HB 280 — Third Party Litigation Funding Amendments

(6)(6)(a) (a) "Consumer maintenance funding provider" means a person that enters into a consumer maintenance funding agreement with a consumer.

{or} (iii) an attorney providing legal services to a consumer{.}consumer; ;

or {[(2)](iv) (7)} a bank, lender, financing entity, or other special purpose entity:

(10)(10)(a) - 5 - HB0280 compared with HB0280S03 (a) "Foreign entity of concern" means a partnership, associationassociation, , corporation, organization, or other legal entity that:

(b)- "Foreign4 entity- ofEnrolled concern"Copy includesH.B. an individual that owns, has a controlling interest in, or is a director or senior officer of any entity that falls within Subsection (10)(a).

280 (b) "Foreign entity of concern" includes an individual that owns, has a controlling interest in, or is a director or senior officer of any entity that falls within Subsection (10)(a).

and] [(b) has or may have a pending legal action in this state.] [(6) "Legal funding" means a payment of $500,000 or less to an individual in exchange for the right to receive an amount out of the potential proceeds of any realized settlement, judgment, award, or verdict the individual may receive in a civil legal action.] [(7) "Maintenance funding agreement" means an agreement between an individual and a maintenance funding provider under which the maintenance funding provider provides legal funding to the individual.] [(8)[(8)(a) (a) "Maintenance funding provider" means a business entity that engages in the business of legal funding.] [(b) "Maintenance funding provider" does not include:] [(i) an immediate family member of an individual;] [(ii) an accountant providing accounting services to an individual;

-The 6following -section HB0280is comparedaffected withby HB0280S03a Sectioncoordination 2.clause at the end of this bill.

Section 2.

13-57-201.13-57-201 .

[(1) {[} Except as provided in Subsection (4), a business entity {]may A person }may not act as a maintenance funding provider in this state without registering with the division.] (1)(1)(a) (a) A person may not act as a consumer maintenance funding provider in this state without registering with the division.

and (b)- that5 includes:- H.B.

280 Enrolled Copy (b) that includes:

and] - 7 - HB0280 compared with HB0280S03 [(b) until the division makes a determination regarding the person's application for registration under this section.] SectionThe 3.following section is affected by a coordination clause at the end of this bill.

Section 3.

13-57-202.13-57-202 .

(a) pay or offer to pay a commission, referral fee, or any other form of consideration to the- following6 for- referringEnrolled [anCopy individual]H.B. a consumer to the consumer maintenance funding provider:

280 the following for referring [an individual] a consumer to the consumer maintenance funding provider:

-(5) 8 - HB0280 compared with HB0280S03 {(5) } {(a) {An attorney or law firm that the consumer retains may not have a financial interest in the consumer maintenance funding provider offering maintenance funding to the consumer.} } (b){(5)} {An attorney who refers the } A consumer {to } maintenance funding provider may not offer maintenance funding to a consumer who has retained, or been referred by, an attorney or law firm that {the consumer retains may not have } has a financial interest {a } in the consumer maintenance funding providerprovider. {that offers a consumer maintenance funding agreement to the consumer} .

{(6)(6) {The attorney or law firm that the consumer retains may only disclose privileged information to the consumer maintenance funding provider with the written consent of the consumer.} } (7){(6)} A consumer maintenance funding provider may not enter into a consumer maintenance funding agreement directly or indirectly with a foreign entity of concern or a foreign country or person of concern.

The following section is affected by a coordination clause at the end of this bill.

13-57-203.13-57-203 .

(a)- under7 oath;- H.B.

280 Enrolled Copy (a) under oath;

and - 9 - HB0280 compared with HB0280S03 (f) any other information the director requires concerning the maintenance funding provider's business or operations in the state.

13-57-301.13-57-301 .

(b) be written in a clear and coherent manner using words with common, everyday meanings so that the average consumerconsumer, , who makes a reasonable effort under ordinary circumstancescircumstances, {to } , can read and understand the terms of the consumer maintenance funding agreement without requiring the assistance of a professional;

[(b)] (d) contain a right of rescission permitting the [individual] consumer to cancel the [agreement][ agreement] consumer maintenance funding agreement without penalty or further obligation, if the [individual] consumer returns to the consumer maintenance funding provider the full amount of the disbursed funds:

and (ii)- (A)8 in- personEnrolled byCopy deliveringH.B. the consumer maintenance funding provider's uncashed check to the consumer maintenance funding provider's office;

280 (ii)(A) in person by delivering the consumer maintenance funding provider's uncashed check to the consumer maintenance funding provider's office;

and (ii) lists the total amount of any realized settlement, judgment, award, or verdict to be paid to the consumer maintenance funding provider at the end of each six-month period, if the - 10 - HB0280 compared with HB0280S03 [contract] consumer maintenance funding agreement is satisfied during that {[period{]}period; period};

{(3)(3) } (a){(3)} {The } A consumer maintenance funding agreement {shall contain } is not valid unless the agreement includes a- written9 {acknowledgment- }H.B. certification signed by the consumer stating that {attests} :

(i){(a)}280 theEnrolled consumer,Copy witha thewritten consumer'scertification attorneysigned {hasby } , reviewed the mandatoryconsumer disclosuresstating inthat: Section 13-57-302 {with the consumer} ;

(ii){(b)}(a) the {attorneyconsumer, iswith beingthe paidconsumer's }attorney, consumerreviewed is represented by an attorney in the legalmandatory claimdisclosures on a contingency fee basis in accordanceSection with13-57-302; a written fee agreement;

(iii){(c)}(b) the consumer willis directrepresented theby consumer'san attorney toin receive and disburse all proceeds of the legal claim {willon bea disbursedcontingency }fee throughbasis {eitherin }accordance thewith attorney's trust account {of the attorney } or a settlementwritten fundfee establishedagreement; {to receive } for the {proceeds } benefit of the {legal claim on the consumer's behalf;} consumer;

and(c) (iv){(d)} the consumer will direct the consumer's attorney {isto obligatedreceive }and to disburse fundsall {fromproceeds }of in accordance with the {legallegal claim andthrough ensurethe thatattorney's thetrust }account termsor ofa thesettlement consumerfund maintenanceestablished fundingfor agreementthe {arebenefit fulfilled;}of .the consumer;

-and 11(d) -the HB0280consumer comparedwill withdirect HB0280S03the {(v)consumer's {the attorney hasto notdisburse receivedfunds ain referralaccordance feewith orthe otherterms considerationof from the consumer maintenance funding provideragreement. in connection with the maintenance funding, nor will the attorney receive a referral fee or other consideration for the referral in the future;

and}(4)(a) } {(vi) {the attorney in the legal claim has provided no tax, public or private benefit planning, or financial advice regarding this transaction.} } {(b) {Subsection (3)(a) applies to a new attorney or law firm that the consumer retains.} } (4) (a) {the } The consumer maintenance funding agreement is null and void if the {attorney or law firm that the consumer retains } consumer does not provide the acknowledgment Subsection (3) requires.

13-57-302.13-57-302 .

{(1) In a legal claim in which a plaintiff enters into a consumer maintenance funding agreement, the plaintiff or the plaintiff's attorney shall provide to each of the other parties, and each insurer that has a duty to defend another party, written notice that the plaintiff has entered into a consumer maintenance funding agreement.} {(2) In a legal claim in which a plaintiff enters into a consumer maintenance funding agreement, the contents of the consumer maintenance funding agreement are subject to discovery under the Utah Rules of Civil Procedure and Evidence.} {(3)} {(a) A plaintiff or a plaintiff's attorney shall provide the written notice Subsection (1) requires within 20 days after the day on which the consumer maintenance funding agreement is fully executed.} {(b) The disclosure obligation Subsection (1) requires is a continuing obligation.} {(4) {The written notice Subsection (1) requires is not admissible as evidence in a court proceeding.} {(5)} A consumer maintenance funding provider shall disclose in a consumer maintenance funding agreement:

(1) - 12 - HB0280 compared with HB0280S03 {[(1)] (a)} that the consumer maintenance funding provider may not participate in deciding whether, when, or the amount for which a legal action is settled;

{[(2){]}(2) {(b)} } that the maintenance funding provider may not interfere with the independent professional judgment of the attorney handling the legal action or any settlement of the legal action;

{[(3){]}(3) {(c)} } the following statement in substantially the following form, in all capital letters and at least a 12-point type:

YOU WILL NOT OWE (INSERT NAME OF THE CONSUMER MAINTENANCE FUNDING PROVIDER HERE) ANYTHING IF THERE ARE NO PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU HAVE VIOLATED A MATERIAL TERM OF THIS AGREEMENT OR YOU HAVE COMMITTED FRAUD AGAINST THE CONSUMER MAINTENANCE- FUNDING10 PROVIDER.";- Enrolled Copy H.B.

{[(4){]}280 {(d)}MAINTENANCE }FUNDING inPROVIDER."; accordance with Section 13-57-301, the following statement in substantially the following form and at least a 12-point type:

(4) in accordance with Section 13-57-301, the following statement in substantially the following form and at least a 12-point type:

and {[(5){]}(5) {(e)} } immediately above the line for the [individual's] consumer's signature, the following statement in at least a 12-point type:

Depending on your circumstances, you may want to consult a tax, benefits planning, or financial professional." {SectionSection 7.

Section 13-57-401 is amended to read:

} 13-57-401.

Rulemaking.

- 13 - HB0280 compared with HB0280S03 The division shall make rules in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, to:

(1) establish an application process for a business entity to register with the division as a consumer maintenance funding provider, in accordance with Section 13-57-201;

(2) establish a filing process for a consumer maintenance funding provider to file a consumer maintenance funding agreement with the division;

(3) establish a filing process for annual reports required under Section 13-57-203;

and (4) carry out the provisions of this chapter.

{Section 8.

Section 13-57-402 is amended to read:

} 13-57-402.

Public education regarding legal funding -- Reporting to Legislature.

[(1)] The director shall help educate the general public regarding legal funding in the state by:

[(a)] (1) analyzing and summarizing data consumer maintenance funding providers submit under Section 13-57-203;

and [(b)] (2) publishing the analysis and summary described in Subsection (1)(a) on the division's web page.

[(2) Before October 1, 2022, the director shall report to the Business and Labor Interim Committee on the status of legal funding in the state and make any recommendation the director decides is necessary to improve the regulatory framework of legal funding, including a recommendation on whether to limit charges a maintenance funding provider may impose under a maintenance funding agreement.] Section 7.

13-57-501.13-57-501 .

If a {consumermaintenance }maintenance funding provider willfully violates a provision of this chapter, a {consumermaintenance }maintenance funding agreement associated with the violation is unenforceable by the {consumermaintenance }maintenance funding provider or any successor-in-interest to the {consumer } maintenance funding agreement.

{Section 10.

Section 13-57-502 is amended to read:

} 13-57-502.

Penalties -- Enforcement.

- 14 - HB0280 compared with HB0280S03 (1) After notice and an opportunity for an administrative hearing in accordance with Title 63G, Chapter 4, Administrative Procedures Act, the division may, in addition to exercising the division's enforcement powers under Section 13-2-6, enforce the provisions of this chapter by:

(a) revoking or suspending a consumer maintenance funding provider's registration;

(b) ordering a consumer maintenance funding provider to cease and desist from further legal funding;

(c) imposing a penalty of up to:

(i) $1,000 per violation;

or (ii) $10,000 per violation that the division finds willful;

or (d) ordering the consumer maintenance funding provider to make restitution to [an individual] a consumer.

(2) The division's enforcement powers under this section and Section 13-2-6 do not affect [an individual's] a consumer's legal claim against a consumer maintenance funding provider.

{Section 11.

Section 13-57-503 is amended to read:

} 13-57-503.

Applicability.

The requirements of this chapter for a consumer maintenance funding provider do not apply to:

(1) a bank while in the course of conducting a banking business as described in Section 7-3-1;

(2) a deferred deposit lender, as defined in Section 7-23-102, while engaged in the business of deferred deposit lending;

(3) a title lender, as defined in Section 7-24-102, while engaged in the business of extending a title loan;

or (4) a creditor, as defined in Section 70C-1-302, subject to the provisions of Title 70C, Utah Consumer Credit Code.

Section 813-57-504 is enacted to read:

13-57-504.13-57-504 .

(1) The contingent right to receive an amount of the potential proceeds of a legal claim is assignable by a {consumer } party to a {consumer } maintenance funding provider.

(2) Only attorney's liens related to the legal claim that is the subject of the {consumer } maintenance funding or Medicare or other statutory liens related to the legal claim take priority over a lien of the {consumer } maintenance funding provider.

Section 13.

Section 13 is enacted to read:

- 15 - HB0280 compared with HB0280S03 13-57-505.

Effect of communication on privileges.

Communications between a consumer's attorney and a consumer maintenance funding provider to allow the consumer maintenance funding provider to ascertain the status of a legal claim or a legal claims expected value are not discoverable by a person against whom the consumer asserts or files the claim.

Section 14.

Section 14 is enacted to read:

13-57-506.

Joint and several liability for costs.

A maintenance funding provider is jointly and severally liable for any award or order imposing or assessing costs or monetary sanctions against a consumer or a party's legal representative arising from or relating to any civil proceeding, administrative proceeding, claim, or cause of action for which the maintenance funding provider is providing funding.

Section 913-57-601 is enacted to read:

13-57-601.- 11 - H.B.

280 Enrolled Copy 13-57-601 .

{6.(1) A commercial maintenance funding provider may not enter into a commercial maintenance funding agreement directly or indirectly with a foreign entity of concern or a foreign country or person of concern.

Commercial(2) Maintenance Funding} (1) A commercial maintenance funding provider may not enterreceive, intoaccess, aor commercialuse maintenanceany fundingdocuments agreementor directlyinformation subject to a court order to seal or indirectlyprotect withthat athe foreigncourt entityissues in the course of concernthe orcivil proceeding unless a foreigncourt countryorder orspecifically personallows ofa concern.commercial maintenance funding provider to have access to such documents or information.

(2)(3)(a) A {party} commercial maintenance funding provider may not receive,direct, {an attorney} access, or {ahave law firm for a partycontractual shallright notto disclosecontrol, orthe shareparty } use any documents or informationthe subjectparty's toattorney awith courtrespect order to seal or protect {is issued} that the courtconduct issues in the course of the civilunderlying proceedinglegal {withclaim }or unless a courtsettlement orderor specificallyresolution allowsof athe commerciallegal maintenanceclaim. funding providerto have access to such documents or information.

(3)(b) (a)The A commercial maintenance funding provider may not {make a decision, } direct, or have {influence} a contractual right to control,make {or direct } the {plaintiffdecisions }Subsection party(3)(a) ordescribes theremains {plaintiff'ssolely } party's attorney {with respect to the conduct of the underlying legal claim or a settlement or resolution of the legal claim, or make a decision } with respect to the conductparty ofand the underlyingparty's legalattorney claimin or a settlement or resolution of the legalcivil claim.proceeding.

(b) The right to make the decisions Subsection (3)(a) describes {remains} remains solely with the {plaintiff } party and the {plaintiff's } party's attorney in the civil proceeding.

- 16 - HB0280 compared with HB0280S03 This Bill Repeals:

Section 16.

Section 16 is enacted to read:

13-57-602.

Disclosure of a commercial maintenance funding agreement.

(1) (a) Except as otherwise stipulated or ordered by the court, without awaiting a discovery request, a party or a party's counsel shall provide to the other parties any agreement in which a commercial maintenance funding provider has a right to receive compensation that is contingent on the outcome of the legal claim.

(b) The disclosure obligation Subsection (1)(a) requires is a continuing obligation.

(2) A commercial maintenance funding agreement is admissible as evidence in a court proceeding.

(3) A plaintiff or the plaintiff's attorney shall provide the agreement Subsection (1) requires within 20 days after the day on which the parties execute the commercial maintenance funding agreement.

Effective date.

2-23-26 9:50 AM - 1712 -