S.F. 586 Section 1. PURPOSE. In an effort to promote consumer 1 protections related to consumer litigation funding 2 transactions, this Act establishes that such transactions must 3 be subject to state regulation and sets forth requirements 4 regarding disclosure, registration, funding company and 5 attorney responsibilities and limitations, violations, 6 and other items. This Act also requires the disclosure of 7 commercial litigation financing agreements and sets forth 8 certain prohibitions regarding commercial litigation financing 9 agreements. 10 Sec. 2. NEW SECTION . 537C.1 Title. 11 This chapter shall be known and may be cited as the 12 “Third-Party Litigation Funding Transparency Act” . 13 Sec. 3. NEW SECTION . 537C.2 Definitions. 14 As used in this chapter, the following terms shall have the 15 following meanings: 16 1. “Advertise” means publishing or disseminating any 17 written, oral, electronic, or printed communication or any 18 communication by means of recorded telephone messages or 19 transmitted or broadcast on radio, television, the internet or 20 similar communications, media, including audio recordings, film 21 strips, motion pictures and videos, published, disseminated, 22 circulated or placed before the public, directly or indirectly, 23 for the purpose of inducing a consumer to enter into a consumer 24 litigation funding. 25 2. “Charges” means the amount of money to be paid to the 26 consumer litigation funding company by or on behalf of the 27 consumer, above the funded amount provided by or on behalf of 28 the consumer litigation funding company to a consumer. Charges 29 include all administrative, origination, underwriting, or other 30 fees, including interest, no matter how denominated. 31 3. “Commercial litigation financier” means a person in the 32 business of entering into commercial litigation financing 33 agreements with claimants or with lawyers or law firms 34 asserting legal claims on behalf of claimants. “Commercial 35 -1- LSB 2128SV (4) 91 cm/jh 1/ 19

S.F. 586 litigation financier” does not include a nonprofit organization 1 exempt from federal income tax under section 501(c)(3) of 2 the Internal Revenue Code or its funders if the nonprofit 3 organization represents the claimant on a pro bono basis, which 4 may include an award of costs or attorney fees to the nonprofit 5 organization or a related attorney. 6 4. a. “Commercial litigation financing agreement” means 7 with respect to any civil action or group of civil actions, 8 a written agreement or any contract that does all of the 9 following: 10 (1) A third party agrees to provide funds to one of the 11 named parties or any law firm affiliated with the action or 12 group of civil actions. 13 (2) Creates a direct or collateralized interest in the 14 proceeds of a civil action or group of civil actions, whether 15 by settlement, verdict, judgment, or otherwise, and whose 16 interest is based in whole or in part on a funding-based 17 obligation to the action or group of actions or the appearing 18 counsel or any contractual co-counsel or the law firms of the 19 counsel or co-counsel executed with any of the following: 20 (a) Any attorney representing a party. 21 (b) Any co-counsel in the litigation with a contingent fee 22 interest in the representation of that party. 23 (c) Any third party who has a collateral-based interest in 24 the contingency fees of the counsel or co-counsel firm related 25 in whole or in part to the fees derived from representing that 26 party. 27 b. “Commercial litigation financing agreement” does not 28 include any of the following: 29 (1) A consumer litigation funding agreement. 30 (2) An agreement by an attorney or law firm to provide 31 legal services on a contingency fee basis to the claimant or to 32 advance the claimant’s legal costs in accordance with the Iowa 33 rules of professional conduct. 34 (3) A health insurer, medical provider, or assignee that has 35 -2- LSB 2128SV (4) 91 cm/jh 2/ 19

S.F. 586 paid, is obligated to pay, or is owed any sums for a person’s 1 health care under the terms of a health insurance plan or 2 agreement. 3 (4) A financial institution providing loans to the claimant 4 or the claimant’s attorney or law firm when repayment is not 5 contingent upon the outcome of the legal claim or on the 6 outcome of any matter within a portfolio that includes the 7 legal claim and involves the same attorney or law firm or 8 affiliated attorney or law firm. 9 (5) A person with a preexisting contractual obligation to 10 indemnify or defend a party to a legal claim. 11 5. “Consumer” means a natural person or estate for a 12 decedent with a legal claim. 13 6. “Consumer litigation funding” means a nonrecourse 14 transaction in which a consumer litigation funding company 15 purchases and a consumer assigns to the company a contingent 16 right to receive an amount of the potential proceeds of 17 a settlement, judgment, award, or verdict obtained in the 18 consumer’s legal claim. 19 7. “Consumer litigation funding company” means a person or 20 entity that enters into a consumer litigation funding contract 21 with a consumer. “Consumer litigation funding company” does not 22 include any of the following: 23 a. An immediate family member of the consumer. 24 b. A bank, lender, financing entity, or other special 25 purpose entity that provides financing to a consumer litigation 26 funding company or to which a consumer litigation funding 27 company grants a security interest or transfers any rights or 28 interest in a consumer litigation funding. 29 c. An attorney or accountant who provides services to a 30 consumer. 31 8. “Foreign country or person of concern” means a foreign 32 government or person listed in 15 C.F.R. §791.4 or a country 33 designated as a threat to critical infrastructure by the 34 governor. 35 -3- LSB 2128SV (4) 91 cm/jh 3/ 19

S.F. 586 9. “Foreign entity of concern” means an entity that is any 1 of the following: 2 a. Organized or incorporated in a foreign country of 3 concern. 4 b. Owned or controlled by the government, a political 5 subdivision, or a political party of a foreign country of 6 concern. 7 c. Has a principal place of business in a foreign country 8 of concern. 9 d. Owned, organized, or controlled by, affiliated with, or 10 acting on behalf of an individual or entity that is or has been 11 any of the following: 12 (1) On a sanctions list maintained by the federal office of 13 foreign assets control, including any of the following: 14 (a) Specially designated nationals and blocked persons 15 list. 16 (b) Foreign sanctions evaders list. 17 (c) Non-SDN Iran sanctions act list. 18 (d) Sectoral sanctions identifications list. 19 (e) List of foreign financial institutions subject to 20 correspondent account and payable-through account sanctions. 21 (2) Designated by the United States secretary of state as a 22 foreign terrorist organization. 23 10. “Funded amount” means the amount of moneys provided to, 24 or on behalf of, the consumer in a consumer litigation funding 25 contract. “Funded amount” excludes charges. 26 11. “Funding date” means the date on which the funded amount 27 is transferred to the consumer by the consumer litigation 28 funding company either by personal delivery or through a wire 29 transfer network, automated clearing house, or other electronic 30 means or mailed by insured, certified, or registered United 31 States mail. 32 12. “Immediate family member” means a parent; sibling; 33 child by blood, adoption, or marriage; spouse; grandparent; or 34 grandchild. 35 -4- LSB 2128SV (4) 91 cm/jh 4/ 19

S.F. 586 13. “Legal claim” means a civil claim or cause of action. 1 14. “Resolution date” means the date the funded amount, 2 plus the agreed-upon charges, are delivered to the consumer 3 litigation funding company by the consumer, the consumer’s 4 attorney, or otherwise. 5 Sec. 4. NEW SECTION . 537C.3 Consumer litigation funding 6 contract requirements —— right of rescission —— disclosures to 7 consumers. 8 1. All consumer litigation funding contracts must meet all 9 of the following requirements: 10 a. The contract shall be written in a clear and coherent 11 manner using words with common, everyday meanings to enable the 12 average consumer who makes a reasonable effort under ordinary 13 circumstances to read and understand the terms of the contract 14 without having to obtain the assistance of a professional. 15 b. The contract shall be completely filled in when presented 16 to the consumer for signature. 17 c. The contract shall contain the initials of the consumer 18 on each page. 19 d. The contract shall contain a statement that there are no 20 fees or charges to be paid by the consumer other than what is 21 disclosed on the disclosure form. 22 e. In the event the consumer seeks more than one litigation 23 funding contract from the same company, the contract shall 24 contain a statement providing the cumulative amount due from 25 the consumer for all transactions, including charges under all 26 contracts, if repayment is made any time after the contracts 27 are executed. 28 f. The contract shall contain a statement of the maximum 29 amount the consumer may be obligated to pay under the 30 contract other than in a case of material breach, fraud, or 31 misrepresentation by or on behalf of the consumer. 32 g. The contract shall clearly and conspicuously detail 33 how charges, including any applicable fees, are incurred or 34 accrued. 35 -5- LSB 2128SV (4) 91 cm/jh 5/ 19

S.F. 586 2. All consumer litigation funding contracts must contain 1 the disclosures specified in this section, which shall 2 constitute material terms of the contract. Unless otherwise 3 specified, such disclosures shall be typed in at least twelve 4 point bold type font and be placed clearly and conspicuously 5 within the contract, as follows: 6 a. On the front page under appropriate headings, language 7 specifying all of the following: 8 (1) The funded amount to be paid to the consumer by the 9 consumer litigation funding company. 10 (2) An itemization of one-time charges. 11 (3) The maximum total amount to be assigned by the consumer 12 to the company, including the funded amount and all charges. 13 (4) A payment schedule to include the funded amount and 14 charges, listing all dates and the amount due at the end of 15 each one-hundred-eighty-day period from the funding date, until 16 the date the maximum amount due to the company pursuant to the 17 contract is paid. 18 b. Within the body of the consumer litigation funding 19 contract, language stating all of the following: 20 Consumer’s right to cancellation: you may cancel this 21 contract without penalty or further obligation within ten 22 business days after the funding date if you return to the 23 consumer litigation funding company the full amount of the 24 disbursed funds. 25 The consumer litigation funding company shall have no role 26 in deciding whether, when, and how much the legal claim is 27 settled for; however, the consumer and consumer’s attorney must 28 notify the consumer litigation funding company of the outcome 29 of the legal claim by settlement or adjudication prior to or on 30 the resolution date. The company may seek updated information 31 about the status of the legal claim but in no event shall 32 the company attempt to interfere with, control, or influence 33 the independent professional judgment of the attorney in the 34 handling of the legal claim or any settlement thereof. 35 -6- LSB 2128SV (4) 91 cm/jh 6/ 19

S.F. 586 THE FUNDED AMOUNT AND AGREED-UPON CHARGES SHALL BE PAID 1 ONLY FROM THE PROCEEDS OF YOUR LEGAL CLAIM, AND SHALL BE PAID 2 ONLY TO THE EXTENT THAT THERE ARE AVAILABLE PROCEEDS FROM YOUR 3 LEGAL CLAIM. YOU WILL NOT OWE (INSERT NAME OF THE CONSUMER 4 LITIGATION FUNDING COMPANY) ANYTHING IF THERE ARE NO PROCEEDS 5 FROM YOUR LEGAL CLAIM, UNLESS YOU HAVE VIOLATED ANY MATERIAL 6 TERM OF THIS CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST 7 (INSERT NAME OF CONSUMER LITIGATION FUNDING COMPANY). 8 c. Located immediately above the place on the contract 9 where the consumer’s signature is required, in twelve point 10 bold type font: Do not sign this contract before you read it 11 completely. Do not sign this contract if it contains any blank 12 spaces. You are entitled to a completely filled-in copy of the 13 contract before you sign this contract. You should obtain the 14 advice of an attorney before signing this contract. Depending 15 on the circumstances, you may want to consult a tax, public 16 or private benefits planning, or financial professional. You 17 acknowledge that your attorney in the legal claim has provided 18 no tax, public or private benefit planning, or financial advice 19 regarding this transaction. You further acknowledge that your 20 attorney has explained the terms and conditions of the consumer 21 litigation funding contract. 22 3. All consumer litigation funding contracts must contain a 23 written acknowledgment by the attorney retained by the consumer 24 in the legal claim that attests to all of the following: 25 a. The attorney has reviewed the disclosures in subsections 26 1 and 2 with the consumer. 27 b. The attorney is being paid on a contingency basis 28 pursuant to a written fee agreement. 29 c. All proceeds of the legal claim will be disbursed via 30 either the trust account of the attorney or a settlement fund 31 established to receive the proceeds of the legal claim on 32 behalf of the consumer. 33 d. The attorney is obligated to disburse funds from the 34 legal claim and take any other steps to ensure that the terms 35 -7- LSB 2128SV (4) 91 cm/jh 7/ 19

S.F. 586 of the litigation funding contract are fulfilled. 1 e. The attorney has not received a referral fee or other 2 consideration from the consumer litigation funding company in 3 connection with the consumer litigation funding, nor will the 4 attorney receive such fee or other consideration in the future. 5 f. The attorney in the legal claim has provided no tax, 6 public, or private benefit planning, or financial advice 7 regarding this transaction. 8 4. In the event that the acknowledgement required pursuant 9 to subsection 3 is not provided by the attorney or firm 10 retained by the consumer in the legal claim, the consumer 11 litigation funding contract shall be null and void. The 12 consumer litigation funding contract shall remain valid and 13 enforceable in the event the consumer terminates the initial 14 attorney or retains a new attorney with respect to the legal 15 claim. 16 5. A copy of the executed contract shall promptly be 17 delivered to the attorney for the consumer. 18 Sec. 5. NEW SECTION . 537C.4 Consumer litigation funding 19 prohibitions and charge limitations. 20 1. Consumer litigation funding companies shall not do any 21 of the following: 22 a. Pay or offer to pay commissions, referral fees, or other 23 forms of consideration to any attorney, law firm, health care 24 provider, chiropractor, physical therapist, or any of such 25 person’s employees for referring a consumer to the consumer 26 litigation funding company. 27 b. Accept commissions, referral fees, rebates, or other 28 forms of consideration from an attorney, law firm, health care 29 provider, chiropractor, physical therapist, or any of such 30 person’s employees. 31 c. Intentionally advertise false or misleading information 32 regarding the consumer litigation funding company’s products 33 or services. 34 d. Refer, in furtherance of an initial legal funding, a 35 -8- LSB 2128SV (4) 91 cm/jh 8/ 19

S.F. 586 customer or potential customer to a specific attorney, law 1 firm, health care provider, chiropractor, physical therapist, 2 or any of such person’s employees; provided, however, if a 3 customer needs legal representation, the consumer litigation 4 funding company may refer the customer to a local or state bar 5 association referral service. 6 e. Knowingly provide funding to a consumer who has 7 previously assigned or sold a portion of the consumer’s right 8 to proceeds from a legal claim without first making payment to 9 or purchasing a prior unsatisfied consumer litigation funding 10 company’s entire funded amount and contracted charges, unless a 11 lesser amount is otherwise agreed to in writing by the consumer 12 litigation funding company, except that multiple companies may 13 agree to contemporaneously provide consumer litigation funding 14 to a consumer provided that the consumer and the consumer’s 15 attorney consent to the arrangement in writing. 16 f. Make any decision, have any influence, or direct 17 any decisions with respect to the course of a legal claim, 18 including decisions in appointing or changing counsel, choice 19 or use of expert witnesses, litigation strategy, and settlement 20 or other resolution. The right to make all decisions regarding 21 a legal claim remains solely with the claimant and the 22 claimant’s attorney or law firm. 23 g. Attempt to obtain a waiver of any remedy or right by the 24 consumer, including but not limited to the right to trial by 25 jury. 26 h. Knowingly pay or offer to pay for court costs, filing 27 fees, or attorney fees either during or after the resolution 28 of the legal claim, using funds from the consumer litigation 29 funding transaction. 30 2. Notwithstanding any other provision of law, prepayment 31 penalties or fees shall not be charged or collected in 32 connection with a consumer litigation funding transaction. A 33 prepayment penalty in a consumer litigation funding transaction 34 is unenforceable. 35 -9- LSB 2128SV (4) 91 cm/jh 9/ 19

S.F. 586 3. An attorney or law firm retained by the consumer in a 1 legal claim shall not have a financial interest in the consumer 2 litigation funding company offering consumer litigation funding 3 to that consumer. 4 4. An attorney who has referred the consumer to a retained 5 attorney shall not have a financial interest in the consumer 6 litigation funding company offering consumer litigation funding 7 to that consumer. 8 5. An attorney shall not disclose confidential or 9 privileged information to a consumer litigation funding company 10 without the written consent of the consumer and in accord with 11 any order of the court in the litigation. 12 6. A consumer litigation funding company shall not enter 13 into a consumer litigation financing contract directly or 14 indirectly with a foreign entity of concern or a foreign 15 country or person of concern. 16 Sec. 6. NEW SECTION . 537C.5 Contracted amounts for consumer 17 litigation funding. 18 The contracted amount to be paid to the consumer litigation 19 funding company shall be a predetermined amount based upon 20 intervals of time from the funding date through the resolution 21 date, and shall not be determined as a percentage of the 22 recovery from the legal claim. 23 Sec. 7. NEW SECTION . 537C.6 Disclosures. 24 1. Within thirty days of a written request, a consumer shall 25 disclose to any party to a legal claim and each insurer that 26 has a duty to defend whether the consumer has entered into a 27 consumer litigation funding contract. 28 2. If a consumer enters into a consumer litigation funding 29 contract after responding to a request pursuant to subsection 30 1, the consumer has a continuing obligation to disclose and 31 shall disclose this fact to the requesting person within thirty 32 days after the consumer enters into the contract. 33 3. Consumer litigation funding contracts, and all 34 participants or parties to the consumer litigation contract, 35 -10- LSB 2128SV (4) 91 cm/jh 10/ 19

S.F. 586 are presumed to be discoverable in a civil proceeding, 1 notwithstanding any agreement or provision with respect 2 to confidentiality. A consumer may seek to rebut this 3 presumption. 4 4. Consumer litigation funding transactions disclosed 5 under subsections 1 and 2 and consumer litigation funding 6 contracts discovered pursuant to subsection 3 are presumed to 7 be inadmissible as evidence. A party may seek to rebut this 8 presumption. 9 Sec. 8. NEW SECTION . 537C.7 Violations of consumer 10 litigation funding requirements. 11 1. If a consumer litigation funding company that willfully 12 violates any provision of this chapter in a specific funding 13 case, all of the following apply: 14 a. Shall waive the consumer litigation funding company’s 15 right to recover both the funded amount and any and all 16 charges, as defined in section 537C.2, in that particular case. 17 b. Shall be liable for a civil penalty of not more than one 18 hundred thousand dollars for each violation, which shall accrue 19 to the state of Iowa and may be recovered in a legal claim 20 brought by the attorney general. 21 2. This chapter shall not restrict the power of the attorney 22 general. 23 Sec. 9. NEW SECTION . 537C.8 Assignability —— liens 24 regarding consumer litigation funding. 25 1. The contingent right to receive an amount of the 26 potential proceeds of a legal claim is assignable by a consumer 27 to a consumer litigation funding company. 28 2. Only attorney’s liens related to the legal claim which 29 is the subject of the consumer litigation funding, Medicare, 30 or other statutory liens related to the legal claim shall take 31 priority over any lien of the consumer litigation funding 32 company. 33 Sec. 10. NEW SECTION . 537C.9 Consumer litigation funding 34 privileged communications. 35 -11- LSB 2128SV (4) 91 cm/jh 11/ 19

S.F. 586 Communications between a consumer’s attorney and a consumer 1 legal funding company to allow the consumer legal funding 2 company to ascertain the status of a legal claim or a legal 3 claim’s expected value shall not be discoverable by a person 4 against whom the legal claim is asserted or filed. 5 Sec. 11. NEW SECTION . 537C.10 Consumer litigation funding 6 and commercial litigation financing registration. 7 1. Unless a consumer litigation funding company or 8 commercial litigation financier has first registered with the 9 state pursuant to this chapter, the company shall not engage in 10 consumer litigation funding or commercial litigation financing 11 agreements in this state. 12 2. An applicant’s registration must be filed in the manner 13 prescribed by the secretary of state and must contain all 14 the information required by the secretary of state to make 15 an evaluation of the character and fitness of the applicant 16 company or financier, including but not limited to any 17 beneficial ownership exceeding twenty percent. The initial 18 application must be accompanied by a fee determined by the 19 secretary of state. A renewal registration must include a fee 20 determined by the secretary of state. A registration must be 21 renewed every two years and expires on December 31. 22 3. A certificate of registration shall not be issued unless 23 the secretary of state, upon investigation, finds that the 24 character and fitness of the applicant company or financier, 25 and of the officers and directors thereof, are such as to 26 warrant belief that the business will be operated honestly and 27 fairly within the purposes of this chapter. 28 4. Every registrant shall, at the time of filing such 29 application, file with the secretary of state, if the secretary 30 of state so requires, a bond satisfactory to the secretary 31 of state in an amount not to exceed one hundred thousand 32 dollars. In lieu of the bond at the option of the registrant, 33 the registrant may post an irrevocable letter of credit. The 34 terms of the bond must run concurrent with the period of time 35 -12- LSB 2128SV (4) 91 cm/jh 12/ 19

S.F. 586 during which the registration will be in effect. The bond 1 must provide that the registrant will faithfully conform to 2 and abide by the provisions of this chapter and to all rules 3 lawfully made by the administrator under this chapter and to 4 any such person or persons any and all amounts of money that 5 may become due or owing to the state or to such person or 6 persons from the registrant under and by virtue of this chapter 7 during the period for which the bond is given. 8 5. Upon written request, the applicant shall be entitled to 9 a hearing on the question of the applicant’s qualifications for 10 registration if any of the following are true: 11 a. The secretary of state has notified the applicant in 12 writing that the application has been denied. 13 b. The secretary of state has not issued a registration 14 within sixty days after the application for the registration 15 was filed. 16 6. A request for a hearing shall not be made more than 17 fifteen days after the secretary of state has mailed a written 18 notice to the applicant that the application has been denied 19 and stating in substance the secretary of state’s findings 20 supporting denial of the application. 21 7. Notwithstanding the prior approval requirement of 22 subsection 1, a consumer litigation funding company or 23 commercial litigation financier that registered with the 24 secretary of state between the effective date of this Act or 25 when the secretary of state has made applications available 26 to the public, whichever is later, and one hundred eighty 27 days thereafter may engage in consumer commercial litigation 28 funding or commercial litigation financing agreements while the 29 company’s registration is pending approval with the secretary 30 of state. All consumer litigation funding or commercial 31 litigation financing agreements entered into prior to the 32 effective date of this Act are not subject to the terms of this 33 chapter. 34 8. A person or entity shall not use any form of consumer 35 -13- LSB 2128SV (4) 91 cm/jh 13/ 19

S.F. 586 litigation funding contract or commercial litigation financing 1 agreement in this state unless it has been filed with the 2 secretary of state in accordance with the filing procedures 3 set forth by the secretary of state. Such procedures shall 4 designate a reasonable time frame for the state to raise 5 objections to any filed form. 6 Sec. 12. NEW SECTION . 537C.11 Commercial litigation 7 financing reporting. 8 1. Each commercial litigation financier that engages 9 in business in the state shall annually submit a report to 10 the secretary of state by December 31 specifying all of the 11 following: 12 a. The number of litigation fundings by the company or 13 financier that year. 14 b. A summation of funded amounts in dollars that year. 15 c. The annual percentage charged to each consumer or 16 commercial litigation funding recipient where repayment was 17 made that year. 18 2. The secretary of state shall make such information 19 available to the public, in a manner which maintains the 20 confidentiality of the name of each company and consumer, no 21 later than thirty days after the reports are submitted. 22 Sec. 13. NEW SECTION . 537C.12 Prohibitions related to 23 commercial litigation funding. 24 1. A commercial litigation financier shall not enter 25 into a commercial litigation financing agreement directly or 26 indirectly with a foreign entity of concern, a foreign country, 27 or person of concern. 28 2. A claimant, attorney, or law firm representing a 29 claimant, affiliated attorney, or law firm shall not disclose 30 or share any documents or information with a commercial 31 litigation financier where such information is subject to a 32 protective or sealing order from a court. 33 3. A commercial litigation financier shall not make any 34 decision, have any influence, or direct any decisions with 35 -14- LSB 2128SV (4) 91 cm/jh 14/ 19

S.F. 586 respect to the course of a legal claim, including decisions 1 in appointing or changing counsel, choice or use of expert 2 witnesses, litigation strategy, and settlement or other 3 resolution. The right to make all decisions regarding a legal 4 claim remains solely with the claimant and the claimant’s 5 attorney or law firm. 6 Sec. 14. NEW SECTION . 537C.13 Commercial litigation 7 financing agreement disclosure and discovery. 8 1. Except as otherwise stipulated or ordered by the court, 9 a claimant or the claimant’s attorney shall, without awaiting 10 a discovery request, provide to all parties any commercial 11 litigation financing agreement at the time a legal claim is 12 asserted or commenced and any time thereafter that a commercial 13 litigation financing agreement is executed or amended. An 14 insurer that has or may have a duty to defend or indemnify a 15 party to a legal claim shall be provided with the commercial 16 litigation financing agreement or any modifications or 17 amendments to the agreement. 18 2. Commercial litigation financing agreements and all 19 participants or parties to such agreements are permissible 20 subjects of discovery in a legal claim. 21 Sec. 15. NEW SECTION . 537C.14 Authority of secretary of 22 state to promulgate certain rules. 23 The secretary of state is authorized to adopt rules 24 necessary to effectuate the purposes of this chapter. 25 Sec. 16. APPLICABILITY. This Act applies to any consumer 26 litigation funding, contract, or commercial litigation 27 financing agreement that is effectuated on or after July 1, 28 2025. 29 EXPLANATION 30 The inclusion of this explanation does not constitute agreement with 31 the explanation’s substance by the members of the general assembly. 32 This bill creates the third-party litigation funding 33 transparency Act, which provides the terms, conditions, 34 and disclosures related to consumer litigation funding 35 -15- LSB 2128SV (4) 91 cm/jh 15/ 19

S.F. 586 transactions. 1 The bill defines “consumer litigation funding” to mean a 2 nonrecourse transaction in which a consumer litigation funding 3 company purchases, and a consumer assigns to the company, a 4 contingent right to receive an amount of the potential proceeds 5 of settlement, judgment, award, or verdict obtained in the 6 consumer’s legal claim. 7 The bill requires all consumer litigation funding contracts 8 to do the following: (1) be written in a clear and coherent 9 manner, (2) be completely finished when presented to the 10 consumer for a signature, (3) contain the initial of the 11 consumer on each page of the contract, (4) have a statement 12 providing there are no fees or charges other than the ones 13 listed in the contract, (5) if a consumer has more than one 14 consumer litigation funding contract with the same company, 15 each contract must provide the cumulative amount due from the 16 consumer for all transactions, (6) contain a statement of the 17 maximum amount the consumer may be obligated to pay, and (7) 18 detail how charges or fees are incurred or accrued. A consumer 19 litigation funding contract must include disclosures required 20 by the bill and the manner in which disclosures are typed. The 21 bill requires a consumer litigation funding contract to have a 22 written acknowledgment by the attorney retained by the consumer 23 in the legal claim. If such required attorney acknowledgment 24 is not provided, the consumer litigation funding contract 25 is null and void. If the consumer retains a new attorney 26 or terminates the initial attorney, the consumer litigation 27 funding contract is considered enforceable. The bill requires 28 a copy of the executed contract to be promptly delivered to the 29 consumer’s attorney. 30 The bill prohibits consumer litigation funding companies 31 from doing any of the following: (1) paying or offering to pay 32 commissions, referral fees, or other forms of consideration 33 to any person for referring a consumer to the consumer 34 litigation funding company, (2) accepting commissions, 35 -16- LSB 2128SV (4) 91 cm/jh 16/ 19

S.F. 586 referral fees, rebates, or other forms of consideration from 1 an attorney, law firm, health care provider, chiropractor, 2 physical therapist, or any of such person’s employees, (3) 3 intentionally advertising false or misleading information 4 regarding the consumer litigation funding company’s products 5 or services, (4) referring, in furtherance of an initial 6 legal funding, a customer or potential customer to a specific 7 person, (5) knowingly providing funding to a consumer who has 8 previously assigned or sold a portion of the consumer’s right 9 to proceeds from a legal claim without first making payment to 10 or purchasing a prior unsatisfied consumer litigation funding 11 company’s entire funded amount and contracted charges, (6) 12 making any decision, having any influence, or directing any 13 decisions with respect to the course of a legal claim, (7) 14 attempting to obtain a waiver of any remedy or right by the 15 consumer, and (8) knowingly paying or offering to pay for court 16 costs, filing fees, or attorney fees using funds from the 17 consumer litigation funding transaction. The bill provides 18 that a consumer litigation funding company shall not enter into 19 a consumer litigation financing contract directly or indirectly 20 with a foreign entity of concern or a foreign country or person 21 of concern, as those terms are defined in the bill. 22 The bill requires that the contracted amount to be paid to 23 the consumer litigation funding company to be a predetermined 24 amount and shall not be determined as a percentage of the 25 recovery from the legal claim. 26 The bill requires that within 30 days of a written request, 27 a consumer shall disclose to any party to a legal claim and 28 each insurer that has a duty to defend whether the consumer 29 has entered into a consumer litigation funding contract. The 30 consumer has an ongoing obligation to disclose a consumer 31 litigation funding contract to such parties if entered 32 into after the initial request. The bill provides that 33 consumer litigation funding contracts, and all participants 34 or parties to the consumer litigation contract, are presumed 35 -17- LSB 2128SV (4) 91 cm/jh 17/ 19

S.F. 586 to be discoverable in a civil proceeding. However, consumer 1 litigation funding transactions disclosed under the bill and 2 consumer litigation funding contracts discovered pursuant to 3 the bill are presumed to be inadmissible as evidence. 4 The bill provides damages and penalties for a violation of a 5 consumer litigation funding requirement. 6 The bill allows the contingent right to receive an amount of 7 the potential proceeds of a legal claim to be assignable by a 8 consumer to a consumer litigation funding company. The bill 9 also provides which liens shall take priority. 10 The bill provides for privileged communications between 11 a consumer’s attorney and a consumer legal funding company 12 to allow the consumer legal funding company to ascertain the 13 status of a legal claim. 14 The bill requires the registration of consumer litigation 15 funding companies and commercial litigation financers with 16 the secretary of state. The bill provides registration 17 requirements and procedures for a consumer litigation funding 18 company or commercial litigation financer. The bill requires a 19 commercial litigation financier or consumer litigation funding 20 company to submit annual reports to the secretary of state. 21 The bill provides that all documents and information filed with 22 the secretary of state pursuant to the registration are public 23 records. 24 The bill prohibits a commercial litigation financier from 25 entering into a commercial litigation financing agreement 26 directly or indirectly with a foreign entity of concern, a 27 foreign country, or person of concern. The bill prohibits 28 a claimant, attorney, or law firm representing a claimant, 29 affiliated attorney, or law firm from disclosing or sharing any 30 documents or information with a commercial litigation financier 31 where such information is subject to a protective or sealing 32 order from a court. The bill further prohibits a commercial 33 litigation financier from making any decision, having any 34 influence, or directing any decisions with respect to the 35 -18- LSB 2128SV (4) 91 cm/jh 18/ 19