The bill establishes the "Colorado Consumer Legal Funding Act" (act). A consumer legal funding transaction occurs when a consumer legal funding company (company) purchases, for an amount not to exceed $500,000, an interest in an individual's (consumer) associated legal claim. The money provided by the company must be repaid from the proceeds, if any, resulting from the settlement or judgment of the consumer's associated legal claim. The company may also receive a funding fee as part of the contract. The funding fee may not exceed 36% of the funded amount. The money provided to a consumer is meant to cover living expenses while the consumer awaits resolution of the associated legal claim.The bill provides the requirements for a consumer legal funding contract. A consumer legal funding contract is satisfied when a consumer's associated legal claim has been resolved or settled. The consumer must pay the company a predetermined amount, as specified in the contract, and the amount may not be calculated as a percentage of the judgment or settlement. The consumer is not required to repay the company if the consumer does not prevail on or settle the consumer's associated legal claim. The bill also details disclosures that are required as part of a consumer legal funding contract.The bill prohibits certain actions of consumer legal funding companies and describes how these companies are regulated by the attorney general's office, including registration requirements and associated registration fees and surcharges. The registration fees are credited to a new consumer legal funding cash fund and used to pay the attorney general's costs to implement and administer the bill. The surcharges are credited to the Colorado identity theft and financial fraud cash fund for use in enforcing the "Identity Theft and Financial Fraud Deterrence Act".The attorney general may fine a company, suspend or revoke a company's license, or prohibit a company from recovering funding fees for violating the bill.The bill gives permission to the administrator of the "Uniform Commercial Credit Code" to adopt rules regarding certain consumer credit transactions that are secured by the consumer's potential proceeds from a settlement or judgment obtained in an associated legal claim.
(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)
(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)Statutes affected:
Preamended PA1 (02/17/2023):