The proposed Third-Party Litigation Funding Transparency Act aims to enhance consumer protections in litigation funding transactions by establishing regulatory requirements for such agreements in Iowa. It defines consumer litigation funding as a nonrecourse transaction where a consumer assigns a contingent right to receive potential proceeds from a legal claim to a funding company. The Act mandates that all consumer litigation funding contracts must be clear and complete, including specific disclosures about the maximum amount owed and the acknowledgment of the consumer's attorney. It also prohibits funding companies from engaging in practices such as paying referral fees or influencing legal decisions, and establishes penalties for violations, including the waiver of the right to recover funds and civil penalties up to $100,000.

Furthermore, the Act requires consumer litigation funding companies and commercial litigation financiers to register with the Secretary of State, detailing the application process and necessary qualifications for registration. It mandates annual reporting on funding activities and prohibits commercial financiers from entering agreements with foreign entities of concern. The legislation ensures that communications between consumers and their attorneys regarding funding are privileged and not discoverable in court. The provisions of this Act will apply to any agreements made on or after July 1, 2025, thereby creating a more transparent and fair environment for consumers engaging in litigation funding.