The Consumer Legal Funding Act aims to enhance regulation of consumer legal funding providers in New Jersey, which currently operate with limited oversight. The bill introduces definitions for key terms such as "consumer," "charges," and "funded amount," and establishes specific requirements for consumer legal funding contracts. These contracts must be fully completed upon presentation to consumers, include a right of rescission allowing cancellation within five business days, and require the consumer's initials on each page. Furthermore, the attorney representing the consumer must provide a written acknowledgment confirming the disclosure of costs, charges, and the absence of referral fees from the funding company.

The legislation 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, requiring funding companies to file applications and pay associated fees. The act clarifies that consumer legal funding transactions are not classified as loans and outlines the priority of liens related to legal claims. Additionally, it mandates that contracts include specific disclosures regarding the funded amount, itemized charges, payment schedules, and consumer rights, including the right to cancel. If a court finds that a funding company has intentionally violated the bill's provisions, the company can only recover the funded amount without any additional charges.