The Consumer Legal Funding Act aims to regulate the largely unregulated consumer legal funding industry in New Jersey by establishing clear definitions and requirements for funding contracts. Key provisions include mandates for contracts to be fully completed, the inclusion of a right of rescission allowing consumers to cancel within five business days, and the necessity for consumer initials on each page. Additionally, attorneys representing consumers must provide a written acknowledgment confirming the disclosure of costs, charges, and the absence of referral fees from funding companies. The bill also stipulates that a contract is void if the attorney's acknowledgment is incomplete, but remains valid if completed, even if the consumer changes attorneys.

The legislation further prohibits consumer legal funding companies from engaging in practices such as paying referral fees, advertising misleading information, and charging excessive fees. It establishes a registration process with the Department of Banking and Insurance, ensuring that funding companies adhere to operational standards. The act clarifies that consumer legal funding transactions are not classified as loans and protects attorney-client communications from being compromised by funding company interactions. If a court finds that a funding company has intentionally violated the bill's provisions, the company can only recover the funded amount without additional charges. Overall, the Consumer Legal Funding Act seeks to enhance transparency and fairness in the legal funding process, ultimately protecting consumers.