Pre-settlement loans in Colorado are legal but hard to get. A 2015 Colorado Supreme Court decision classified litigation cash advances as loans, which brought them under the state’s Uniform Consumer Credit Code and its interest rate caps. Those caps make small advances unprofitable, so most funding companies now set a minimum advance of $75,000, and cases with an expected recovery below that line generally cannot be funded in Colorado.
Why Colorado Treats These Advances as Loans
In Oasis Legal Finance Group, LLC v. Coffman, decided November 16, 2015, the Colorado Supreme Court ruled that litigation finance transactions are loans subject to the Colorado Uniform Consumer Credit Code (UCCC).1Findlaw. Oasis Legal Fin. Grp., LLC v. Coffman, 361 P.3d 400 Two funding companies had argued their products were purchases of legal claims rather than loans. The court disagreed.
The court said these transactions create “debt” because they create an obligation to repay that grows over time, even though repayment depends on the plaintiff winning. The multipliers funding companies used to calculate what plaintiffs owed functioned as finance charges, which the court called a “hallmark of a consumer loan.” And because plaintiffs kept full control over their lawsuits, the deals were not genuine sales of legal claims.1Findlaw. Oasis Legal Fin. Grp., LLC v. Coffman, 361 P.3d 400
After the ruling, some funding companies simply pulled out of Colorado rather than submit to UCCC regulation.2Drug and Device Law Blog. A Loan Is a Loan, At Least in Colorado Any company that stayed had to register and obtain licensure as a lender.3Hall & Evans. Predatory Lending Practices Targeting Plaintiffs Dealt a Blow
The $75,000 Threshold and Rate Caps
Under the UCCC, Colorado’s consumer credit rules apply to advances under $75,000 (C.R.S. § 5-1-301). Below that line, state law caps interest (C.R.S. § 5-2-201) at 36% per year on the first $1,000 of the unpaid balance, 21% per year on the portion between $1,000 and $3,000, and 15% per year on anything above $3,000. A lender may instead choose to charge a flat 21% per year on the full balance.4Compare Lawsuit Loans. Colorado Lawsuit Loans
Litigation funders elsewhere in the country commonly charge 27% to 60% or higher.5Annuity.org. Pre-Settlement Funding Colorado’s caps sit well below those numbers, so few companies offer advances under $75,000 in the state. If your expected settlement isn’t large enough to justify an advance of at least that size, you’re generally ineligible for pre-settlement funding in Colorado.6Mustang Funding. Colorado Legal Funding
How It Works If Your Case Qualifies
The application process looks like it does elsewhere. You submit case details and your attorney’s information to a funding company. The company evaluates the strength of the case, the likely settlement amount, and the defendant’s ability to pay. Credit scores rarely factor in.5Annuity.org. Pre-Settlement Funding
Approved plaintiffs in Colorado typically receive around 15% to 20% of the anticipated final judgment, and money can arrive within a couple of days once the file is complete. The funding is non-recourse. If you lose the case, you owe nothing. If you settle or win, you repay the advance plus interest out of the proceeds.7Colorado Law. What You Need to Know About Catastrophic Injury Settlement Funding Taking the money doesn’t hand any control over the lawsuit to the lender; you and your attorney still decide strategy and whether to settle.1Findlaw. Oasis Legal Fin. Grp., LLC v. Coffman, 361 P.3d 400
What Cases Qualify
Funding companies in Colorado look at personal injury cases where the expected recovery clears $75,000. Common categories include:
- Auto, motorcycle, bicycle, and pedestrian crashes with severe injuries
- Slip and fall and other premises liability claims
- Medical malpractice cases with verified legal representation
- Product liability and pharmaceutical claims
- Workplace injuries, including third-party claims and construction accidents
- Dog bites and animal attacks
- Wrongful death claims
Some providers also list class actions as a possible category, though Colorado-specific guidance doesn’t go into detail on that.8MyLawFunds. Colorado Pre-Settlement Funding for Personal Injury7Colorado Law. What You Need to Know About Catastrophic Injury Settlement Funding Timing matters too. Colorado’s two-year statute of limitations for personal injury (Colo. Rev. Stat. § 13-80-102) affects eligibility, since funders won’t advance money on a claim that’s already expired.
What It Costs and What Can Go Wrong
Even under Colorado’s rules, this is expensive money. Nationally, funding fees run 2% to 4% per month, which translates to annual rates of 27% to 60% or more.9Nolo. Pros and Cons of Lawsuit Loans Colorado’s UCCC caps rein those rates in on advances under $75,000, but advances above that line sit outside the caps, and costs on those larger advances can still be steep.
Interest typically compounds monthly. A case that drags on for years can leave you owing double or triple the amount advanced. Once attorneys’ fees, litigation costs, and medical liens are also taken out, the repayment obligation can eat most or all of the settlement. There is no federal regulation of the industry, which makes it hard to compare offers or spot predatory terms.9Nolo. Pros and Cons of Lawsuit Loans
Alternatives If You Don’t Clear $75,000
Most Colorado personal injury plaintiffs won’t meet the threshold, so it’s worth knowing what else is available. Options include negotiating payment plans or lien arrangements directly with medical providers, asking your attorney to advance small case-related costs or defer fees, applying for government assistance such as Medicaid or SNAP, and reaching out to local charities or nonprofits for help with rent, utilities, or food.10HighRise Legal Funding. Alternatives to Lawsuit Funding Personal loans and credit cards are also options, though they have to be repaid regardless of how the lawsuit turns out.
Who Can Legally Offer These Loans in Colorado
A pre-settlement funding company operating in Colorado must hold a supervised lender license from the UCCC Administrator, which sits inside the Colorado Attorney General’s Consumer Credit Unit.11Colorado Attorney General. Uniform Consumer Credit Code General Information Under C.R.S. § 5-2-301, anyone making supervised loans has to be licensed unless they qualify as a supervised financial organization such as a bank.12Findlaw. Colorado Revised Statutes § 5-2-301 Licensed lenders must file annual reports with the Consumer Credit Unit. Before signing anything, you can check whether a company is licensed to lend in Colorado.
In 2023, the legislature passed HB 23-1162, which gave the UCCC Administrator authority to write rules specifically for consumer credit transactions secured by potential settlement or judgment proceeds.13Colorado General Assembly. HB23-1162: Consumer Legal Funding Transactions The bill, signed into law on June 1, 2023, delegated rulemaking authority rather than setting new caps directly.
A Note on the 2025 Foreign Funding Law
Colorado’s HB 25-1329, signed June 3, 2025, and effective August 6, 2025, targets litigation funders connected to “foreign countries of concern,” defined as China, Cuba, Iran, North Korea, Russia, and Venezuela’s Maduro regime.14Colorado General Assembly. HB25-1329: Foreign Third-Party Litigation Financing15Shook Hardy & Bacon. An Update: State Laws Regulating Third-Party Litigation Financing It requires those funders to disclose their identity and funding agreements to the Attorney General within 35 days, bars them from directing case strategy or accessing proprietary or national security information, and voids agreements that violate the law, with civil penalties up to $20,000 per violation.16Legal Finance Expert. How Six States Redrew the Rules of Litigation Finance in 202517Colorado General Assembly. HB25-1329 Fiscal Note This law affects foreign-controlled funders, not the typical plaintiff seeking an advance from a licensed Colorado lender.