SB 967 - This act establishes the "Litigation Financing Consumer Protection Act".
Under this act, no person shall engage in litigation financing unless registered with the Division of Finance within the Department of Insurance, Financial Institutions and Professional Registration. This act sets forth registration requirements based upon if such person is a business entity or partnership, or is neither. If such person is not a business entity or partnership, the person shall be required to file an application for registration as a litigation financier, and pay a filing fee of $100. Further, each litigation financier shall also file a $50,000 surety bond with the Division of Finance, with such bond being used by the Attorney General and any person who may have a cause of action against the obligor of the bond. If a litigation financier's information changes, they shall amend their registration with the Division of Finance and shall pay a $20 fee. All documents filed under this act shall be considered a public record.
This act requires a litigation financier to meet certain requirements set forth in this act, including setting forth the terms of the litigation financing transaction in a written contract that is completely filled in, requiring such contract to have a right of rescission allowing the consumer to cancel within 5 business days, requiring such contract contain a written acknowledgment of whether the consumer is represented by an attorney, and if so, acknowledgments on behalf of such attorney, and if proceeds are paid into a settlement fund, the financier shall notify the administrator of the fund of any outstanding liens from the litigation financing contract.
This act prohibits litigation financiers from taking certain actions, including paying or accepting commissions or referral fees from certain entities, advertising false or misleading information, referring a consumer to a specific entity, failing to provide copies of all litigation financing contracts to the consumer and their attorney, attempting to obtain a waiver of any remedy, attempting to affect arbitration, offering legal advice, and assigning a litigation financing contract.
This act requires litigation financing contracts to contain certain disclosures. On the front page of the contract, such disclosures shall include the total amount of money provided to the consumer, the maximum amount the consumer can be required to provide to the litigation financier, the maximum annual percentage fee, and the consumer's right to cancellation. This act also requires that the contract contain a provision stating that if there is no recovery of any money from the consumer's legal claim or enough to satisfy the portion assigned to the financier in full, that the consumer will not owe such financier anything in excess of such consumer's recovery. The contract shall also include a provision immediately above the place where the consumer's signature is required, as set forth in this act.
Under this act, the contingent right to receive an amount of the potential proceeds of a legal claim my be assigned by a consumer, and a lien on such consumer's legal claim shall take priority over any lien of the litigation financier.
All consumers entering into litigation financing transactions shall pay a maximum interest rate not to exceed 17% per year. Such transactions shall not exceed a term of 3 years, and are limited to a maximum yearly fee not to exceed $360 per year for each $1,000 of unpaid principal funds advanced to the consumer. Further, such litigation financiers shall not enter into an agreement with the consumer that incorporates an original litigation financing transaction into a subsequent litigation financing transaction.
Any violation of this act shall make the litigation financing contract unenforceable. Further, any violation shall constitute an unlawful practice under merchandising practices provisions of law, and shall be enforced by the Attorney General.
This act is similar to HB 2226 (2018).