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1 | AN ACT concerning regulation.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 1. Short title. This Act may be cited as the | ||||||
5 | Non-Recourse Civil Litigation Funding Act. | ||||||
6 | Section 5. Definitions. In this Act: | ||||||
7 | "Civil litigation funding company" means a person or entity | ||||||
8 | that enters into a non-recourse civil litigation funding | ||||||
9 | transaction with a consumer. | ||||||
10 | "Consumer" means a person residing or domiciled in Illinois | ||||||
11 | or who elects to enter into a transaction under this Act, | ||||||
12 | whether it be in-person, over the internet, by facsimile, or | ||||||
13 | any other electronic means, and who has a pending legal claim | ||||||
14 | and is represented by an attorney at the time he or she | ||||||
15 | receives the non-recourse civil litigation funding. | ||||||
16 | "Department" means the Department of Financial and | ||||||
17 | Professional Regulation. | ||||||
18 | "Legal claim" means a civil or statutory claim or action. | ||||||
19 | "Non-recourse civil litigation funding" means a | ||||||
20 | transaction in which a civil litigation funding company | ||||||
21 | purchases and a consumer assigns the contingent right to | ||||||
22 | receive an amount of the potential proceeds of a settlement, | ||||||
23 | judgment, award, or verdict obtained in the consumer's legal |
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1 | claim to the civil litigation funding company. | ||||||
2 | Section 10. Contract provisions. All contracts for | ||||||
3 | non-recourse civil litigation funding shall comply with the | ||||||
4 | following requirements: | ||||||
5 | (1) The contract shall contain on the front page, | ||||||
6 | appropriately headed and in at least 12-point bold face | ||||||
7 | type, the following disclosures: | ||||||
8 | (A) the total dollar amount of funds to be paid to | ||||||
9 | the consumer; | ||||||
10 | (B) an itemization of one-time fees; and | ||||||
11 | (C) the total dollar amount being assigned by the | ||||||
12 | consumer to the civil litigation funding company, set | ||||||
13 | forth in 6-month intervals for 36 months. | ||||||
14 | (2) The contract shall provide that the consumer may | ||||||
15 | cancel the contract within 5 business days following the | ||||||
16 | consumer's receipt of funds, without penalty or further | ||||||
17 | obligation. The contract shall contain the following | ||||||
18 | notice written in at least 12-point, bold face type: | ||||||
19 | "Consumer's right to cancellation: You may cancel this | ||||||
20 | contract without penalty or further obligation within 5 | ||||||
21 | business days after the date you receive funds from (insert | ||||||
22 | name of civil litigation funding company).". | ||||||
23 | The contract also shall specify that in order for the | ||||||
24 | cancellation to be effective, the consumer must either return | ||||||
25 | to the civil litigation funding company the full amount of |
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1 | disbursed funds by delivering the civil litigation funding | ||||||
2 | company's uncashed check to the civil litigation company's | ||||||
3 | offices in person within 5 business days after the disbursement | ||||||
4 | of the funds or mail a notice of cancellation and include in | ||||||
5 | that mailing a return of the full amount of disbursed funds in | ||||||
6 | the form of the civil litigation funding company's uncashed | ||||||
7 | check, or a registered or certified check or money order, by | ||||||
8 | insured, registered, or certified United States mail, | ||||||
9 | postmarked within 5 business days after the receipt of those | ||||||
10 | funds from the civil litigation funding company, at the address | ||||||
11 | specified in the contract for cancellation. | ||||||
12 | (3) The contract shall contain all of the following | ||||||
13 | statements in at least 12-point bold face type: | ||||||
14 | (A) (Insert name of civil litigation funding | ||||||
15 | company) agrees that it shall have no right to and will | ||||||
16 | not make any decisions with respect to the conduct of | ||||||
17 | the underlying legal claim or any settlement or | ||||||
18 | resolution thereof and that the right to make those | ||||||
19 | decisions remains solely with you and your attorney in | ||||||
20 | the legal claim. | ||||||
21 | (B) (Insert name of civil litigation funding | ||||||
22 | company) agrees that it shall only accept an assignment | ||||||
23 | of an amount of the potential proceeds, rather than an | ||||||
24 | assignment of the consumer's legal claim. (Insert name | ||||||
25 | of civil litigation funding company) agrees that it | ||||||
26 | shall have no right to pursue the legal claim on behalf |
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1 | of or in lieu of the consumer. | ||||||
2 | (4) All contracts to the consumer must contain the | ||||||
3 | following statement, in plain language in a box with | ||||||
4 | 15-point, bold face type, in all capitalized letters, | ||||||
5 | stating the following:
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6 | "THE CIVIL LITIGATION FUNDING COMPANY SHALL ONLY BE | ||||||
7 | PAID FROM THE PROCEEDS OF THE LEGAL CLAIM. YOU WILL NOT OWE | ||||||
8 | THE CIVIL LITIGATION FUNDING COMPANY ANYTHING IF THERE IS | ||||||
9 | NO RECOVERY OF PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU | ||||||
10 | VIOLATE THE TERMS OF THIS AGREEMENT. IF THERE ARE | ||||||
11 | INSUFFICIENT PROCEEDS TO PAY THE CIVIL LITIGATION FUNDING | ||||||
12 | COMPANY IN FULL, THE CIVIL LITIGATION FUNDING COMPANY SHALL | ||||||
13 | ONLY BE PAID TO THE EXTENT THAT THERE ARE AVAILABLE | ||||||
14 | PROCEEDS FROM THE LEGAL CLAIM, UNLESS YOU VIOLATE THE TERMS | ||||||
15 | OF THIS AGREEMENT.". | ||||||
16 | (5) The contract shall contain the following statement | ||||||
17 | in at least 12-point bold face type located immediately | ||||||
18 | above the space where the consumer signature is required: | ||||||
19 | "Do not sign this Agreement before you read it | ||||||
20 | completely or if it contains any blank spaces. You are | ||||||
21 | entitled to a completely filled-in copy of this contract. | ||||||
22 | Before you sign this Agreement you should obtain the advice | ||||||
23 | of an attorney. Depending on the circumstances, you may | ||||||
24 | want to consult a tax, public, or private benefit planning | ||||||
25 | or financial professional. You acknowledge that your | ||||||
26 | attorney in the legal claim has provided no tax, public, or |
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1 | private benefit planning regarding this transaction.". | ||||||
2 | The contract shall contain the following statement | ||||||
3 | located above the signature line: "The consumer | ||||||
4 | understands and agrees that the funds received from this | ||||||
5 | Non-Recourse Civil Litigation Funding shall not be used to | ||||||
6 | pay for litigation costs related to the underlying Legal | ||||||
7 | claim." | ||||||
8 | (6) The contract for nonrecourse civil litigation | ||||||
9 | funding shall contain a written acknowledgement by the | ||||||
10 | consumer that he or she has reviewed the contract in its | ||||||
11 | entirety, that he or she shall notify his or her current | ||||||
12 | attorney and any successor attorneys representing him or | ||||||
13 | her in the legal claim of the existence of the transaction | ||||||
14 | and shall instruct the nonrecourse civil litigation | ||||||
15 | funding company to provide the attorney with a copy of the | ||||||
16 | contract. Additionally, before obtaining any additional or | ||||||
17 | subsequent nonrecourse civil litigation funding, the | ||||||
18 | consumer will notify his or her attorney and receive prior | ||||||
19 | written permission for such transaction from the prior | ||||||
20 | civil litigation funding company. | ||||||
21 | Section 15. Priorities. Any attorney's lien, Medicare | ||||||
22 | lien, Medicaid lien, or health care provider lien against the | ||||||
23 | consumer's legal claim shall take priority over any lien of the | ||||||
24 | civil litigation funding company. |
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1 | Section 20. Standards and practices. Each civil litigation | ||||||
2 | funding company shall adhere to the following: | ||||||
3 | (1) The civil litigation funding company shall not pay | ||||||
4 | or offer to pay commissions or referral fees to any | ||||||
5 | attorney or employee of a law firm or to any medical | ||||||
6 | provider, chiropractor, or physical therapist or their | ||||||
7 | employees for referring a consumer to the civil litigation | ||||||
8 | funding company. The civil litigation funding company | ||||||
9 | agrees not to accept any commissions, referral fees, or | ||||||
10 | rebates from any attorney or employee of a law firm or any | ||||||
11 | medical provider, chiropractor, or physical therapist or | ||||||
12 | their employees, other than what is agreed to be paid to | ||||||
13 | the civil litigation funding company out of the proceeds of | ||||||
14 | the legal claim pursuant to the signed contract between the | ||||||
15 | consumer and the civil litigation funding company. | ||||||
16 | (2) The civil litigation funding company shall not | ||||||
17 | advertise false or intentionally misleading information | ||||||
18 | regarding its product or services.
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19 | (3) The civil litigation funding company shall not | ||||||
20 | knowingly provide funding to a consumer who has previously | ||||||
21 | sold and assigned an amount of his potential proceeds from | ||||||
22 | his legal claim to another civil litigation funding company | ||||||
23 | without first purchasing that civil litigation funding | ||||||
24 | company's entire accrued balance unless otherwise agreed | ||||||
25 | in writing by the civil litigation funding companies and | ||||||
26 | the consumer. |
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1 | (4) The civil litigation funding company shall not | ||||||
2 | offer single premium credit life, disability, or | ||||||
3 | unemployment insurance that is to be financed through a | ||||||
4 | civil litigation funding transaction. | ||||||
5 | (5) For non-English speaking consumers, upon the | ||||||
6 | written request of the consumer, the principal terms of the | ||||||
7 | contract must be translated in writing into the consumer's | ||||||
8 | primary language, the consumer must sign the translated | ||||||
9 | document containing the principal terms and initial each | ||||||
10 | page, and the translator or lawyer must sign an affirmation | ||||||
11 | confirming that the principal terms have been presented to | ||||||
12 | the consumer in the consumer's primary language and | ||||||
13 | acknowledged by the consumer. Principal terms shall | ||||||
14 | include all items that must be disclosed by this Section. | ||||||
15 | Section 25. Sale and assignment of proceeds of legal
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16 | claims. The contingent right to receive an amount of the | ||||||
17 | potential proceeds of a legal claim is assignable and that | ||||||
18 | assignment is valid for the purposes of obtaining funding from | ||||||
19 | a civil litigation funding company.
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20 | Section 30. Civil litigation funding companies; | ||||||
21 | requirements. | ||||||
22 | (a) It is unlawful to enter into a non-recourse civil | ||||||
23 | litigation funding transaction unless the civil litigation | ||||||
24 | funding company (i) is licensed by the Department in accordance |
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1 | with the licensure requirements of the Consumer Installment | ||||||
2 | Loan Act, (ii) has received special authorization in the form | ||||||
3 | of an Other Business Authorization for non-recourse civil | ||||||
4 | litigation funding certificate from the Department, and (iii) | ||||||
5 | complies with all Sections of this Act. | ||||||
6 | (b) Nothing in this Act shall cause any non-recourse civil | ||||||
7 | litigation funding transaction conforming to this Act to be | ||||||
8 | deemed to be a "loan" or subject to the restrictions or | ||||||
9 | provisions governing loans set forth in the Interest Act, the | ||||||
10 | Consumer Installment Loan Act, or other provisions of Illinois | ||||||
11 | law.
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12 | Section 35. List of civil litigation funding companies. The | ||||||
13 | Department shall maintain a list of all persons operating in | ||||||
14 | accordance with Section 30 of this Act that have notified the | ||||||
15 | Department that they intend to be civil litigation funding | ||||||
16 | companies. This list shall be posted on the Department's | ||||||
17 | website and shall be made available by the Department to any | ||||||
18 | person who requests the list.
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19 | Section 40. Reporting.
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20 | (a) The Department shall require a civil litigation funding | ||||||
21 | company operating in accordance with Section 30 of this Act to | ||||||
22 | annually submit data regarding the number of non-recourse civil | ||||||
23 | litigation funding transactions and the amount of funding | ||||||
24 | provided to Illinois consumers during the year. This data must |
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1 | be submitted to the Department no later than February 15 of | ||||||
2 | each year the civil litigation funding company does business in | ||||||
3 | this State for the previous year of activity.
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4 | (b) Every civil litigation funding company shall retain and | ||||||
5 | use in its business, or at another location approved by the | ||||||
6 | Director, such records as may be required by the Director to | ||||||
7 | enable the Director to determine whether the civil litigation | ||||||
8 | funding company is complying with the provisions of this Act | ||||||
9 | and the rules adopted pursuant to this Act. Every civil | ||||||
10 | litigation funding company shall preserve the records of any | ||||||
11 | non-recourse civil litigation funding for at least 2 years | ||||||
12 | after making the final entry for such transaction. Accounting | ||||||
13 | systems maintained in whole or in part by mechanical or | ||||||
14 | electronic data processing methods that provide information | ||||||
15 | equivalent to that otherwise required and follow generally | ||||||
16 | accepted accounting principles are acceptable for that | ||||||
17 | purpose, if approved by the Director in writing.
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18 | Section 45. Cease and desist.
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19 | (a) The Department may issue a cease and desist order to | ||||||
20 | any person doing business without the required license or to | ||||||
21 | any licensee, who, in the opinion of the Department, is | ||||||
22 | violating or is about to violate the best practices or | ||||||
23 | licensure requirements of this Act. | ||||||
24 | (b) The Department shall serve notice of its action, | ||||||
25 | designated as a cease and desist order made pursuant to this |
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1 | Section, including a statement of the reasons for the action, | ||||||
2 | either personally or by certified mail, return receipt | ||||||
3 | requested. Service by certified mail shall be deemed completed | ||||||
4 | when the notice is deposited in the U.S. mail.
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5 | (c) Within 15 days of service of the cease and desist | ||||||
6 | order, the licensee or other person may request, in writing, a | ||||||
7 | hearing.
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8 | (d) The Department shall schedule a hearing within 30 days | ||||||
9 | after the request for a hearing unless otherwise agreed to by | ||||||
10 | the parties.
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11 | (e) If it is determined that the Department had the | ||||||
12 | authority to issue the cease and desist order, it may issue | ||||||
13 | such orders as may be reasonably necessary to correct, | ||||||
14 | eliminate, or remedy such conduct, limited to the penalties | ||||||
15 | listed in Section 30 of this Act.
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16 | (f) The powers vested in the Department by this Section are | ||||||
17 | additional to any and all other powers and remedies vested in | ||||||
18 | the Department by law, and nothing in this Section shall be | ||||||
19 | construed as requiring that the Department shall employ the | ||||||
20 | power conferred in this Section instead of or as a condition | ||||||
21 | precedent to the exercise of any other power or remedy vested | ||||||
22 | in the Department.
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23 | Section 50. Penalties.
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24 | (a) Any person who engages in business as a civil | ||||||
25 | litigation funding company without the license required by this |
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1 | Act shall be guilty of a Class 4 felony.
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2 | (b) A license issued under this Act may be revoked if the | ||||||
3 | licensee, or any directors, managers of a limited liability | ||||||
4 | company, partners, or officer thereof is convicted of a felony.
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5 | (c) Any person engaging in non-recourse litigation funding | ||||||
6 | without the required license and found in violation of this | ||||||
7 | Act, may be subject to fines assessed by the Department, | ||||||
8 | limited to a maximum of $50,000, after an administrative | ||||||
9 | hearing on the case is heard. No fines can be imposed by the | ||||||
10 | Department until the results of the administrative hearing are | ||||||
11 | concluded.
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12 | (d) No provision of this Section imposing any liability | ||||||
13 | shall apply to any act done or omitted in conformity with any | ||||||
14 | rule or regulation or written interpretation thereof by the | ||||||
15 | Department, notwithstanding that after such act or omission has | ||||||
16 | occurred, the rule, regulation or interpretation is amended, | ||||||
17 | rescinded, or determined by judicial or other authority to be | ||||||
18 | invalid for any reason.
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19 | Section 55. Judicial review. All final administrative | ||||||
20 | decisions of the Department hereunder shall be subject to | ||||||
21 | judicial review pursuant to the provisions of the | ||||||
22 | Administrative Review Law, and all amendments and | ||||||
23 | modifications thereof, and any rules adopted pursuant thereto. | ||||||
24 | Section 60. Application of the Act. During the first 90 |
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1 | days after the effective date of this Act, any person who has | ||||||
2 | applied for a license under this Act, or filed written notice | ||||||
3 | of intention to apply for such license with the Department, and | ||||||
4 | who has not been denied, shall be subject to all provisions of | ||||||
5 | this Act and may engage in non-recourse litigation funding as | ||||||
6 | if he were a licensee under this Act. This Act shall not apply | ||||||
7 | to any loan transaction entered into by a civil litigation | ||||||
8 | funding company that conforms to the Consumer Installment Loan | ||||||
9 | Act entered into prior or subsequent to such effective date of | ||||||
10 | this Act.
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11 | Section 900. The Consumer Installment Loan Act is amended | ||||||
12 | by changing Section 21 as follows:
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13 | (205 ILCS 670/21) (from Ch. 17, par. 5427)
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14 | Sec. 21. Application of Act. This Act does not apply to any | ||||||
15 | person, partnership,
association, limited liability company, | ||||||
16 | or
corporation doing business under and as permitted by any law | ||||||
17 | of this State
or of the United States relating to banks, | ||||||
18 | savings and
loan
associations, savings banks, credit unions, or
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19 | licensees under the Residential Mortgage License Act for | ||||||
20 | residential mortgage
loans made pursuant to that Act. This Act | ||||||
21 | does
not apply to
business loans. This Act does not apply to | ||||||
22 | payday loans. This Act does not apply to non-recourse civil | ||||||
23 | litigation funding, except for its licensure requirements.
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24 | (Source: P.A. 94-13, eff. 12-6-05.)
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1 | Section 970. Severability. The provisions of this Act are | ||||||
2 | severable under Section 1.31 of the Statute on Statutes.
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3 | Section 999. Effective date. This Act takes effect upon | ||||||
4 | becoming law.
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