Third-party litigation funding—also known as lawsuit lending—is a highly secretive, unchecked industry that turns our legal system into a money-making machine for exploitative lenders, who act as puppet masters, manipulating lawsuits for profit. These hidden deals fuel excessive lawsuits and drive up the costs for California residents and business owners. Plus, some funders have even been linked to foreign actors, inviting foreign influence into our courts.

Due to the lack of regulation around this secretive practice, third-party lenders can charge inordinately high interest rates of up to 100% or more, with some examples soaring over 200%. These lenders also hurt small businesses, which operate on thin margins and can be bankrupted by one big settlement. These puppet masters turn our civil justice system into a money-making machine for private investors at the expense of vulnerable borrowers, increasing lawsuit costs that may get passed down to everyday Californians.

Without reform, private lenders will keep turning our courts into their puppet stage—profiting from lawsuits they quietly control from behind the scenes. Right now, the California Assembly is considering a half-hearted reform bill (AB 931) that does not include enough provisions to protect Californians or bring real transparency. If passed, it will leave the door open for these financial puppeteers to continue distorting justice in California.

Lawmakers should reject AB 931 and focus on passing real reforms to rein in the puppet masters exploiting everyday Californians.