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 stringent 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, and require the consumer's initials on each page. Additionally, if applicable, contracts must be provided in the consumer's native language. A new requirement mandates 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 referral fees from the funding company.

The legislation also prohibits certain practices by consumer legal funding companies, including the payment of referral fees, misleading advertising, and charging excessive fees. It requires that the funding amount be predetermined based on time intervals rather than a percentage of the legal claim's recovery. The bill ensures that attorneys cannot have a financial interest in the funding companies and protects attorney-client privileges in communications regarding funding. Furthermore, consumer legal funding companies must register with the Department of Banking and Insurance, ensuring compliance with the new regulations. The act is set to take effect 90 days after enactment and does not retroactively affect any agreements made prior to its effective date.