SB 842

This bill creates provisions governing consumer lawsuit lending transactions.

Under the bill, a “consumer" is an individual who is or may become a plaintiff or

claimant in a civil action or other proceeding (dispute). “Consumer lawsuit lending"

means 1) providing money to a consumer, for the consumer to use for any purpose

other than prosecuting the consumer's dispute, with repayment of the money

conditioned on and derived from the consumer's proceeds of the dispute; or 2)

purchasing from a consumer a contingent right to receive a share of the potential

proceeds of the consumer's dispute. In a consumer lawsuit lending transaction, all

of the following apply: 1) the lender may charge interest at a rate of no more than

18 percent per year; 2) the consumer may prepay the transaction at any time and,

upon prepayment in full, is entitled to a refund of unearned interest charged; 3) the

transaction term may not exceed 36 months; 4) the lender may not charge fees of

more than $360 per year; 5) the lender may not pay commissions or referral fees to

attorneys or health care providers; and 6) there must be a written agreement

between the lender and the consumer that contains specified information, including

the interest rate and the consumer's right to receive a refund of interest charged if

prepayment is made in full, as well as provisions that disclose all one-time fees

charged to the consumer, disclose the amount to be received by the consumer and the

amount the consumer assigns to the lender, state that the consumer has a right to

cancel the agreement within five days, state that the lender has no right to make

decisions or otherwise participate in the dispute, and state that the lender may be

paid only from the consumer's proceeds of the dispute and is not entitled to be repaid

if there are no such proceeds. A lender that violates any of these requirements or

restrictions is subject to a civil forfeiture of not less than $25 nor more than $5,000,

unless the lender establishes that the violation was the result of an unintentional

good faith error and the lender had in place policies or procedures designed to achieve

compliance. The Department of Trade, Agriculture and Consumer Protection has

enforcement authority over violations.