Regulating litigation financing contracts, and including effective date and applicability provisions

This bill creates the litigation financing transparency and consumer protection Act. The bill requires the registration of litigation financers with the secretary of state. The bill provides registration requirements and procedures for the litigation financer. The bill provides that all documents and information filed with the secretary of state pursuant to the registration of the ligation financer are public records. The bill provides limitations on how a litigation financer may conduct business. A litigation financer may not (1) pay or offer any form of consideration to any person in exchange for referring a consumer to a litigation financer, (2) accept any type of consideration from any person providing any goods or rendering any services to the consumer, (3) charge a rate of interest that exceeds the rate of interest allowed under Code chapter 535 (money and interest), (4) receive or recover any payment that exceeds percent of the reward obtained in the action subject to the litigation contract, (5) advertise false or misleading information regarding the litigation financer products or services, (6) refer or require any consumer to hire or engage any person providing any goods or rendering any services to the consumer, (7) fail to promptly deliver a fully completed and signed litigation financing contract to the consumer and the consumer’s legal representative, (8) attempt to secure a remedy or obtain a waiver of any remedy, including but not limited to compensatory, statutory, or punitive damages, (9) offer or provide legal advice to the consumer, (10) assign a litigation financing contract in whole or in part, (11) report a consumer to a credit reporting agency, or (12) demand, request, receive, or exercise any right to influence, affect, or otherwise make any decision in the handling, conduct, administration, litigation, settlement, or resolution of any civil action, administrative proceeding, claim, or cause of action in which the litigation financer has provided litigation financing. The bill also provides that a person who provides any goods or renders any services to the consumer shall not have a financial interest in litigation financing. The bill provides the terms, conditions, and disclosures required in a litigation financer contract. Upon execution of the contract, the litigation financer may not amend any terms or conditions of the contract without full disclosure and written consent of all parties. The bill provides that a consumer or legal representative of a consumer, unless otherwise stipulated or ordered by the court, shall disclose and deliver the litigation financing contract to each party of the matter, the court, and any known person with a contractual obligation in the matter. The bill provides exemptions to the new Code chapter, including: (1) a nonprofit organization that provides litigation financing for the benefit of the nonprofit organization or one or more of the nonprofit organization’s members; (2) an entity engaged in commerce or business activity, but only if the entity does not: charge or collect any interest, fees, or other consideration; retain or receive any financial interest in the outcome of the civil action, administrative proceeding, claim, or cause of action; and receive any right to recovery or payment from the amount of any judgment, award, settlement, verdict, or other form of monetary relief obtained in the matter; or (3) a regulated lender that does not receive a right to receive payment from the value of any proceeds or other consideration realized from any reward received or recovered in relation to the matter. The bill provides that the new Code chapter applies to class actions. The bill provides that a litigation financer is jointly and severally liable for any award or order imposing or assessing costs or monetary sanctions against a consumer arising from or relating to matters for which the litigation financer is providing litigation financing. The bill authorizes the secretary of state to adopt rules or other policies to enforce the new Code chapter. The bill provides that any violation of the new Code chapter by the litigation financer shall render the contract void and may be subject to penalties. The bill takes effect on January 1, 2026, and applies to any civil action or administrative proceeding involving a litigation financer pending on or commenced after January 1, 2026.