HB5244 104TH GENERAL ASSEMBLY

LRB104 19343 SPS 32790 b

104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB5244

Introduced 2/10/2026, by Rep. Dan Ugaste

SYNOPSIS AS INTRODUCED:

New Act
735 ILCS 5/2-1003	from Ch. 110, par. 2-1003
815 ILCS 505/2MMMM new

Creates the Litigation Financing Transparency Act. Provides that a person shall not engage in litigation financing in the State unless the person is registered as a litigation financier under the Act. Provides that, to register as a litigation financier, a person shall file a registration statement with the Department of Financial and Professional Regulation. Sets forth requirements for registration. Prohibits litigation financier from engaging in specified conduct. Sets forth required disclosures in litigation financing agreements. Provides that a violation of the Act constitutes an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. Amends the Code of Civil Procedure. Provides that a party may obtain discovery of the existence and terms and conditions of a litigation financing agreement if it is the subject of or is involved in a pending action. Amends the Consumer Fraud and Deceptive Business Practices Act to make a conforming change.

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Litigation Financing Transparency Act.

Section 5. Definitions. As used in this Act:

"Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another person.

"Consumer" means any individual, government entity, or commercial entity who resides, is present, or is domiciled in this State or who is or has standing to become a plaintiff, claimant, or complainant in a civil action, administrative proceeding, legal claim, or other legal proceeding or in pursuit of any claim or cause of action in this State.

"Department" means the Department of Financial and Professional Regulation.

"Entity" means any domestic or foreign corporation, partnership, limited partnership, limited liability company, trust, fund, plan, or any other business, enterprise, association, or organization of any kind or nature.

"Foreign person" means an individual or an entity that is not:

(1) a citizen of the United States;

(2) an alien lawfully admitted for permanent residence in the United States;

(3) an unincorporated association with a majority of members who are citizens of the United States or aliens lawfully admitted for permanent residence in the United States; or

(4) a corporation that is incorporated in the United States.

"Foreign principal" means:

(1) the government or a government official of any country other than the United States;

(2) a political subdivision or political party of a country other than the United States; or

(3) a partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a country other than the United States whose shares or other ownership interest is owned by the government or a government official of a country other than the United States or is owned by a political subdivision or political party of a country other than the United States.

"Legal representative" means any attorney, group of attorneys, or law firm duly licensed and authorized to practice law and to represent a consumer in a civil action, administrative proceeding, legal claim, or other legal proceeding in this State.

"Litigation financier" means any broker-dealer, institutional investor, issuer, or any other person engaged in or formed, created, or established for the purpose of engaging in any kind of business or economic activity that involves providing litigation financing.

"Litigation financing agreement" or "litigation financing" means an agreement in which a litigation financier agrees to provide financing to a consumer or entity that is or has standing to become a party to or counsel of record for a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages, which right is contingent in any respect on the outcome of the action, claim, or proceeding by settlement, judgment, or otherwise, or on the outcome of any matter within a portfolio that includes the action, claim, or proceedings and involves the same legal representative or affiliated legal representative. "Litigation financing agreement" or "litigation financing" does not include:

(1) an agreement where a legal representative consents to provide legal services on a contingency fee basis or to advance the client's legal costs, and where the services or costs are provided by the legal representative in accordance with the Illinois Rules of Professional Conduct as adopted by the Supreme Court of Illinois;

(2) a preexisting contractual obligation to indemnify or defend a party to a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages, or any other legal proceeding;

(3) any obligation of a health insurer to pay any sums for healthcare for an injured person under the terms of a health insurance plan or agreement;

(4) Any obligation to repay a financial institution for loans made directly to a party to a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages, or the party's legal representative, provided that the repayment of the loan is not contingent upon the outcome of the action, claim, or proceedings, or on the outcome of any matter within a portfolio that includes the action, claim, or proceedings, and involves the same legal representative or affiliated legal representative; or

(5) funding provided to a nonprofit organization that is funded by private donations, represents one or more clients on a pro-bono, no-cost basis, and seeks only injunctive relief on behalf of its clients; provided, however, that the provisions of this paragraph shall not be construed to prohibit or otherwise affect any award of costs or attorney's fees to the nonprofit organization seeking only injunctive relief on behalf of a client that the nonprofit organization represents on a pro-bono, no-cost basis, or to the client.

"Litigation financing contract" or "contract" means a written contract memorializing the terms and conditions of a litigation financing agreement.

"Secretary" means the Secretary of Financial and Professional Regulation.

"Sovereign wealth fund" means an investment fund owned or controlled by a foreign principal or an agent thereof.

Section 10. Registration.

(a) A person shall not engage in litigation financing in this State unless the person is registered as a litigation financier under this Act.

(b) If the person registering as a litigation financier is an entity:

(1) the entity shall be authorized to do business in this State; and

(2) the entity's articles of incorporation, charter, articles of organization, certificate of limited partnership, or other organizational or governing document shall contain a statement that the entity is authorized to engage in the business of litigation financing and is registered as a litigation financier by the Department under this Act.

(c) To register as a litigation financier, a person shall file with the Department a registration statement setting forth the following:

(1) the legal name of the person;

(2) the principal business address and preferred mailing address of the person;

(3) the telephone number and email address through which the person may be contacted;

(4) the name, principal business address, and preferred mailing address of the person's registered agent that is authorized to accept service of process on behalf of the person;

(5) the name, principal business address, and citizenship or country of incorporation or registration of any foreign person, foreign principal, or sovereign wealth fund affiliated with the person seeking to register as a litigation financier under this Act in any capacity directly or indirectly related to the person's litigation financing business; and

(6) any other information deemed necessary by the Department.

(d) If the person seeking to register as a litigation financier is an entity, the entity shall file with the Department a registration statement that provides, with respect to each person that directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing 5% or more of the voting shares of the litigation financier, the following:

(1) the legal name of each person;

(2) the principal business address and preferred mailing address of each person;

(3) if the person is an individual:

(A) the individual's occupation;

(B) any offices and positions held with the person seeking to register as a litigation financier during the previous 5 years;

(C) any conviction of a crime other than misdemeanor traffic violations during the previous 10 years; and

(D) the name, principal business address, and citizenship or country of incorporation or registration of any foreign person, foreign principal, or sovereign wealth fund affiliated with the individual seeking to register as a litigation financier under this Act in any capacity directly or indirectly related to the individual's litigation financing business;

(4) if the person is an entity:

(A) the nature of the entity's business operations during the previous 5 years or a description of the business intended to be undertaken by the entity and the entity's subsidiaries, if any;

(B) a list of all individuals who are or who have been selected to become directors or officers of the entity and each subsidiary of the entity, including, for each individual, the information required under paragraph (3); and

(C) the name, principal business address, and citizenship or country of incorporation or registration of any foreign person, foreign principal, or sovereign wealth fund affiliated with the entity seeking to register as a litigation financier under this Act in any capacity directly or indirectly related to the entity's litigation financing business; and

(5) any other information deemed necessary by the Department.

(e) A person subject to registration under this Act shall file, within 30 days after any change to the most recently filed registration or within 30 days after the registration becomes inaccurate or incomplete in any respect, an amended registration with the Department.

(f) The Secretary may prescribe the forms and the filing fees that the Secretary deems necessary for the purposes of this Act.

(g) All documents and information filed with the Department under this Act are public records subject to disclosure in accordance with the Freedom of Information Act.

Section 15. Litigation financier prohibitions.

(a) A litigation financier shall not:

(1) Engage in litigation financing in this State that is, in any capacity directly or indirectly related to the person's litigation financing business, affiliated with any: (i) foreign person; (ii) foreign principal; or (iii) sovereign wealth fund of a foreign government or foreign nongovernment person, that is designated by the United States Secretary of Commerce as a foreign adversary under 15 CFR 7.4.

(2) Direct, or make any decisions with respect to, the course of any civil action, administrative proceeding, legal claim, or other legal proceeding for which the litigation financier has provided litigation financing, or any settlement or other disposition thereof. The prohibition includes, but is not limited to, decisions in appointing or changing legal representatives, choice or use of expert witnesses, and litigation strategy. All rights to make decisions with respect to the course and settlement or other disposition of the subject civil action, administrative proceeding, legal claim, or other legal proceeding shall remain solely with the parties to the action, claim, or proceedings and their legal representatives. The provisions of this paragraph shall be strictly construed in favor of the consumer or individual or entity receiving litigation funding and against the litigation financier.

(3) Pay or offer commissions, referral fees, rebates, or other forms of consideration to any person, including, but not limited to, an attorney or any employee of an attorney or a law firm, medical provider, chiropractic physician, or physical therapist or any of their employees or agents in exchange for referring a consumer to a litigation financier.

(4) Accept any commissions, referral fees, rebates, or other forms of consideration from any person, including, but not limited to, an attorney or any employee of an attorney or a law firm, medical provider, chiropractic physician, or physical therapist or any of their employees or agents for providing any goods or rendering any services to the consumer or individual or entity receiving litigation funding.

(5) Contract for, receive, or recover, whether directly or indirectly, any amount that exceeds 25% of, or that is greater than an amount equal to, the gross amount of any judgment, award, settlement, verdict or other form of monetary relief obtained by the plaintiffs or claimants in a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages financed by a litigation financing agreement after the payment of any attorney's fees and costs owed in connection to the action, claim, or proceedings.

(6) Advertise false or misleading information regarding its products or services.

(7) Require any consumer or individual or entity receiving litigation funding to hire or engage any person providing any goods or rendering any services.

(8) Fail to promptly deliver a fully completed and signed litigation financing contract to the consumer and the consumer's legal representative.

(9) Attempt to secure a remedy or obtain a waiver of any remedy, including, but not limited to, compensatory, statutory, equitable remedies, or punitive damages, that the consumer may or may not be entitled to pursue or recover otherwise.

(10) Offer or provide legal advice to the consumer.

(11) Assign or securitize a litigation financing agreement in whole or in part.

(12) Report a consumer to a credit reporting agency if insufficient funds remain to repay the litigation financier in full from the proceeds received from any judgment, award, settlement, verdict, or other form of monetary relief obtained in a civil action, administrative proceeding, legal claim, or other legal proceeding that is the subject of the litigation financing agreement.

(b) No person that provides any goods or renders any services to the consumer or individual or entity receiving litigation funding shall have a financial interest in litigation financing provided by a litigation financier to the consumer, and no person shall receive any commissions, referral fees, rebates, or other forms of consideration from any litigation financier or the litigation financier's agents, employees, owners, or affiliates.

Section 20. Liability for litigation financiers.

(a) A litigation financier shall be jointly and severally liable for any award or order imposing or assessing damages, costs, or monetary sanctions against a consumer arising from or relating to any civil action, administrative proceeding, legal claim, or other legal proceeding for which the litigation financier is providing litigation financing.

(b) In each litigation financing contract, the litigation financier shall agree to indemnify, and shall indemnify even without the agreement, the plaintiffs and claimants to the civil action, administrative proceeding, legal claim, or other legal proceeding that is the subject of the litigation financing agreement and the plaintiffs' and claimants' legal representatives against any adverse costs, attorney's fees, damages, or sanctions that may be ordered or awarded against the persons in the action, claim, or proceedings; provided, however, that the indemnification shall not be required or enforceable for adverse costs, attorney's fees, damages, or sanctions that the litigation financier can show resulted from the intentional misconduct of the plaintiffs or claimants or their legal representatives.

Section 25. Disclosures.

(a) The terms and conditions of a litigation financing agreement shall be set forth in a fully completed, written litigation financing contract with no material terms or conditions omitted, and the contract shall contain all material terms and conditions at the time it is signed by any party.

(b) Upon execution of a litigation financing contract, a litigation financier shall not amend the terms or conditions of the litigation financing agreement that is memorialized by the contract without full disclosure to and prior written consent of all parties to the litigation financing agreement.

(c) Each litigation financing contract shall set forth the name, principal business address, and preferred mailing address of the litigation financier on the first page of the contract, and the following disclosures shall be typed in at least 14 point bold font and placed clearly and conspicuously immediately above the consumer's signature line in the litigation financing contract:

"IMPORTANT DISCLOSURES -- PLEASE READ CAREFULLY

1. Right to Cancellation: You, the consumer, or your legal representative may cancel this litigation financing agreement without penalty or further obligation within 5 business days from the date you sign this contract or the date you receive financing from the litigation financier, whichever date is later. You or your legal representative may cancel this litigation financing agreement by sending a notice of cancellation to the litigation financier and returning to the litigation financier any funds received from the litigation financier at the litigation financier's preferred mailing address set forth on page 1 of this contract.

2. The maximum amount the litigation financier may receive or recover from any contingent payment provided for in this litigation financing agreement shall be no more than an amount equal to the share of the proceeds collectively recovered by the plaintiffs or claimants in a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages financed by this litigation financing agreement after the payment of any attorney's fees and costs owed in connection to the action, claim, or proceedings.

3. The litigation financier agrees that it has no right to, and will not demand, request, receive, or exercise any right to, influence, affect, or otherwise make any decision in the handling, conduct, administration, litigation, settlement, or resolution of your civil action, administrative proceeding, legal claim, or other legal proceeding. All of these rights remain solely with you and your legal representative.

4. You, the consumer, are not required by the terms of this litigation financing agreement to continue to be represented by any particular legal representative, and the litigation financing agreement does not include any right for the litigation financier, any legal representative, or any other person to claim or seek to recover any assessment, charge, fee, penalty, or damages of any kind if you elect to change legal representatives at any time.

5. If there is no recovery of any money from your civil action, administrative proceeding, legal claim, or other legal proceeding, or if there is not enough money to satisfy in full the portion assigned to the litigation financier, you will not owe anything in excess of the proceeds collectively recovered by the plaintiffs or claimants in a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages financed by this litigation financing agreement after the payment of any attorney's fees and costs owed in connection to the action, claim, or proceedings.

6. You are entitled to a fully completed litigation financing contract with no material terms or conditions omitted prior to signing. Before signing the litigation financing contract, or authorizing anyone to sign it on your behalf, you should read the contract completely and consult an attorney."

(d) Only the consumer shall be authorized to execute a litigation financing contract on the consumer's own behalf, except in cases where the consumer lacks the legal capacity to execute a contract. The consumer's legal representative in the civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages financed by the corresponding litigation financing agreement shall not execute a litigation financing contract on behalf of the consumer. A litigation financing contract executed by the legal representative on behalf of the consumer shall be void and unenforceable as a matter of law.

(e) If the consumer is represented by a legal representative in the civil action, administrative proceeding, legal claim, or other legal proceeding that is the subject of the litigation financing agreement, the legal representative shall acknowledge in the litigation financing contract that the legal representative and the legal representative's employer and employees have not received or paid a commission, referral fee, rebate, or any other consideration from or to the litigation financier and have no obligation to do so in the future.

(f) If the consumer's legal representative is a party to a litigation financing agreement related to the consumer's civil action, administrative proceeding, legal claim, or other legal proceeding that is the subject of the consumer's litigation financing agreement, the legal representative shall disclose and deliver a copy of the legal representative's litigation financing contract to the consumer. Following the disclosure and delivery, the consumer shall sign an acknowledgment that the consumer has read and understands the terms and conditions of the consumer's legal representative's litigation financing contract. The consumer shall be provided with a copy of the signed acknowledgment.

Section 30. Nullification of agreement for violation. Any violation of this Act by a litigation financier renders the litigation financing agreement void and unenforceable by the litigation financier or any successor-in-interest to the litigation financing agreement.

Section 35. Penalties.

(a) It is unlawful for a litigation financier to enter into or offer to enter into a litigation financing agreement unless the litigation financier is registered under this Act.

(b) A person that willfully violates this Act shall be guilty of a Class 4 felony.

(c) The Attorney General or the proper prosecuting attorney with or without a reference from the Secretary may institute criminal proceedings under this Act.

(d) This Act does not limit the power of this State to punish a person for conduct that constitutes a crime under other laws of this State.

Section 40. Enforcement. A violation of this Act constitutes an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. All remedies, penalties, and authority granted to the Attorney General by the Consumer Fraud and Deceptive Business Practices Act shall be available to the Attorney General for the enforcement of this Act.

Section 45. Rulemaking. The Secretary may adopt rules to implement and administer this Act.

Section 90. The Code of Civil Procedure is amended by changing Section 2-1003 as follows:

(735 ILCS 5/2-1003) (from Ch. 110, par. 2-1003)

Sec. 2-1003. Discovery and depositions.

(a) Discovery, such as admissions of fact and of genuineness of documents, physical and mental examinations of parties and other persons, the taking of any depositions, and interrogatories, shall be in accordance with rules.

(b) (Blank).

(c) (Blank).

(d) Whenever the defendant in any litigation in this State has the right to demand a physical or mental examination of the plaintiff pursuant to statute or Supreme Court Rule, relative to the occurrence and extent of injuries or damages for which claim is made, or in connection with the plaintiff's capacity to exercise any right plaintiff has, or would have but for a finding based upon such examination, the plaintiff has the right to have his or her attorney, or such other person as the plaintiff may wish, present at such physical or mental examination. The plaintiff also has the right to designate an additional person to be present and video record the examination. The changes to this Section by this amendatory Act of the 103rd General Assembly apply to actions commenced or pending on or after the effective date of this amendatory Act of the 103rd General Assembly.

(e) No person or organization shall be required to furnish claims, loss or risk management information held or provided by an insurer, which information is described in Section 143.10a of the "Illinois Insurance Code".

(f) A party may obtain discovery of the existence and terms and conditions of a litigation financing agreement if it is the subject of or is involved in a pending action. Any information concerning the litigation financing agreement is not by reason of disclosure admissible in evidence at trial; provided, however, that nothing in this subsection shall be construed to limit the admissibility of such information as evidence of a party's claim or defense. As used in this subsection, "litigation financing agreement" has the meaning set forth in the Litigation Financing Transparency Act.

(Source: P.A. 103-388, eff. 7-28-23.)

Section 95. The Consumer Fraud and Deceptive Business Practices Act is amended by adding Section 2MMMM as follows:

(815 ILCS 505/2MMMM new)

Sec. 2MMMM. Violations of the Litigation Financing Transparency Act. A person who violates the Litigation Financing Transparency Act commits an unlawful practice within the meaning of this Act.

Section 97. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.