House Bill 2638 introduces new regulations for litigation financing in Arizona, aiming to ensure transparency and protect consumers involved in litigation. The bill prohibits litigation financiers from making decisions about the litigation they fund and from receiving a larger share of the proceeds than the actual parties involved in the lawsuit. It requires full disclosure of litigation financing agreements to all parties, the court, and indemnifying parties, and mandates that financiers indemnify funded consumers against certain costs and sanctions, barring intentional wrongdoing by the consumer. Violations of these regulations are considered unlawful practices under the Arizona Consumer Fraud Act.

The bill defines key terms related to litigation financing and clarifies who qualifies as a litigation financier, while excluding certain types of funding from these regulations, such as personal loans not meant for litigation expenses, contingency fee arrangements, and non-compensatory funding from nonprofits. The new chapter will be added to Title 12 of the Arizona Revised Statutes and will apply to actions pending or commenced on or after January 1, 2025, with the bill itself becoming effective on December 31, 2024.