Purpose of the Bill

The bill aims to establish the "Consumers in Crisis Protection Act" to regulate consumer litigation funding and provide protections for consumers engaged in legal funding agreements. It intends to ensure transparency, fairness, and accountability within the consumer litigation funding industry by outlining clear contract requirements, prohibiting certain practices, and specifying registration and reporting obligations for companies.

Main Provisions

• Definitions and Scope: The bill introduces specific definitions related to consumer and commercial litigation funding, including key terms such as consumer litigation funding company, funded amount, and agreement specifics.

• Contract Requirements: Contracts must be clearly written, allowing consumers to understand terms without professional help. They must include a right of rescission, allowing consumers to cancel funding within ten business days without penalty.

• Prohibited Practices: The bill prohibits consumer litigation funding companies from paying or receiving commissions for referrals, advertising false information, and influencing legal proceedings. It also bans attorneys with financial interests in funding companies from referring clients.

• Charges and Payments: There are limitations on the charges imposed by funding companies, disallowing agreements by which recoveries from legal claims determine charges, and prohibiting prepayment penalties.

• Transparency and Disclosures: Contracts and agreements related to litigation funding must be disclosed to all parties and are permissible for discovery during legal proceedings.

• Violations and Penalties: Companies that violate these regulations face loss of recovery rights and civil penalties.

• Registration and Reporting: All consumer litigation funding companies must register with the state, provide periodic reports summarizing activities, and ensure they are not affiliated with foreign entities of concern.

Significant Changes to Existing Law

• New Regulatory Chapter: The bill introduces new statutory chapters (45B and 48B) in Minnesota law, focusing on consumer protection in litigation funding.
• Increased Transparency: It mandates disclosure of funding agreements to relevant parties in legal claims, which was not previously required.
• Limitations on Foreign Entities: It restricts foreign entities from participating in litigation funding, enhancing national security concerns.

Relevant Terms

consumer litigation funding, commercial litigation financier, nonrecourse transaction, funding agreement, registration, disclosure, consumer protection, violations, civil penalties, attorney general authority, discovery, liens, foreign entity of concern, transparent contracts, unfair practices, litigation strategy, financial interest, bond requirements, rulemaking.