The Consumer Legal Funding Act seeks 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 comprehensive requirements for consumer legal funding contracts. These contracts must be fully completed upon presentation, include a right of rescission allowing consumers to cancel within five business days under specific conditions, and require the consumer's initials on each page. If applicable, contracts must also be provided in the consumer's native language. Additionally, the act mandates that contracts include a written acknowledgment from the consumer's attorney, confirming that all proceeds from the legal claim will be disbursed through a trust account or settlement fund, and that the attorney will not receive any 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, with total charges capped at 40% of the funded amount within any 12-month period. It requires detailed disclosures in contracts, including the funded amount, itemized charges, and payment schedules, while ensuring that funding is not used for court costs or attorney fees. Furthermore, consumer legal funding companies must register with the Department of Banking and Insurance to ensure fair and transparent operations. The act will take effect 90 days after enactment and will not impact any consumer legal funding agreements made prior to its effective date.