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. 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 adherence to the consumer's instructions and the prohibition of referral fees from the funding company.

The act imposes several restrictions on consumer legal funding companies, including a ban on paying referral fees to attorneys or medical providers, prohibiting misleading advertisements, and capping total charges at 40% of the funded amount within any 12-month period. It requires detailed disclosures in contracts regarding the funded amount, itemized charges, and payment schedules, and stipulates that funding amounts must be predetermined based on time intervals rather than a percentage of the legal claim's recovery. The act also ensures that attorneys cannot have a financial interest in the funding company and protects attorney-client privileges in communications about the funding. Consumer legal funding companies must register with the Department of Banking and Insurance before conducting business, and the act will take effect 90 days after enactment, without affecting agreements made prior to its effective date.