The Litigation Financing Transparency and Consumer Protection Act establishes a regulatory framework for litigation financing contracts in Iowa, requiring individuals or entities engaged in this practice to register with the Secretary of State. The bill defines key terms such as "consumer," "entity," "litigation financer," and "litigation financing," and mandates the disclosure of essential information for registration, including the legal name and ownership details of the litigation financer. It aims to protect consumers by prohibiting excessive interest rates, referral fees, and any influence on the handling of civil actions. Additionally, it requires clear disclosures in litigation financing contracts regarding terms, cancellation rights, and the maximum recoverable amount.

The legislation introduces new provisions, including joint and several liability for litigation financers concerning costs or monetary sanctions imposed on consumers, and grants the Secretary of State the authority to implement regulatory oversight through rulemaking. It also stipulates that any violation by a litigation financer will render the financing contract unenforceable and may result in penalties for usury if interest rates exceed legal limits. The act is set to take effect on January 1, 2026, and will apply to civil actions or administrative proceedings involving litigation financers that are pending or initiated after that date.