Bill > SF586

Introduced Session

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, 2025.

AI Summary

Committee Categories

No sponsors listed

Other Sponsors (1)

Committee report approving bill, renumbered as SF 2419. S.J. 368. (on 02/23/2026)

Official Document