AB 464

This bill creates provisions governing nonrecourse civil litigation advance

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), and a “company”

is a person that enters into a nonrecourse civil litigation advance transaction with

a consumer. A “nonrecourse civil litigation advance" (advance) is a transaction in

which a company makes a cash payment to or on behalf of a consumer who has a

pending dispute in exchange for the right to receive an amount out of the proceeds

of any realized settlement, judgment, or award the consumer may receive in the

dispute. In a nonrecourse civil litigation advance transaction, all of the following

apply: 1) there must be a written contract between the company and the consumer

governing the transaction; 2) the company may not contract for, or otherwise require,

repayment in an amount that would result in a finance charge greater than the prime

interest rate plus 10 percent; 3) the consumer may prepay the advance at any time

and, upon a prepayment, is entitled to a pro rata reduction in the finance charge

imposed; 4) the contract may not provide for repayment of the advance later than 36

months after the contract is entered into; 5) the company may not pay commissions

or referral fees to attorneys or health care providers; and 6) the contract must contain

specified information, including the annual percentage rate of the finance charge

imposed and the consumer's right to receive a reduction in the finance charge

imposed if prepayment is made, 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 company, state that the consumer has a right

to cancel the contract within five days, state that the company has no right to make

decisions or otherwise participate in the dispute, and state that, except for the

consumer's prepayments, the company 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 company 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 company establishes

that the violation was the result of an unintentional good faith error and the

company had in place policies or procedures designed to achieve compliance. The

Department of Trade, Agriculture and Consumer Protection has enforcement

authority over violations.