SF 2419 (LSB 2128SZ (2) 91)

SENATE FILE 2419

BY  COMMITTEE ON JUDICIARY

(SUCCESSOR TO SF 586)
(SUCCESSOR TO SF 54)

A BILL FOR

An Act relating to third-party litigation funding and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  PURPOSE.  In an effort to promote consumer protections related to consumer litigation funding transactions, this Act establishes that such transactions must be subject to state regulation and sets forth requirements regarding disclosure, registration, funding company and attorney responsibilities and limitations, violations, and other items. This Act also requires the disclosure of commercial litigation financing agreements and sets forth certain prohibitions regarding commercial litigation financing agreements.
    Sec. 2.  NEW SECTION.  537C.1  Title.
   This chapter shall be known and may be cited as the “Third-Party Litigation Funding Transparency Act”.
    Sec. 3.  NEW SECTION.  537C.2  Definitions.
   As used in this chapter, the following terms shall have the following meanings:
   1.  “Advertise” means publishing or disseminating any written, oral, electronic, or printed communication or any communication by means of recorded telephone messages or transmitted or broadcast on radio, television, the internet or similar communications, media, including audio recordings, film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of inducing a consumer to enter into a consumer litigation funding.
   2.  “Charges” means the amount of money to be paid to the consumer litigation funding company by or on behalf of the consumer, above the funded amount provided by or on behalf of the consumer litigation funding company to a consumer. Charges include all administrative, origination, underwriting, or other fees, including interest, no matter how denominated.
   3.  “Commercial litigation financier” means a person in the business of entering into commercial litigation financing agreements with claimants or with lawyers or law firms asserting legal claims on behalf of claimants. “Commercial litigation financier” does not include a nonprofit organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code or its funders if the nonprofit organization represents the claimant on a pro bono basis, which may include an award of costs or attorney fees to the nonprofit organization or a related attorney.
   4.  a.  “Commercial litigation financing agreement” means with respect to any civil action or group of civil actions, a written agreement or any contract that does all of the following:
   (1)  A third party agrees to provide funds to one of the named parties or any law firm affiliated with the action or group of civil actions.
   (2)  Creates a direct or collateralized interest in the proceeds of a civil action or group of civil actions, whether by settlement, verdict, judgment, or otherwise, and whose interest is based in whole or in part on a funding-based obligation to the action or group of actions or the appearing counsel or any contractual co-counsel or the law firms of the counsel or co-counsel executed with any of the following:
   (a)  Any attorney representing a party.
   (b)  Any co-counsel in the litigation with a contingent fee interest in the representation of that party.
   (c)  Any third party who has a collateral-based interest in the contingency fees of the counsel or co-counsel firm related in whole or in part to the fees derived from representing that party.
   b.  “Commercial litigation financing agreement” does not include any of the following:
   (1)  A consumer litigation funding agreement.
   (2)  An agreement by an attorney or law firm to provide legal services on a contingency fee basis to the claimant or to advance the claimant’s legal costs in accordance with the Iowa rules of professional conduct.
   (3)  A health insurer, medical provider, or assignee that has paid, is obligated to pay, or is owed any sums for a person’s health care under the terms of a health insurance plan or agreement.
   (4)  A financial institution providing loans to the claimant or the claimant’s attorney or law firm when repayment is not contingent upon the outcome of the legal claim or on the outcome of any matter within a portfolio that includes the legal claim and involves the same attorney or law firm or affiliated attorney or law firm.
   (5)  A person with a preexisting contractual obligation to indemnify or defend a party to a legal claim.
   5.  “Consumer” means a natural person or estate for a decedent with a legal claim.
   6.  “Consumer litigation funding” means a nonrecourse transaction in which a consumer litigation funding company purchases and a consumer assigns to the company a contingent right to receive an amount of the potential proceeds of a settlement, judgment, award, or verdict obtained in the consumer’s legal claim.
   7.  “Consumer litigation funding company” means a person or entity that enters into a consumer litigation funding contract with a consumer. “Consumer litigation funding company” does not include any of the following:
   a.  An immediate family member of the consumer.
   b.  A bank, lender, financing entity, or other special purpose entity that provides financing to a consumer litigation funding company or to which a consumer litigation funding company grants a security interest or transfers any rights or interest in a consumer litigation funding.
   c.  An attorney or accountant who provides services to a consumer.
   8.  “Foreign country or person of concern” means a foreign government or person listed in 15 C.F.R. §791.4 or a country designated as a threat to critical infrastructure by the governor.
   9.  “Foreign entity of concern” means an entity that is any of the following:
   a.  Organized or incorporated in a foreign country of concern.
   b.  Owned or controlled by the government, a political subdivision, or a political party of a foreign country of concern.
   c.  Has a principal place of business in a foreign country of concern.
   d.  Owned, organized, or controlled by, affiliated with, or acting on behalf of an individual or entity that is or has been any of the following:
   (1)  On a sanctions list maintained by the federal office of foreign assets control, including any of the following:
   (a)  Specially designated nationals and blocked persons list.
   (b)  Foreign sanctions evaders list.
   (c)  Non-SDN Iran sanctions act list.
   (d)  Sectoral sanctions identifications list.
   (e)  List of foreign financial institutions subject to correspondent account and payable-through account sanctions.
   (2)  Designated by the United States secretary of state as a foreign terrorist organization.
   10.  “Funded amount” means the amount of moneys provided to, or on behalf of, the consumer in a consumer litigation funding contract. “Funded amount” excludes charges.
   11.  “Funding date” means the date on which the funded amount is transferred to the consumer by the consumer litigation funding company either by personal delivery or through a wire transfer network, automated clearing house, or other electronic means or mailed by insured, certified, or registered United States mail.
   12.  “Immediate family member” means a parent; sibling; child by blood, adoption, or marriage; spouse; grandparent; or grandchild.
   13.  “Legal claim” means a civil claim or cause of action.
   14.  “Resolution date” means the date the funded amount, plus the agreed-upon charges, are delivered to the consumer litigation funding company by the consumer, the consumer’s attorney, or otherwise.
    Sec. 4.  NEW SECTION.  537C.3  Consumer litigation funding contract requirements —— right of rescission —— disclosures to consumers.
   1.  All consumer litigation funding contracts must meet all of the following requirements:
   a.  The contract shall be written in a clear and coherent manner using words with common, everyday meanings to enable the average consumer who makes a reasonable effort under ordinary circumstances to read and understand the terms of the contract without having to obtain the assistance of a professional.
   b.  The contract shall be completely filled in when presented to the consumer for signature.
   c.  The contract shall contain the initials of the consumer on each page.
   d.  The contract shall contain a statement that there are no fees or charges to be paid by the consumer other than what is disclosed on the disclosure form.
   e.  In the event the consumer seeks more than one litigation funding contract from the same company, the contract shall contain a statement providing the cumulative amount due from the consumer for all transactions, including charges under all contracts, if repayment is made any time after the contracts are executed.
   f.  The contract shall contain a statement of the maximum amount the consumer may be obligated to pay under the contract other than in a case of material breach, fraud, or misrepresentation by or on behalf of the consumer.
   g.  The contract shall clearly and conspicuously detail how charges, including any applicable fees, are incurred or accrued.
   2.  All consumer litigation funding contracts must contain the disclosures specified in this section, which shall constitute material terms of the contract. Unless otherwise specified, such disclosures shall be typed in at least twelve point bold type font and be placed clearly and conspicuously within the contract, as follows:
   a.  On the front page under appropriate headings, language specifying all of the following:
   (1)  The funded amount to be paid to the consumer by the consumer litigation funding company.
   (2)  An itemization of one-time charges.
   (3)  The maximum total amount to be assigned by the consumer to the company, including the funded amount and all charges.
   (4)  A payment schedule to include the funded amount and charges, listing all dates and the amount due at the end of each one-hundred-eighty-day period from the funding date, until the date the maximum amount due to the company pursuant to the contract is paid.
   b.  Within the body of the consumer litigation funding contract, language stating all of the following:
   Consumer’s right to cancellation: you may cancel this contract without penalty or further obligation within ten business days after the funding date if you return to the consumer litigation funding company the full amount of the disbursed funds.
   The consumer litigation funding company shall have no role in deciding whether, when, and how much the legal claim is settled for; however, the consumer and consumer’s attorney must notify the consumer litigation funding company of the outcome of the legal claim by settlement or adjudication prior to or on the resolution date. The company may seek updated information about the status of the legal claim but in no event shall the company attempt to interfere with, control, or influence the independent professional judgment of the attorney in the handling of the legal claim or any settlement thereof.
   THE FUNDED AMOUNT AND AGREED-UPON CHARGES SHALL BE PAID ONLY FROM THE PROCEEDS OF YOUR LEGAL CLAIM, AND SHALL BE PAID ONLY TO THE EXTENT THAT THERE ARE AVAILABLE PROCEEDS FROM YOUR LEGAL CLAIM. YOU WILL NOT OWE (INSERT NAME OF THE CONSUMER LITIGATION FUNDING COMPANY) ANYTHING IF THERE ARE NO PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU HAVE VIOLATED ANY MATERIAL TERM OF THIS CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST (INSERT NAME OF CONSUMER LITIGATION FUNDING COMPANY).

   c.  Located immediately above the place on the contract where the consumer’s signature is required, in twelve point bold type font: Do not sign this contract before you read it completely. Do not sign this contract if it contains any blank spaces. You are entitled to a completely filled-in copy of the contract before you sign this contract. You should obtain the advice of an attorney before signing this contract. Depending on the circumstances, you may want to consult a tax, public or private benefits planning, or financial professional. You acknowledge that your attorney in the legal claim has provided no tax, public or private benefit planning, or financial advice regarding this transaction. You further acknowledge that your attorney has explained the terms and conditions of the consumer litigation funding contract.
   3.  All consumer litigation funding contracts must contain a written acknowledgment by the attorney retained by the consumer in the legal claim that attests to all of the following:
   a.  The attorney has reviewed the disclosures in subsections 1 and 2 with the consumer.
   b.  The attorney is being paid on a contingency basis pursuant to a written fee agreement.
   c.  All proceeds of the legal claim will be disbursed via either the trust account of the attorney or a settlement fund established to receive the proceeds of the legal claim on behalf of the consumer.
   d.  The attorney is obligated to disburse funds from the legal claim and take any other steps to ensure that the terms of the litigation funding contract are fulfilled.
   e.  The attorney has not received a referral fee or other consideration from the consumer litigation funding company in connection with the consumer litigation funding, nor will the attorney receive such fee or other consideration in the future.
   f.  The attorney in the legal claim has provided no tax, public, or private benefit planning, or financial advice regarding this transaction.
   4.  In the event that the acknowledgement required pursuant to subsection 3 is not provided by the attorney or firm retained by the consumer in the legal claim, the consumer litigation funding contract shall be null and void. The consumer litigation funding contract shall remain valid and enforceable in the event the consumer terminates the initial attorney or retains a new attorney with respect to the legal claim.
   5.  A copy of the executed contract shall promptly be delivered to the attorney for the consumer.
    Sec. 5.  NEW SECTION.  537C.4  Consumer litigation funding prohibitions and charge limitations.
   1.  Consumer litigation funding companies shall not do any of the following:
   a.  Pay or offer to pay commissions, referral fees, or other forms of consideration to any attorney, law firm, health care provider, chiropractor, physical therapist, or any of such person’s employees for referring a consumer to the consumer litigation funding company.
   b.  Accept commissions, referral fees, rebates, or other forms of consideration from an attorney, law firm, health care provider, chiropractor, physical therapist, or any of such person’s employees.
   c.  Intentionally advertise false or misleading information regarding the consumer litigation funding company’s products or services.
   d.  Refer, in furtherance of an initial legal funding, a customer or potential customer to a specific attorney, law firm, health care provider, chiropractor, physical therapist, or any of such person’s employees; provided, however, if a customer needs legal representation, the consumer litigation funding company may refer the customer to a local or state bar association referral service.
   e.  Knowingly provide funding to a consumer who has previously assigned or sold a portion of the consumer’s right to proceeds from a legal claim without first making payment to or purchasing a prior unsatisfied consumer litigation funding company’s entire funded amount and contracted charges, unless a lesser amount is otherwise agreed to in writing by the consumer litigation funding company, except that multiple companies may agree to contemporaneously provide consumer litigation funding to a consumer provided that the consumer and the consumer’s attorney consent to the arrangement in writing.
   f.  Make any decision, have any influence, or direct any decisions with respect to the course of a legal claim, including decisions in appointing or changing counsel, choice or use of expert witnesses, litigation strategy, and settlement or other resolution. The right to make all decisions regarding a legal claim remains solely with the claimant and the claimant’s attorney or law firm.
   g.  Attempt to obtain a waiver of any remedy or right by the consumer, including but not limited to the right to trial by jury.
   h.  Knowingly pay or offer to pay for court costs, filing fees, or attorney fees either during or after the resolution of the legal claim, using funds from the consumer litigation funding transaction.
   2.  Notwithstanding any other provision of law, prepayment penalties or fees shall not be charged or collected in connection with a consumer litigation funding transaction. A prepayment penalty in a consumer litigation funding transaction is unenforceable.
   3.  An attorney or law firm retained by the consumer in a legal claim shall not have a financial interest in the consumer litigation funding company offering consumer litigation funding to that consumer.
   4.  An attorney who has referred the consumer to a retained attorney shall not have a financial interest in the consumer litigation funding company offering consumer litigation funding to that consumer.
   5.  An attorney shall not disclose confidential or privileged information to a consumer litigation funding company without the written consent of the consumer and in accord with any order of the court in the litigation.
   6.  A consumer litigation funding company shall not enter into a consumer litigation financing contract directly or indirectly with a foreign entity of concern or a foreign country or person of concern.
    Sec. 6.  NEW SECTION.  537C.5  Contracted amounts for consumer litigation funding.
   The contracted amount to be paid to the consumer litigation funding company shall be a predetermined amount based upon intervals of time from the funding date through the resolution date, and shall not be determined as a percentage of the recovery from the legal claim.
    Sec. 7.  NEW SECTION.  537C.6  Disclosures.
   1.  Within thirty days of a written request, a consumer shall disclose to any party to a legal claim and each insurer that has a duty to defend whether the consumer has entered into a consumer litigation funding contract.
   2.  If a consumer enters into a consumer litigation funding contract after responding to a request pursuant to subsection 1, the consumer has a continuing obligation to disclose and shall disclose this fact to the requesting person within thirty days after the consumer enters into the contract.
   3.  Consumer litigation funding contracts, and all participants or parties to the consumer litigation contract, are presumed to be discoverable in a civil proceeding, notwithstanding any agreement or provision with respect to confidentiality. A consumer may seek to rebut this presumption.
   4.  Consumer litigation funding transactions disclosed under subsections 1 and 2 and consumer litigation funding contracts discovered pursuant to subsection 3 are presumed to be inadmissible as evidence. A party may seek to rebut this presumption.
    Sec. 8.  NEW SECTION.  537C.7  Violations of consumer litigation funding requirements.
   1.  If a consumer litigation funding company that willfully violates any provision of this chapter in a specific funding case, all of the following apply:
   a.  Shall waive the consumer litigation funding company’s right to recover both the funded amount and any and all charges, as defined in section 537C.2, in that particular case.
   b.  Shall be liable for a civil penalty of not more than one hundred thousand dollars for each violation, which shall accrue to the state of Iowa and may be recovered in a legal claim brought by the attorney general.
   2.  This chapter shall not restrict the power of the attorney general.
    Sec. 9.  NEW SECTION.  537C.8  Assignability —— liens regarding consumer litigation funding.
   1.  The contingent right to receive an amount of the potential proceeds of a legal claim is assignable by a consumer to a consumer litigation funding company.
   2.  Only attorney’s liens related to the legal claim which is the subject of the consumer litigation funding, Medicare, or other statutory liens related to the legal claim shall take priority over any lien of the consumer litigation funding company.
    Sec. 10.  NEW SECTION.  537C.9  Consumer litigation funding privileged communications.
   Communications between a consumer’s attorney and a consumer legal funding company to allow the consumer legal funding company to ascertain the status of a legal claim or a legal claim’s expected value shall not be discoverable by a person against whom the legal claim is asserted or filed.
    Sec. 11.  NEW SECTION.  537C.10  Consumer litigation funding and commercial litigation financing registration.
   1.  Unless a consumer litigation funding company or commercial litigation financier has first registered with the state pursuant to this chapter, the company shall not engage in consumer litigation funding or commercial litigation financing agreements in this state.
   2.  An applicant’s registration must be filed in the manner prescribed by the secretary of state and must contain all the information required by the secretary of state to make an evaluation of the character and fitness of the applicant company or financier, including but not limited to any beneficial ownership exceeding twenty percent. The initial application must be accompanied by a fee determined by the secretary of state. A renewal registration must include a fee determined by the secretary of state. A registration must be renewed every two years and expires on December 31.
   3.  A certificate of registration shall not be issued unless the secretary of state, upon investigation, finds that the character and fitness of the applicant company or financier, and of the officers and directors thereof, are such as to warrant belief that the business will be operated honestly and fairly within the purposes of this chapter.
   4.  Every registrant shall, at the time of filing such application, file with the secretary of state, if the secretary of state so requires, a bond satisfactory to the secretary of state in an amount not to exceed one hundred thousand dollars. In lieu of the bond at the option of the registrant, the registrant may post an irrevocable letter of credit. The terms of the bond must run concurrent with the period of time during which the registration will be in effect. The bond must provide that the registrant will faithfully conform to and abide by the provisions of this chapter and to all rules lawfully made by the administrator under this chapter and to any such person or persons any and all amounts of money that may become due or owing to the state or to such person or persons from the registrant under and by virtue of this chapter during the period for which the bond is given.
   5.  Upon written request, the applicant shall be entitled to a hearing on the question of the applicant’s qualifications for registration if any of the following are true:
   a.  The secretary of state has notified the applicant in writing that the application has been denied.
   b.  The secretary of state has not issued a registration within sixty days after the application for the registration was filed.
   6.  A request for a hearing shall not be made more than fifteen days after the secretary of state has mailed a written notice to the applicant that the application has been denied and stating in substance the secretary of state’s findings supporting denial of the application.
   7.  Notwithstanding the prior approval requirement of subsection 1, a consumer litigation funding company or commercial litigation financier that registered with the secretary of state between the effective date of this Act or when the secretary of state has made applications available to the public, whichever is later, and one hundred eighty days thereafter may engage in consumer commercial litigation funding or commercial litigation financing agreements while the company’s registration is pending approval with the secretary of state. All consumer litigation funding or commercial litigation financing agreements entered into prior to the effective date of this Act are not subject to the terms of this chapter.
   8.  A person or entity shall not use any form of consumer litigation funding contract or commercial litigation financing agreement in this state unless it has been filed with the secretary of state in accordance with the filing procedures set forth by the secretary of state. Such procedures shall designate a reasonable time frame for the state to raise objections to any filed form.
    Sec. 12.  NEW SECTION.  537C.11  Commercial litigation financing reporting.
   1.  Each commercial litigation financier that engages in business in the state shall annually submit a report to the secretary of state by December 31 specifying all of the following:
   a.  The number of litigation fundings by the company or financier that year.
   b.  A summation of funded amounts in dollars that year.
   c.  The annual percentage charged to each consumer or commercial litigation funding recipient where repayment was made that year.
   2.  The secretary of state shall make such information available to the public, in a manner which maintains the confidentiality of the name of each company and consumer, no later than thirty days after the reports are submitted.
    Sec. 13.  NEW SECTION.  537C.12  Prohibitions related to commercial litigation funding.
   1.  A commercial litigation financier shall not enter into a commercial litigation financing agreement directly or indirectly with a foreign entity of concern, a foreign country, or person of concern.
   2.  A claimant, attorney, or law firm representing a claimant, affiliated attorney, or law firm shall not disclose or share any documents or information with a commercial litigation financier where such information is subject to a protective or sealing order from a court.
   3.  A commercial litigation financier shall not make any decision, have any influence, or direct any decisions with respect to the course of a legal claim, including decisions in appointing or changing counsel, choice or use of expert witnesses, litigation strategy, and settlement or other resolution. The right to make all decisions regarding a legal claim remains solely with the claimant and the claimant’s attorney or law firm.
    Sec. 14.  NEW SECTION.  537C.13  Commercial litigation financing agreement disclosure and discovery.
   1.  Except as otherwise stipulated or ordered by the court, a claimant or the claimant’s attorney shall, without awaiting a discovery request, provide to all parties any commercial litigation financing agreement at the time a legal claim is asserted or commenced and any time thereafter that a commercial litigation financing agreement is executed or amended. An insurer that has or may have a duty to defend or indemnify a party to a legal claim shall be provided with the commercial litigation financing agreement or any modifications or amendments to the agreement.
   2.  Commercial litigation financing agreements and all participants or parties to such agreements are permissible subjects of discovery in a legal claim.
    Sec. 15.  NEW SECTION.  537C.14  Authority of secretary of state to promulgate certain rules.
   The secretary of state is authorized to adopt rules necessary to effectuate the purposes of this chapter.
    Sec. 16.  APPLICABILITY.  This Act applies to any consumer litigation funding, contract, or commercial litigation financing agreement that is effectuated on or after July 1, 2026.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill creates the third-party litigation funding transparency Act, which provides the terms, conditions, and disclosures related to consumer litigation funding transactions.
   The bill defines “consumer litigation funding” to mean a nonrecourse transaction in which a consumer litigation funding company purchases, and a consumer assigns to the company, a contingent right to receive an amount of the potential proceeds of settlement, judgment, award, or verdict obtained in the consumer’s legal claim.
   The bill requires all consumer litigation funding contracts to do the following: (1) be written in a clear and coherent manner, (2) be completely finished when presented to the consumer for a signature, (3) contain the initial of the consumer on each page of the contract, (4) have a statement providing there are no fees or charges other than the ones listed in the contract, (5) if a consumer has more than one consumer litigation funding contract with the same company, each contract must provide the cumulative amount due from the consumer for all transactions, (6) contain a statement of the maximum amount the consumer may be obligated to pay, and (7) detail how charges or fees are incurred or accrued. A consumer litigation funding contract must include disclosures required by the bill and the manner in which disclosures are typed. The bill requires a consumer litigation funding contract to have a written acknowledgment by the attorney retained by the consumer in the legal claim. If such required attorney acknowledgment is not provided, the consumer litigation funding contract is null and void. If the consumer retains a new attorney or terminates the initial attorney, the consumer litigation funding contract is considered enforceable. The bill requires a copy of the executed contract to be promptly delivered to the consumer’s attorney.
   The bill prohibits consumer litigation funding companies from doing any of the following: (1) paying or offering to pay commissions, referral fees, or other forms of consideration to any person for referring a consumer to the consumer litigation funding company, (2) accepting commissions, referral fees, rebates, or other forms of consideration from an attorney, law firm, health care provider, chiropractor, physical therapist, or any of such person’s employees, (3) intentionally advertising false or misleading information regarding the consumer litigation funding company’s products or services, (4) referring, in furtherance of an initial legal funding, a customer or potential customer to a specific person, (5) knowingly providing funding to a consumer who has previously assigned or sold a portion of the consumer’s right to proceeds from a legal claim without first making payment to or purchasing a prior unsatisfied consumer litigation funding company’s entire funded amount and contracted charges, (6) making any decision, having any influence, or directing any decisions with respect to the course of a legal claim, (7) attempting to obtain a waiver of any remedy or right by the consumer, and (8) knowingly paying or offering to pay for court costs, filing fees, or attorney fees using funds from the consumer litigation funding transaction. The bill provides that a consumer litigation funding company shall not enter into a consumer litigation financing contract directly or indirectly with a foreign entity of concern or a foreign country or person of concern, as those terms are defined in the bill.
   The bill requires that the contracted amount to be paid to the consumer litigation funding company to be a predetermined amount and shall not be determined as a percentage of the recovery from the legal claim.
   The bill requires that within 30 days of a written request, a consumer shall disclose to any party to a legal claim and each insurer that has a duty to defend whether the consumer has entered into a consumer litigation funding contract. The consumer has an ongoing obligation to disclose a consumer litigation funding contract to such parties if entered into after the initial request. The bill provides that consumer litigation funding contracts, and all participants or parties to the consumer litigation contract, are presumed to be discoverable in a civil proceeding. However, consumer litigation funding transactions disclosed under the bill and consumer litigation funding contracts discovered pursuant to the bill are presumed to be inadmissible as evidence.
   The bill provides damages and penalties for a violation of a consumer litigation funding requirement.
   The bill allows the contingent right to receive an amount of the potential proceeds of a legal claim to be assignable by a consumer to a consumer litigation funding company. The bill also provides which liens shall take priority.
   The bill provides for privileged communications between a consumer’s attorney and a consumer legal funding company to allow the consumer legal funding company to ascertain the status of a legal claim.
   The bill requires the registration of consumer litigation funding companies and commercial litigation financers with the secretary of state. The bill provides registration requirements and procedures for a consumer litigation funding company or commercial litigation financer. The bill requires a commercial litigation financier or consumer litigation funding company to submit annual reports to the secretary of state. The bill provides that all documents and information filed with the secretary of state pursuant to the registration are public records.
   The bill prohibits a commercial litigation financier from entering into a commercial litigation financing agreement directly or indirectly with a foreign entity of concern, a foreign country, or person of concern. The bill prohibits a claimant, attorney, or law firm representing a claimant, affiliated attorney, or law firm from disclosing or sharing any documents or information with a commercial litigation financier where such information is subject to a protective or sealing order from a court. The bill further prohibits a commercial litigation financier from making any decision, having any influence, or directing any decisions with respect to the course of a legal claim.
   The bill authorizes the secretary of state to adopt rules necessary to effectuate the purposes of the bill.
   The bill applies to any consumer litigation funding, contract, or commercial litigation financing agreement that is effectuated on or after July 1, 2026.