The "Consumer Legal Funding Act" seeks to regulate the consumer legal funding industry in New Jersey, which has previously operated with minimal oversight. The act defines essential terms such as "consumer," "consumer legal funding," and "charges," and sets forth specific requirements for consumer legal funding contracts. These contracts must be fully completed before signing and include a right of rescission allowing consumers to cancel within five business days. Additionally, contracts must provide terms in the consumer's native language if applicable and include a written acknowledgment from the consumer's attorney, confirming that the attorney is compensated on a contingency basis and has not received referral fees from the funding company. If this acknowledgment is incomplete, the contract becomes void, although it remains valid if the consumer changes attorneys.

The act also prohibits certain practices by consumer legal funding companies, such as paying court costs or attorney fees from the funding transaction and charging fees exceeding 40% of the funded amount within a 12-month period. It mandates that contracts disclose the funded amount, itemized charges, and payment schedules, while ensuring consumers are informed of their rights, including cancellation. Furthermore, consumer legal funding companies are required to register with the Department of Banking and Insurance, which includes criteria for registration, fees, and bonding requirements. The legislation emphasizes the protection of attorney-client privilege and establishes that transactions by funding companies are generally inadmissible as evidence in court, aiming to create a more transparent and fair environment for consumers seeking legal funding.