process to start with, and then you've never really heard about litigation funding or consumer litigation funding, and people are coming out of the woodwork to see if you want to take out in advance. We don't proactively, we don't reach out to anybody. We we wouldn't do that. We only work with people who come to us and ask. But there are companies out there that will reach out to folks and try to get them to take pre-settlement funding. And it can be hard. So your your um, I don't know if we call them clients or the people you fund, who comes to you? Is it it's typically the plaintiff lawyer, isn't it? Or am I wrong? Do individuals also come directly? It's usually a plaintiff that will come and fill out the form on our website, but they come to us by way of their attorney. So they don't really find us on their own. Usually they come to their attorney and say, I need, you know, I need some help, or something will happen that will make the attorney think, oh man, I just need to help this person get a couple thousand dollars. So the attorneys will refer them to us. That's what happens most often, which is great because, you know, the attorneys, it is sort of their responsibility to let their clients know of the best options, the options that are in their best interest. And that's always gonna be us. I mean, we're the only nonprofit in this industry. We're the only nonprofit that provides plaintiff funding in the country, probably the world. And so once an attorney knows about us, if they have a good case, it's it's on them to tell the plaintiff, you should try this company or you should try this nonprofit. They can list three or four options. That's fine, and let the plaintiff do some of their own research or due diligence. But at the end of the day, um, yeah, it's typically a trial lawyer that will tell their plaintiff about our service and then the plaintiff reaches out. We do speak with every plaintiff and every either attorney or their paralegal or someone from their legal team to assess every funding request. So we are a bit different than the traditional funding companies. Well, in many ways we're a bit different from them, but in one of the ways is that we really do take a take the time to speak with every plaintiff and every legal team to make sure we have all the facts straight. We know the whole scenario, there's, you know, nothing untoward going on. But some of these traditional funding companies, a plaintiff can just go on there and fill out a form with a few questions and they can get money within 24 hours. And that's great when you're in a pinch and you need money in 24 hours, but you pay the price for that. And so we don't typically do a 24-hour turnaround. It takes us a couple of days. But if someone has a urgent need, we try to expedite that whole process as much as possible. Yeah.

Simple Interest And The Nonprofit Model

Tom Hagy

So, I mean, obviously there is interest on these, but if you could talk about how the foundations, you've got a simple interest structure and how does that differ from some of these other folks?

Rachel McCarthy

Sure. Most companies that are traditional funding companies will use employ some kind of compounding interest model, which means that the interest grows not just on the principal, but on the principal and then interest that has accrued thus far. Um, some of them will do monthly compounding, some of them will say simple interest biannually, which means it compounds every six months. So it's sort of a tricky way of packaging that. But um we are we are just strictly simple interest for pre-settlement funding, it's 15% simple interest for post-settlement funding. So the plaintiff already has an offer, a settlement agreement in play. They just need, you know, it's a taking a couple months maybe to wrap up all the loose ends or what have you. That's 10% simple interest. So, I mean, we we do people will say, Well, you charge interest. How are you really a nonprofit? First of all, you know, we we have to cover our own bank expenses and and our operating expenses. And everything that gets paid back at the end. So when the when the plaintiff receives their settlement and they pay the advance back plus the little bit of simple interest, that just all goes into the pool of funds that we can give out to the next round of families. So nobody is making a profit. There are no profit holders in the equation. Everything goes toward advancing our mission. So that's how we fill that public charity model.

Tom Hagy

Yeah, it's a misconception about nonprofits. They do have expenses to pay.

Rachel McCarthy

Yeah, they do. And it's it's also because it's never been done this way in the industry. I think that attorneys generally are skeptical of plaintiff funding companies, which I get. So they're they're even more skeptical when you try to say to them that you're doing it as a nonprofit

What Lawyers Miss About Ethical Funding

Rachel McCarthy

because it's just a brand new concept to a lot of these trial lawyers.

Tom Hagy

So let's let's talk to those trial lawyers. So, what do you think the typical plaintiff attorney misunderstands or underestimates about ethical claimant funding?

Rachel McCarthy

Yeah. Well, what like I said, a lot of them just heavily dislike this industry. And I get it because traditionally the the plaintiff funding hasn't been ethical. It has been, we see at least the average is like 36 to 40% APR, is what we see on these advances. But we see 50, 100, sometimes 200% at the end of the day. And so I understand completely why plaintiff lawyers would not like this industry. A lot of them will say from the jump, I don't let my client take this kind of funding, or I never sign off on it, or I'm very reluctant to sign off on it. But I want them to sort of be able to see that there is a way to do it ethically, which is I would say how we're doing it, and then to reconsider how they how they're framing it in their mind. And it's not this evil predatory force. It is actually could be used as a strategic tool for their clients who want to be able to see their case through to its just end, but might need a small amount of funding. I mean, the average advance that we provide is $7,000. So it's not like insane, you know, huge money that's going to change everything, but it's enough that if you're a couple months behind on your rent and you're about to be kicked out and put on the streets, we'll help that not happen. So it's just, it's using it, it's turning it into sort of an asset for the plaintiff so that they can see their litigation journey through to its end. The attorney can do their job. They're not worried about this advance that's out there accruing crazy interest, because that also puts the pressure on the attorney, right? Like they have to be able to, they want to be able to settle at the end of the day. And then if if they know that their client has this huge advance out there with all this interest, that's like a great gotta be a gray cloud over their head. So long story short, there is a way that it can be done ethically, and there is a way that that plaintiff funding can become a tool for plaintiffs and for trial lawyers. It's just we're the only ones right now doing it. So we have to influence more people to try this model, which I'd be happy to try to talk anyone through if they're interested. Or, you know, have the the funding, the for-profit companies in the industry change the way they operate a little bit so it doesn't feel so exploitative. Yeah.

Questions To Ask Before Signing

Speaker

The uh so what so what would be like the most important questions an attorney should ask when when evaluating this kind of arrangement? Yeah. That's a that's a great question because I understand that trial lawyers are so busy and already have so much on their plates that in some instances I'm sure they don't even have time to give second thought to what their client is taking out or what the settlement agreement might or the uh pre-funding agreement might look like. Because, you know, they they might have this relationship, this long-standing relationship with a traditional funding company that they they like the people that work there and they get treated to nice dinners here and there or something like that. And so why question that partnership? But at the end of the day, a trial lawyer, it's your responsibility to make sure that you are guiding your client in all of the ways. And if they are signing an agreement that everyone doesn't understand what the implications are, you're not fully best serving your client. So I think that the trial lawyer should take a good look at the agreement, figure out what the fees are, because sometimes there are some pretty arbitrary fees that get folded into these contracts. It's a service fee, a paperwork fee, an administrative fee, an application fee, and those can become egregious. I've seen an instance where a company was charging a fee that was a third of what the plaintiff was requesting. So they were requesting $3,000. The fee was insane. So I would say look at the fees, look at the the way that the interest accrues and the interest rates, because if they and make sure it feels reasonable, I guess. Um, or or and also look around because they might say it's six percent interest, but that's really six percent monthly compounding. And then, you know, I can't do six times twelve quickly in my head, but you you get the point. It adds I do. So, and some contracts, I don't like this, but some contracts will say if you pay between this window and this window, it's gonna be this amount. Well, what if you're able to pay at the very beginning of that window and you have you get lumped into the same amount that it would be if it took you another three months to recover? That's weird. So I would just ask attorneys to take a good look at the agreement, just take some time to realize what you're signing and to to think it through and do a little research and see what else is out there. The other thing I will add is that different states have different regulations and some states are more protected than others, like Arkansas, for example, or Colorado. They'll have statewide rules and regulations that might cap these interest rates. So those states will have less players in the field. So just figure out, you know, what's what are the rules in your state? Who are the players, who's got the lowest rates you could possibly find, and make that your go-to person if possible. I mean, it'll always yes, but we can't find everything because we're a small nonprofit. Yeah, gotcha. Okay. Well, no, it certainly is a can be a lifeline for people, as you just said, if it's $7,000 for somebody who may be losing their not being able to pay their rent or losing their home or whatever, that could also mean that they'll bail. And that means justice wasn't served. So yeah, it's it's such a service. Now you mentioned you mentioned some legislation and

New Rules And State Regulation Trends

Speaker

caps and things like that. Any anything else new because there seems to be some increased attention to consumer litigation funding. Uh in New York, there was recently uh uh a new law. Can you talk about those? Yeah, I think it's an interesting time to be in the consumer litigation funding space because there's starting to be more of a trend and an interest in consumer protection laws, and particularly with respect to litigation funding. So New York State just passed a bill that'll go into effect in um in June of this year, 2026. And it it has certain regulations, the agreement has to be in clear language, certain font size, and and um the pay repayment schedules have to be pretty clearly displayed. And there's is a cap on the percentage of the recovery that a funding company can can recover and take, but there aren't caps on fees and there aren't caps on interest rates. So those are the two, I think the two biggest issues that need to be reined in that aren't reined in. So I think that the bill um leaves a bit to be desired, but it does try to lay the groundwork for a little bit more uniformity and responsibility of everyone who's involved to know what they're signing and make it clear what the agreement is. And as I mentioned before, there are some states that have already passed funding rules, so Colorado being One, Arkansas, Maryland. Some of these states are more protective. They might have a interest cap statewide, or they might have rules around a 2X cap or a 3X cap, meaning, you know, it can't, well, the amount owed can't double or triple. So, so I think that there's certainly more of an interest in this becoming a more regulated piece of the industry because up until now, it's sort of been anything goes. It's non-recourse funding. So it does, so this type of funding is not beholden to traditional lending laws or usury laws. So that's why it's sort of it seems like it can't possibly be true that these certain companies can charge these rates, but in lots of instances it is true because it's been largely unregulated. So I think that there's definitely we'll see we'll see more and more states having these conversations. If not passing anything immediately, they're going to start having these conversations to protect their consumers. Okay.

Non-Recourse Explained And Final Takeaways

Speaker

So you said it's non-recourse? It's non-recourse. So that means that if the plaintiff doesn't recover, or maybe the settlement is much smaller than was anticipated, and they have other liens they must pay back, the funding company cannot come after them. There's no so if there's no settlement, if the case, if they lose the case, or even if they drop their case and they fall off the face of the earth, which has happened in just a few instances, they don't, you know, you can't go after them. There's no recourse. Understood. Rachel, my my takeaways, and if you're you're free to add anything else you'd like, but my my takeaways are that it's important for plaintiff attorneys to understand the genuine benefits of what this what this can mean to their client and to the case. And then understanding how it really works, in fact, I think is important because what you're telling me is we're not giving people a million bucks or you know, sometimes average is seven thousand dollars, you said. And then being mindful or understanding how to pick. You said there are you know questions that you need to ask, and also you said obviously stud well, not obviously, but study the green agreement closely. Take the time to understand it. And the last one is to understand how the foundation, the milestone foundation, is truly different from what else is out there. I think those are my takeaways. Anything you would add to that? Yeah, I I think that we there's certainly a need for this industry to exist. I mean, we talk to plaintiffs every single day, and they are so appreciative when we're able to help them get out of this this a financial, you know, stressful situation that they might be in. And their attorneys are appreciative too. For an attorney, you know, not only do you get the ability to see the case through to its just end, I mean, you really get to best serve your client and fight for every penny and dime that they should have that they deserve. So it gives you the ability to do that. It gives you a little bit of time as an attorney to let their case run its course. And I think too, it's important to note that we are a small nonprofit. So we aren't able to meet the demand as we exist now. With more support and more awareness and more fundraising, eventually, you know, we will be able to increase our service and fund everyone. But I think it's important to note that we are a little more strict with the cases that we will fund. So we definitely, you know, we have relationships with the traditional funding companies. And some of them are better than others, but there's definitely instances where they might have a service that will meet the plaintiff's need better than ours. So if to your point, if a plaintiff does need $50,000, that's not something that we can do, but that's another traditional funding company might be able to do that. Or if they need the money within 24 hours, it might be better off going somewhere else. But just understanding what the outcome of that might look like. So I think, you know, it's a really interesting industry to be in. Um I just, yeah, I ask attorneys to be a little more open-minded about plaintiff funding and to help us get the word out there about what we're doing because we want to just continue to grow our movement. So excellent. Well, Rachel McCarthy, thank you so much for talking with me about this today. Yeah, thank you, Tom. It's been fun.

Ratings Follows And How To Reach Us

Speaker

That brings us to the end of this episode of the Emerging Litigation Podcast. Once again, I'm your host, Tom Hagey. If you like what you hear, please give us a rating. That always helps. And also follow us on uh, let's see, you can follow us on any major podcast platform, Apple, Spotify, all the rest. You can also check us out on YouTube for the video version and some clips and as well as Instagram and quite a few on LinkedIn as well. If you want to participate, give me a shout. My contact information is in the show notes. Thanks for listening.