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 sets forth 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 certain conditions, and require the consumer's initials on each page. Additionally, if applicable, contracts must be provided in the consumer's native language. The legislation also mandates that contracts include a written acknowledgment from the consumer's attorney regarding the disbursement of legal claim proceeds and prohibits attorneys from receiving referral fees from funding companies.

Moreover, the bill prohibits consumer legal funding companies from engaging in practices such as paying referral fees, providing misleading advertisements, and charging excessive fees, which are capped at 40% of the funded amount within a 12-month period. It requires detailed disclosures about the funded amount, itemized charges, and payment schedules, and specifies that funding amounts must be predetermined based on time intervals rather than a percentage of the legal claim's recovery. The act establishes a registration process for funding companies with the Department of Banking and Insurance, ensuring compliance with operational standards. The provisions of the act will take effect 90 days after enactment, while existing consumer legal funding agreements prior to this date will remain unaffected.