STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Senator JOHN F. MCKEON
District 27 (Essex and Passaic)
SYNOPSIS
Consumer Legal Funding Act.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning consumer legal funding and supplementing Title 56 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the Consumer Legal Funding Act.
2. As used in this act:
Advertise means publishing or disseminating any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet or similar communications media, including film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of inducing a consumer to enter into a consumer legal funding.
Charges means the amount of money to be paid to the consumer legal funding company by or on behalf of the consumer, above the funded amount provided by or on behalf of the company to a consumer pursuant to this act. Charges include all administrative, origination, underwriting or other fees no matter how denominated.
Commissioner means the Commissioner of Banking and Insurance.
Consumer means a natural person who has a pending legal claim and who resides in New Jersey.
Consumer legal funding or funding means a non-recourse transaction in which a consumer legal funding company purchases and a consumer transfers to the company an unvested, contingent future interest in the potential net proceeds of the settlement or judgment obtained from the consumers legal claim; if no proceeds are obtained from the consumers legal claim, the consumer is not required to repay the company the consumer legal funding amount or charges.
Consumer legal funding company or company means a person or entity that enters into a consumer legal funding with a consumer. This term shall not include: an immediate family member of the consumer; an attorney or accountant who provides services to a consumer; or a bank, lender, financing entity, or other special purpose entity:
(1) that provides financing to a consumer legal funding company; or
(2) to which a consumer legal funding company grants a security interest or transfers any rights or interest in a consumer legal funding.
Funded amount means the amount of monies provided to, or on behalf of, the consumer in the consumer legal funding. Funded amount excludes charges.
Funding date means the date on which the funded amount is transferred to the consumer by the consumer legal funding company by personal delivery, wire, electronic means, or insured, certified, or registered United States mail.
Immediate family member means a parent; sibling; child by blood, adoption, or marriage; spouse; grandparent; or grandchild.
Legal claim means a bona fide civil claim or cause of action.
Resolution date means the date the amount funded to the consumer, plus the agreed upon charges, are delivered to the consumer legal funding company.
3. a. A consumer legal funding contract shall meet the following requirements:
(1) the contract shall be completely filled in when presented to the consumer for signature;
(2) the contract shall contain, in bold and boxed type, a right of rescission, allowing the consumer to cancel the contract without penalty or further obligation if, within five business days after the funding date, the consumer either:
(a) returns to the consumer legal funding company the full amount of the disbursed funds by delivering the companys uncashed check to the companys office in person; or
(b) mails, by insured, certified, or registered United States mail, to the address specified in the contract, a notice of cancellation and includes in that mailing a return of the full amount of disbursed funds in the form of the companys uncashed check or a registered or certified check or money order; and
(3) the contract shall contain the initials of the consumer on each page.
b. The contract shall contain a written acknowledgment by the attorney retained by the consumer in the legal claim that attests to the following:
(1) to the best of the attorneys knowledge, all the costs and charges relating to the consumer legal funding have been disclosed to the consumer;
(2) the attorney is being paid on a contingency basis pursuant to a written fee agreement;
(3) all proceeds of the legal claim owed to the company will be disbursed via either the trust account of the attorney or a settlement fund established to receive the proceeds of the legal claim on behalf of the consumer;
(4) the attorney is following the written instructions of the consumer with regard to the consumer legal funding; and
(5) the attorney has not received a referral fee or other consideration from the consumer legal funding company in connection with the consumer legal funding, nor will the attorney receive that fee or other consideration in the future.
c. If the acknowledgment required in subsection b. of this section is not completed by the attorney retained by the consumer in the legal claim, the contract shall be void. If the acknowledgement is completed, the contract shall remain valid if the consumer terminates the initial attorney or retains a new attorney with respect to the legal claim.
4. A consumer legal funding company shall not:
a. pay or offer to pay commissions, referral fees, or other forms of consideration to any attorney, law firm, medical provider, chiropractor, or physical therapist or any of their employees for referring a consumer to the company;
b. accept any commissions, referral fees, rebates, or other forms of consideration from an attorney, law firm, medical provider, chiropractor, or physical therapist or any of their employees;
c. intentionally advertise materially false or misleading information regarding its products or services;
d. refer, in furtherance of an initial legal funding, a customer or potential customer to a specific attorney, law firm, medical provider, chiropractor, or physical therapist or any of their employees; provided, however, if a customer needs legal representation, the company may refer the customer to a local or State bar association referral service;
e. fail to promptly supply a copy of the executed contract to the attorney for the consumer upon request;
f. knowingly provide funding to a consumer who has previously assigned or sold a portion of the consumers right to proceeds from his or her legal claim without first making payment to or purchasing a prior unsatisfied consumer legal funding companys entire funded amount and contracted charges, unless a lesser amount is otherwise agreed to in writing by the consumer legal funding companies, except that multiple companies may agree to contemporaneously