Rep. André M. Thapedi

Filed: 3/13/2013

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 2301

2    AMENDMENT NO. ______. Amend House Bill 2301 by replacing
3everything after the enacting clause with the following:
 
4    "Section 1. Short title. This Act may be cited as the
5Non-Recourse Civil Litigation Funding Act.
 
6    Section 5. Definitions. In this Act:
7    "Civil litigation funding company" means a person or entity
8that enters into a non-recourse civil litigation funding
9transaction with a consumer.
10    "Consumer" means a person residing or domiciled in Illinois
11or who elects to enter into a transaction under this Act,
12whether it be in-person, over the Internet, by facsimile, or by
13any other electronic means, and who has a pending legal claim
14and is represented by an attorney at the time he or she
15receives the non-recourse civil litigation funding.
16    "Department" means the Department of Financial and

 

 

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1Professional Regulation.
2    "Legal claim" means a civil claim or action.
3    "Non-recourse civil litigation funding" means a
4transaction in which a civil litigation funding company
5purchases and a consumer assigns the contingent right to
6receive an amount of the potential proceeds of a settlement,
7judgment, award, or verdict obtained in the consumer's legal
8claim to the civil litigation funding company.
 
9    Section 10. Contract provisions.
10    (a) All contracts for non-recourse civil litigation
11funding shall comply with the following requirements:
12        (1) The contract shall contain on the front page,
13    appropriately headed and in at least 12-point bold face
14    type, the following disclosures:
15            (A) the total dollar amount of funds to be paid to
16        the consumer;
17            (B) an itemization of one-time fees;
18            (C) the total dollar amount being assigned by the
19        consumer to the civil litigation funding company, set
20        forth in 6-month intervals for 36 months, including all
21        fees;
22            (D) the total dollar amount in broker fees that are
23        involved in the transaction; and
24            (E) the annual percentage rate of return,
25        calculated as of the last day of each 6-month interval,

 

 

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1        including frequency of compounding.
2        (2) The contract shall provide that the consumer may
3    cancel the contract within 5 business days following the
4    consumer's receipt of funds, without penalty or further
5    obligation. The contract shall contain the following
6    notice written in at least 12-point, bold face type:
7        "Consumer's right to cancellation: You may cancel this
8    contract without penalty or further obligation within 5
9    business days after the date you receive funds from (insert
10    name of civil litigation funding company).".
11        The contract also shall specify that in order for the
12    cancellation to be effective, the consumer shall either
13    return to the civil litigation funding company the full
14    amount of disbursed funds by delivering the civil
15    litigation funding company's uncashed check to the civil
16    litigation company's offices in person within 5 business
17    days after the disbursement of the funds or mail a notice
18    of cancellation and include in that mailing a return of the
19    full amount of disbursed funds in the form of the civil
20    litigation funding company's uncashed check, or a
21    registered or certified check or money order, by insured,
22    registered, or certified United States mail, postmarked
23    within 5 business days after the receipt of those funds
24    from the civil litigation funding company, at the address
25    specified in the contract for cancellation.
26        (3) The contract shall contain the following statement

 

 

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1    in at least 12-point bold face type:
2            "The civil litigation funding company agrees that
3        it shall have no right to and will not make any
4        decisions with respect to the conduct of the underlying
5        legal claim or any settlement or resolution thereof and
6        that the right to make those decisions remains solely
7        with you and your attorney in the legal claim.".
8        (4) The contract for non-recourse civil litigation
9    funding shall contain an acknowledgement by the consumer
10    that he or she has reviewed the contract in its entirety.
11        (5) The contract shall contain the following statement
12    in at least 12-point bold face type located immediately
13    above the space where the consumer signature is required:
14        "Do not sign this Agreement before you read it
15    completely or if it contains any blank spaces. You are
16    entitled to a completely filled-in copy of this contract.
17    Before you sign this Agreement you should obtain the advice
18    of an attorney. Depending on the circumstances, you may
19    want to consult a tax, public, or private benefit planning
20    or financial professional. You acknowledge that your
21    attorney in the legal claim has provided no tax, public, or
22    private benefit planning regarding this transaction.".
23        (6) The contract shall contain a written
24    acknowledgment by the attorney representing the consumer
25    in the legal claim that states all of the following:
26            (A) the attorney representing the consumer in the

 

 

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1        legal claim has reviewed the contract and all costs and
2        fees have been disclosed, including the annualized
3        rate of return applied to calculate the amount to be
4        paid by the consumer;
5            (B) the attorney representing the consumer in the
6        legal claim is being paid on a contingency basis, per a
7        written fee agreement;
8            (C) all proceeds of the civil litigation will be
9        disbursed via the trust account of the attorney
10        representing the consumer in the legal claim or a
11        settlement fund established to receive the proceeds of
12        the civil litigation from the defendant on behalf of
13        the consumer;
14            (D) the attorney representing the consumer in the
15        legal claim is following the written instructions of
16        the consumer with regard to the non-recourse civil
17        litigation funding;
18            (E) the attorney representing the consumer in the
19        legal claim shall not be paid or offered to be paid
20        commissions or referral fees; and
21            (F) whether the attorney representing the consumer
22        in the legal claim does or does not have a financial
23        interest in the civil litigation funding company.
24        (7) All contracts to the consumer must contain the
25    following statement, in plain language in a box with
26    15-point, bold face type, in all capitalized letters:

 

 

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1        "IF THERE IS NO RECOVERY OF PROCEEDS FROM YOUR LEGAL
2    CLAIM, OR IF THERE IS NOT ENOUGH MONEY TO PAY THE CIVIL
3    LITIGATION FUNDING COMPANY IN FULL, YOU WILL NOT OWE THE
4    CIVIL LITIGATION FUNDING COMPANY ANYTHING IN EXCESS OF YOUR
5    RECOVERY, UNLESS YOU VIOLATED THIS PURCHASE AGREEMENT.".
6    (b) If a dispute arises between the consumer and the civil
7litigation funding company concerning the contract for
8non-recourse civil litigation funding, the responsibilities of
9the attorney representing the consumer in the legal claim shall
10be no greater than the attorney's responsibilities under the
11Illinois Rules of Professional Conduct.
 
12    Section 15. Contract fee amount.
13    (a) The civil litigation funding company shall offer the
14consumer the option of either entering into a conventional loan
15under the Consumer Installment Loan Act or entering into a
16non-recourse civil litigation funding.
17    If the consumer elects to enter into a conventional loan
18agreement under the Consumer Installment Loan Act, the interest
19charged shall not exceed an annual percentage rate of 36%.
20    If the consumer elects to enter into a non-recourse civil
21litigation funding, the company shall not charge a fee in
22excess of 36% annual percentage rate plus a deferment fee not
23to exceed 3% for each month the funding is outstanding with
24compounding to occur no more often than monthly.
25    (b) No additional fees shall be applied for any period of

 

 

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1time beyond 1080 days from the funding date.
2    (c) Except for the fees set forth in this Section and
3Section 20, the civil litigation funding company shall not
4impose on a consumer any additional finance charges, interest,
5fees, or charges of any sort for any purpose.
 
6    Section 20. Charges permitted.
7    (a) A licensee may charge an acquisition charge not to
8exceed 8% of the amount funded or $135, whichever is less.
9    (b) A licensee may charge an expedited funds delivery
10option charge not to exceed the actual cost of delivery or $20,
11whichever is less, plus a $25 handling fee. Expedited funds
12delivery options, including, but not limited to, overnight
13delivery, electronic fund transfers, and automated clearing
14house transactions may be offered to the consumer as a choice
15of the method of the delivery of funds. The fund delivery
16charge is fully earned at the time that each funding
17transaction is made and shall not be subject to refund. An
18invoice containing details of expedited delivery charges and
19dates of delivery shall be provided to the consumer or
20consumer's attorney by way of postal mail, courier service,
21facsimile, or e-mail, return receipt acknowledged, no more than
2210 business days after the funding date. A no-charge delivery
23option must be offered to the consumer as a choice.
 
24    Section 25. Claim priority. Any lien arising out of the

 

 

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1underlying consumer's legal claim for subrogation claims and
2litigation costs, health care providers, employers in worker's
3compensation proceedings, health insurers, employers with
4self-funded health care plans, Medicare, and Public Aid shall
5be satisfied before and take priority over any claim of the
6civil litigation funding company. All other holders of liens,
7security interests, or subrogation claims shall take priority
8over the civil litigation funding company to the extent allowed
9by law.
 
10    Section 30. Standards and practices.
11    (a) The civil litigation funding company shall not offer
12single premium credit life, disability, or unemployment
13insurance that will be financed through a non-recourse civil
14litigation funding transaction.
15    (b) For non-English speaking consumers, the principal
16terms of the contract shall be translated in writing into the
17same language in which the oral negotiations were conducted
18between the civil litigation funding company and the consumer.
19The consumer must sign the translated document containing the
20principal terms and initial each page, and any translator of
21the consumer's choice must sign an affirmation confirming that
22the principal terms have been presented to the consumer in the
23same language in which the oral negotiations were conducted
24between the civil litigation funding company and the consumer
25and acknowledged by the consumer. Principal terms shall include

 

 

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1all items that must be disclosed under Section 10.
2    (c) The civil litigation funding company shall not
3knowingly enter into a non-recourse civil litigation funding
4contract with a consumer where the consumer's legal claim is a
5pending class action lawsuit at the time of the funding. If any
6legal claim in which a plaintiff has received non-recourse
7civil litigation funding become a class action matter, no
8further funding shall be permitted.
9    (d) An attorney or law firm shall not have a financial
10interest in the civil litigation funding company providing
11non-recourse civil litigation funding to a consumer
12represented by that attorney or law firm.
13    (e) The return of the funding amount to the civil
14litigation funding company, plus any agreed upon fees, shall be
15rendered only out of the proceeds, if any, of the realized
16settlement, judgment, award, or verdict the consumer may
17receive from the legal claim. Under no circumstances shall the
18civil litigation funding company have recourse for the funding
19amount beyond the consumer's proceeds from the legal claim.
20    (f) The civil litigation funding company shall have no
21authority to make any decisions with respect to the conduct of
22the litigation of the legal claim or any settlement or
23resolution of the claim. The authority to make those decisions
24remains solely with the consumer and the consumer's attorney
25representing the consumer in the legal claim. The civil
26litigation funding company has no right to pursue the legal

 

 

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1claim on the consumer's behalf.
2    (g) The civil litigation funding company shall only accept
3an assignment of a contingent right to receive a portion of the
4potential proceeds, rather than an assignment of the legal
5claim. The contracted return of the funding amount, plus any
6agreed upon fees assigned to the civil litigation funding
7company, shall not be determined as a percentage of the total
8recovery from the legal claim, but shall be set as a
9contractually determined amount based upon intervals of time
10from the funding date through the resolution date.
11    (h) Notwithstanding any other provision of this Section,
12the civil litigation funding company shall allow the consumer
13to make payments on a funding at any time without additional
14cost or penalty.
15    (i) Contact between the civil litigation funding company
16and the consumer shall be subject to the following limitations:
17        (1) The civil litigation funding company shall not
18    contact the consumer after the funding date in order to
19    influence any decisions with respect to the conduct of the
20    legal claim or any settlement or resolution of the claim.
21    The civil litigation funding company may contact the
22    consumer or the consumer's attorney to obtain the status of
23    the legal claim and may contact the consumer after the
24    funding date to obtain updated attorney contact
25    information.
26        (2) After the resolution date, a civil litigation

 

 

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1    funding company shall not seek to collect additional funds
2    or threaten civil action for any deficiency.
 
3    Section 35. Assessment of fees; restrictions; calculation.
4    (a) A civil litigation funding company may not assess fees
5for any period exceeding 36 months from the date of the
6contract with the consumer.
7    (b) Fees assessed by the civil litigation funding company
8shall compound at least semi-annually but shall not compound
9based on any lesser time period.
10    (c) In calculating the annual percentage fee or rate of
11return, a civil litigation funding company shall include all
12charges payable directly or indirectly by the consumer and
13shall compute the rate based only on amounts actually received
14and retained by a consumer.
 
15    Section 40. Effect of communication on privileges. No
16communication between the attorney and the civil litigation
17funding company, as it pertains to the non-recourse civil
18litigation funding contract, shall limit, waive, or abrogate
19the scope or nature of any statutory or common-law privilege,
20including, but not limited to, the work-product doctrine and
21attorney-client privilege.
 
22    Section 45. Civil litigation funding company;
23requirements.

 

 

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1    (a) Unless a civil litigation funding company has first
2registered pursuant to this Act, the civil litigation funding
3company shall not engage in the business of non-recourse civil
4litigation funding.
5    (b) A civil litigation funding company shall submit an
6application of registration to the Department in a form
7prescribed by the Department. An application filed under this
8subsection (b) is a public record and shall contain information
9that allows the Department to make an evaluation of the
10character, fitness, and financial responsibility of the
11company such that the Department may determine that the
12business will be operated honestly or fairly within the
13purposes of this Act. For purposes of determining a civil
14litigation funding company's character, fitness, and financial
15responsibility, the Department shall request a company to
16submit: a copy of the company's articles of incorporation,
17articles of organization, certificate of limited partnership,
18or other organizational documents; proof of registration with
19an Illinois registered agent; and proof of a surety bond or
20irrevocable letter of credit, that is equal to double the
21amount of the largest funding in the past calendar year or
22$50,000, whichever is greater, issued and confirmed by a
23financial institution authorized by law to transact business in
24the State.
25    (c) A civil litigation funding company may apply to renew a
26registration by submitting an application for renewal in a form

 

 

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1prescribed by the Department. An application filed under this
2subsection (c) is a public record. The registration shall
3contain current information on all matters required in an
4original registration.
 
5    Section 50. Registration fee; renewal fee.
6    (a) An application for registration or renewal of
7registration under Section 45 shall be accompanied by either an
8application for registration fee or a renewal of registration
9fee, as applicable.
10    (b) The Department may, by rule, establish fees for
11applications for registration and renewals of registration at
12rates sufficient to cover the costs of administering this Act,
13in the event any such fees are required. Such fees shall be
14collected by the Department and all moneys received by the
15Department under this Act shall be deposited in the Financial
16Institution Fund created under Section 6z-26 of the State
17Finance Act.
 
18    Section 55. Certificate or renewal of registration.
19    (a) The Department shall issue a certificate of
20registration or a renewal of registration to a civil litigation
21funding company that complies with Section 45 and its rules.
22    (b) The Department may refuse to issue a certificate of
23registration if the Department determines that the character,
24fitness, or financial responsibility of the civil litigation

 

 

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1funding company are such as to warrant belief that the business
2will not be operated honestly or fairly within the purposes of
3this Act.
4    (c) The Department may suspend, revoke, or refuse to renew
5a certificate of registration for conduct that would have
6justified denial of registration under subsection (b) of this
7Section or for violating Section 15
8    (d) The Department may deny, suspend, revoke, or refuse to
9renew a certificate of registration only after proper notice
10and an opportunity for a hearing. The Illinois Administrative
11Procedure Act applies to this Act.
12    (e) The Department may issue a temporary certificate of
13registration while an application for registration or renewal
14of registration is pending.
15    (f) The Department shall require a civil litigation funding
16company registered pursuant to this Act to annually submit
17certain data, in a form prescribed by the Department, that
18contains:
19        (1) the number of non-recourse civil litigation
20    fundings;
21        (2) the amount of non-recourse civil litigation
22    fundings;
23        (3) the number of non-recourse civil litigation
24    fundings required to be repaid by the consumer;
25        (4) the amount charged to the consumer, including, but
26    not limited to, the annual percentage fee charged to the

 

 

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1    consumer and the itemized fees charged to the consumer; and
2        (5) the dollar amount and number of cases in which the
3    realization to the civil litigation funding company was
4    less than contracted.
5    (g) The Department shall annually prepare and submit a
6report to the Secretary of the Senate, the Clerk of the House,
7and to the Senate and House Judiciary Committees on the status
8of non-recourse civil litigation funding activities in the
9State. The report shall include aggregate information reported
10by registered civil litigation funding companies.
 
11    Section 60. Rules. The Department shall make and enforce
12reasonable rules and regulations as may be necessary to carry
13out the provisions of this Act.".