Rate Disclosure Requirement

A rate disclosure requirement obligates a pre-settlement funding company to provide the consumer, before or at the time of contracting, a written statement itemizing the amount funded, all fees and charges, and the total amount the consumer would owe at specified future intervals — commonly at six, twelve, twenty-four, and thirty-six months from funding — so the claimant can see how the balance grows if the case takes longer than expected to resolve. This mirrors the function of a Truth in Lending Act disclosure in consumer credit even though the transaction is not classified as a loan, and is one of the most consistently required elements across the states that regulate consumer legal funding by statute. The disclosure format typically presents the payoff schedule as a table rather than as an annualized percentage rate, both because the product's non-recourse, indefinite-term structure does not map cleanly onto an APR calculation and because most enabling statutes deliberately avoid triggering interest-rate-based lending regulation. For funders, the disclosure obligation shapes fee structure design at the outset — since the schedule must be presented and understood at signing, products with simple, predictable growth intervals are easier to disclose clearly than structures with variable or discretionary fee adjustments.

Because the disclosure has to show payoff amounts at fixed future dates, funders design fee schedules around clean, easily tabulated intervals rather than continuous accrual, which is part of why period-based fee structures are more common in the regulated segment of the industry than in less-regulated markets.

The disclosure table is also the document consumer advocates and regulators point to when challenging a specific funder's pricing as excessive, making disclosure compliance and underlying fee design inseparable from litigation and regulatory risk management.