← Personal Injury Mastermind w/ Chris Dreyer
Personal Injury Mastermind w/ Chris Dreyer
302. Toolkit: The Uber of Legal Funding: Breaking Predatory Lending's Grip on PI Cases
00:19:26
ClaimAngel’s CEO Jeremy Alters is dragging a shadowy litigation funding industry into the sunlight by capping interest at 27.8% and building a transparent marketplace where speed and fairness win.
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- [00:00]
A
If they borrow $5,000, you get funded $5,000 and they got to pay back 40,000.
- [00:08]
B
Banks and credit card companies slammed your injured clients with compounding interest rates. Or at least they did, because that's how litigation funding worked until Jeremy Alters decided to break the system. Welcome to Personal Injury Mastermind, the show where ambitious attorneys come to learn, implement, and get results. I'm your host, Chris Dreyer, founder and CEO of Rankings IO, the SEO agency of choice for elite personal injury law firms. Today, Jeremy reveals how ClaimAngel is dragging a shadowy industry into the sunlight. By capping interest rates and building a transparent marketplace, they're forcing traditional funders to compete for the first time.
- [00:44]
A
The quote is, you're ruining the industry. And you know what I say to them? That's the goal.
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B
We explore how a tech driven marketplace gives power back to the people who need emergency funding the most. This is a story about turning an opaque, relationship driven business into a true marketplace where fair rates and speed wins. Here's Jeremy Alter, CEO of Claim Angel. Let's dive in.
- [01:06]
A
A couple of friends of mine that are founders of the company own a PI shop in Boca Raton, Florida, and I used to practice law for 22, almost 23 years. I never used funding in my career. I never liked funding. I thought it was too expensive, too predatory, too dangerous for the claimants, too difficult to settle cases with. They stayed away from them. They brought me this idea about making funding competitive and creating an ecosystem of funding both from, from the claimant side, from the attorney side, all the way through to the funder side.
- [01:38]
B
Can you kind of describe the, the current state of litigation funding and why there's a need for greater transparency in this ecosystem?
- [01:47]
A
In any other aspect of life outside of litigation funding, you find transparency in everything these days. There's Uber, there's Lyft. You know, go down the list of marketplaces that exist to make the consumer's life easier, to create competition for pricing. With our tech driven society, this is what we should be doing. Claim angel saw a need for that exact same thing in litigation funding. And litigation funding has always been gray. And I use that term gray kindly. It is lawyers and their buddies getting claims funded. Companies that, they have relationships that get the claimant's money and that's fine. But getting them money at exorbitant predatory interest rates is the worst possible thing for claimants. And ultimately at the end, it's the worst possible thing for attorneys because if they borrow $5,000 or get funded $5,000 and they gotta pay back 40,000. They're never going to be able to settle those cases. And so we saw a need to fill that gap and create full transparency where the consumer can see everything, the lawyer can see everything. They know exactly what they're going to pay. And the biggest thing we did for claimants is we capped the interest rate at 27.8%. Our goal is to be better than the credit cards. The average consumer credit card for lower income consumers in the United States is 31.99%. Believe it or not. It's, it's crazy. So we said 27.8% is better than their credit card. We cap that at 2x. So you cannot run away if you borrow or get funded. $5,000 it, $10,000 maximum. And that $10,000 does not accrue until 43 months. And the United States, most cases settle well before 43 months. No monthly payment, fully non recourse. No one in the industry can do it. Claim angel is not a funding company. We are a marketplace that has funders and attorneys bring clients together to get the lowest rate. They can even name their own price. And we are promoting competition at the mandated lowest rate.
- [03:59]
B
So you mentioned your rates versus the credit cards. And you know what, what are some of the, these bloated rates that individuals are getting? And then also, could you also just define what non recourse is for? Maybe some of the audience that don't aren't aware of that.
- [04:14]
A
Non recourse means you get the money, you get funded. And I keep correcting myself when I say borrower loan, because it's not a loan, it is a funding. And that funding is basically a purchase interest in the case. And so the funding company is purchasing an interest in the claimant or the plaintiff's case. If that case is lost, the claimant does not have to pay the money back. That's why it's called non recourse. There's no recourse if the case is lost. If the case is won, it gets paid from the settlement. That's the key to all of these.
- [04:45]
B
Things with the non recourse. And you take it on risk, right? Now, you know if that's the name of the game, right, is you're participating some of the risk. You know, what, what's the size of some of these funding of these claims? Are you looking at, you know, credit scores and stuff and like, hey, you're like, how does, how does that process work in terms of the size, not.
- [05:08]
A
Looking at credit scores? We have funded everything from $500 to $2 million. So everywhere in between the claims that get funded between $500 and let's say 25,000 fundings, those are funded pretty quickly. They don't require a ton of information or documents, but a little bit, and we get them funded. When you start getting out funding outside of $25,000, the funding companies need a few documents, police report deck page, some medical records, and a really good description. So we ask the attorneys, while they're not allowed to put a cap on the funding legally, we ask them if there's a range that the case warrants so that it doesn't get to be too much. And then we advise our funders of the value of the case and they make their decision. Most funders will fund 10 to 12% of the value of the case. And sometimes they don't do that all up front. And the claimants don't have to incur interest. It can be spread out over months. It can be done in smaller amounts, and they can come back for more money when they need it. If they're paying their monthly bills and that month they need $2,000 and the next month they need $2,000, we'll do that sort of thing.
- [06:20]
B
Also, are most like, if the individuals go to, say, a bank for lending, or are most of those going to be a recourse? You know, they're, you know, collateralizing to get the debt. And that's like one of the true benefits is like, here you go, like, we're not going to take your house.
- [06:36]
A
That's right. That's exactly right. You know, most people who need this money, the street categories, they needed it because the accident happened or they should take it because it's better than their bank rate or their credit card rate. If someone was in position to go to a bank and get a loan temporarily, they don't need this money. They can go get a prime plus loan. They can do that, but they're not the consumer for this money. Credit cards, more than banks, are fully recourse loans, you are signing away your rights to any money and you have to make a monthly payment. People do not understand what compound interest is. Generally speaking, we have no compounding interest. It is simple interest. And every credit card in the United States, every bank loan in the United States for the most part at this level, is compounding interest, which means even if they're charging you 27.8% by the time it's over, you're actually paying 47, 48, 50, 52 because it compounds simple interest. Is the key. We are simple interest. We are capped. And we are very different from any bank or credit card out there.
- [07:48]
B
I want to kind of dig into the marketplace that allows you to facilitate this. And, you know, you're from what I research and you probably have the. You have the updated numbers. You know, I saw over 4,000 cases funded over $25 million. You know, so you've made significant strides. And this is. Yeah, we were talking.
- [08:07]
A
It's.
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B
This is just the beginning. So can you kind of paint the picture of how the marketplace works and just give us an idea on that.
- [08:14]
A
Side, two ways that it works for claimants. And keep in mind, as a separate note, we also fund attorneys. Non recourse as well. But I'll talk about the claimants first. Claimants kind of come to claimangel.com, fill out information about themselves and tell us the amount of money they need. We then send a form. It's all automated. It's instant. We send an automated form to their attorney because they would have told us who their attorney and or paralegal is. We forward that form to the attorney, we get the information we need for the case, and within minutes, assuming that information is turned around, they have a listing on our site. Imagine you're on Carvana or Truecar or one of these sites, ebay, and you see listings for products. It's the same exact thing. We have listings for each claim that's on our site. And we fund, you know, 50, 70, 100 of these a day listed. They cannot sit on the site because our funders literally have hired people to sit on the site and click reserve when the claim comes up so that they can underwrite it and fund it. It is a rare event that we have more than two or three claims sitting on our site overnight because they are all getting funded within that timeframe. It is a true marketplace experience. The consumer gives us information, the lawyer confirms or gives us further information, you know, information about the case. Let's say it's an auto accident. They tell us a description. We ask for a couple of documents, a police report, a deck page, different things. If we can get them, we don't always need them. And once we get that information, which again can be in minutes, the claim gets listed and we funded people in as fast as an hour. We got real time funding. Real time. Ach. We also do Zelle Venmo checked. As automated as you can get, Chris. That's what we're trying to do. We even do Western Unit, although checking Western Unit are the least Automated. We do do that as well. And we've got a flood of cases that come in from firms. And once the firms use us once or twice, and they understand that partnering with us. And this is another really important point, Chris. Partnering with us protects their ethical and fiduciary duty to their client.
- [10:24]
B
Absolutely. And I kind of want to just break these down. Okay, so, you know, there's some clear benefits for the consumer. There's benefits all around.
- [10:33]
A
Why?
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B
What are the. Some of the main reasons why an attorney wouldn't use Claim angel as opposed to getting these bloated loans? Is it just the, hey, they're buying you Knicks tickets? What's the really underlying reason here?
- [10:47]
A
It's convenience, number one. Meaning they have relationships with people, funding companies, I should say those relationships are sometimes longstanding. They involve gifts, they involve nick tickets or sons tickets or dolphins tickets or whatever it is, golf outings, trips, you name it. But there's also the funder. They pick up the phone, they call a funding company they have a relationship with. And sometimes they will fund that from the phone call in two seconds because they know the lawyer. Now that sounds really good for the claimant. But why would a funding company do that? That they know even if they lose a couple cases, they're still making an exorbitant amount of interest. We don't believe in that. We believe in getting the data, promoting the competition, having full transparency. We also meet your fiduciary gated. And you don't do this when you have other companies and you're just funding with one. We've got 15 funding companies on our site. We've got 11 on the waiting list. So there are 15 eyeballs from those companies, those various companies looking at your claimant's claim to fund. And that means you've given them multiple options. So lowest rate, multiple options. And no other funding company can do this. And again, I want us to restate, it's because we're not a funding company that we can do this. We are reducing the overhead for funding companies and we are partnering with funding companies to do this.
- [12:13]
B
There's like this balancing act with network effects. Right. You need a thriving marketplace with a lot of high quality attorneys as well as the funders and all this. But so, like, what's the balancing act? You said you have this on the waiting list. So, like, what's the criteria to become a funder? What's the criteria to. To have the firm even have the ability to do this? Because I'm sure you kick out the bad apples in the marketplace, starting with.
- [12:38]
A
The funding companies, we do our full KYC to make sure that they are compliant and meet the rules required for funding. We have 11 on the waiting list because I need more volume to make it worth their while. So we've got volume that is satisfying, you know, 6, 7, 10 funders. But to satisfy 25, 30, we need more volume. We need more law firms to send their claims and see how claim angel works to prove that it's the best model out there. That's number one for the attorneys. It is the protection that is offered. They want to protect their clients, we want them to protect their clients. We offer that protection for them. And it is almost seamless in the sense that rarely is there even a phone call needed. It is literally automated transactions that once you do it once or twice, the paralegals love it. Our, our funders love it, our attorneys love it, paralegals love it. And the funders, just so you know, we are at full one touch funding for the funders so they can go on there, look at the claim, look at the documents and click send contracts. And that claim is signed, the contract signed, and the claim is funded. All in that one bullet, full step. So we are one touch funding. You know, we're mirroring Amazon in that regard. When we get to partner with attorneys, Chris, and law firms, we get to one touch funding on the claimant side. And the faster we get, the more efficient we get. And this will not be a great part of the industry any longer if we do it right.
- [14:09]
B
To me this seems like such a no brainer. It's like, you know, do you go to the AJ and the American Bar association may be like, look, here it is. You guys want to do right for the consumer and your space, like, do you put it in their hands? Have you got any feedback from some of those players?
- [14:26]
A
Yeah, we've gotten feedback. We've gotten feedback from a lot of people. Some of it favorable and some of it you're ruining. The quote is you're ruining the industry. And you know what I say to them? That's the goal. Because the industry shouldn't be the way it is. It should be clear and transparent. Here's our phrase, Chris. Fair funding for all. That's our motto. That's our tagline. Claim angel, fair funding for all. And that is the ecosystem.
- [14:58]
B
What started as a mission to fix predatory funding has evolved into something unexpected, a solution where everyone wins. Attorneys are discovering the claim angel just doesn't save their clients money. It makes their practice more efficient. No more phone tag with funders, no more explaining high interest rates to clients. And most importantly, no more watching settlement negotiations fall apart because of astronomical funding paybacks. Through one transfer marketplace, cases get funded in hours instead of weeks. Clients get rates capped at 27.8%. And attorneys? They get the peace of mind knowing they secured the best possible terms for their clients, all while meeting their fiduciary duty. The old guard called it ruining the industry. Thousands of successful cases later, attorneys across the country are calling it the future. I'm Chris Dreyer, and this is Personal Injury Mastermind. Catch you next time I'm out.