The "Litigation Financing Transparency Act" establishes new regulations regarding litigation financing agreements in New Mexico. It defines key terms such as "litigation financier," "funded consumer," and "litigation financing agreement," and outlines the exclusions from these provisions, including agreements made for personal use or those involving contingency fee arrangements. The Act mandates that legal counsel must disclose litigation financing agreements to all parties involved within a specified timeframe and requires ongoing disclosure obligations whenever new agreements are entered or existing ones amended. Additionally, it prohibits litigation financiers from making decisions regarding the course of an action and from offering referral fees for client acquisition.

The Act also includes provisions for the protection of funded consumers, requiring litigation financiers to indemnify them against adverse costs or damages resulting from the litigation, except in cases of intentional wrongdoing. Any litigation financing agreement that violates the Act is deemed void, and violations are classified as unlawful acts under the Unfair Practices Act. The Act will apply to civil actions and administrative proceedings initiated on or after its effective date of December 31, 2026.