Full Text of SB1396 099th General Assembly
SB1396 99TH GENERAL ASSEMBLY |
| | 99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016 SB1396 Introduced 2/20/2015, by Sen. William R. Haine SYNOPSIS AS INTRODUCED: |
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Creates the Civil Justice Funding Act. Establishes requirements for civil justice funding contracts, prohibitions on civil justice funding companies, disclosure requirements, limitations on fees, prohibitions on attorneys, and a requirement to register with the Department of Financial and Professional Regulation before engaging in civil justice funding. Effective July 1, 2015.
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| | A BILL FOR |
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| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 1. Short title. This Act may be cited as the Civil | 5 | | Justice Funding Act. | 6 | | Section 5. Definitions. As used in this Act: | 7 | | "Advertise" means publishing or disseminating any written, | 8 | | electronic, or printed communication or any communication by | 9 | | means of recorded telephone messages or transmitted on radio, | 10 | | television, the Internet, or similar communications media, | 11 | | including film strips, motion pictures, and videos, published, | 12 | | disseminated, circulated, or placed before the public, | 13 | | directly or indirectly, for the purpose of inducing a consumer | 14 | | to enter into a civil justice funding.
| 15 | | "Charges" means the amount of money to be paid to the civil | 16 | | justice funding company by or on behalf of the consumer above | 17 | | the funded amount provided by or on behalf of the company to an | 18 | | Illinois consumer pursuant to this Act. Charges include all | 19 | | administrative, origination, underwriting, or other fees, no | 20 | | matter how denominated.
| 21 | | "Civil justice funding" means a non-recourse transaction | 22 | | in which a civil justice funding company purchases and a | 23 | | consumer assigns to the company a contingent right to receive |
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| 1 | | an amount of the potential proceeds of a settlement, judgment, | 2 | | award, or verdict obtained in the consumer's legal claim.
| 3 | | "Civil justice funding company" or "company" means a person | 4 | | or entity that enters into a civil justice funding with an | 5 | | Illinois consumer. "Civil justice funding company" or | 6 | | "company" does not include: | 7 | | (1) an immediate family member of the consumer; | 8 | | (2) a bank, lender, financing entity, or other special | 9 | | purpose entity: | 10 | | (A) that provides financing to a civil justice | 11 | | funding company; or | 12 | | (B) to which a civil justice funding company grants | 13 | | a security interest or transfers any rights or interest | 14 | | in a civil justice funding; and | 15 | | (3) an attorney or accountant who provides services to | 16 | | a consumer.
| 17 | | "Consumer" means a natural person who has a pending legal | 18 | | claim and who (1) resides or is domiciled in Illinois or (2) | 19 | | has a legal claim in Illinois.
| 20 | | "Funded amount" means the amount of moneys provided to or | 21 | | on behalf of the consumer in the civil justice funding. | 22 | | "Funded amount" does not include charges.
| 23 | | "Funding date" means the date on which the funded amount is | 24 | | transferred to the consumer by the civil justice funding | 25 | | company either by personal delivery or via wire, ACH, or other | 26 | | electronic means or mailed by insured, certified, or registered |
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| 1 | | United States mail.
| 2 | | "Immediate family member" means a parent; sibling; child by | 3 | | blood, adoption, or marriage; spouse; grandparent or | 4 | | grandchild.
| 5 | | "Legal claim" means a bona fide civil claim or cause of | 6 | | action.
| 7 | | "Resolution date" means the date the amount funded to the | 8 | | consumer, plus the agreed upon charges, are delivered to the | 9 | | civil justice funding company.
| 10 | | Section 10. Contract requirements; right of rescission. | 11 | | (a) All civil justice fundings shall meet the following | 12 | | requirements:
| 13 | | (1) the contract shall be completely filled in when | 14 | | presented to the consumer for signature;
| 15 | | (2) the contract shall contain, in bold and boxed type, | 16 | | a right of rescission, allowing the consumer to cancel the | 17 | | contract without penalty or further obligation if, within 5 | 18 | | business days after the funding date, the consumer either:
| 19 | | (A) returns to the civil justice funding company | 20 | | the full amount of the disbursed funds by delivering | 21 | | the company's uncashed check to the company's office in | 22 | | person; or
| 23 | | (B) mails, by insured, certified, or registered | 24 | | United States mail, to the address specified in the | 25 | | contract, a notice of cancellation and includes in such |
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| 1 | | mailing a return of the full amount of disbursed funds | 2 | | in the form of the company's uncashed check or a | 3 | | registered or certified check or money order; and
| 4 | | (3) the contract shall contain the initials of the | 5 | | consumer on each page.
| 6 | | (b) The contract shall contain a written acknowledgment by | 7 | | the attorney retained by the consumer in the legal claim that | 8 | | attests to the following:
(1) to the best of the attorney's | 9 | | knowledge, all the costs and charges relating to the civil | 10 | | justice funding have been disclosed to the consumer;
(2) the | 11 | | attorney is being paid on a contingency basis pursuant to a | 12 | | written fee agreement;
(3) all proceeds of the legal claim will | 13 | | be disbursed via either the trust account of the attorney or a | 14 | | settlement fund established to receive the proceeds of the | 15 | | legal claim on behalf of the consumer;
(4) the attorney is | 16 | | following the written instructions of the consumer with regard | 17 | | to the civil justice funding; and
(5) the attorney has not | 18 | | received a referral fee or other consideration from the civil | 19 | | justice funding company in connection with the civil justice | 20 | | funding, nor will the attorney receive such fee or other | 21 | | consideration in the future.
| 22 | | (c) If the acknowledgment required in subsection (b) of | 23 | | this Section is not be completed by the attorney retained the | 24 | | consumer in the legal claim, the contract shall be null and | 25 | | void. The contract remains valid and enforceable if the | 26 | | consumer terminates the initial attorney or retains a new |
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| 1 | | attorney with respect to the legal claim. | 2 | | Section 15. Civil justice funding company prohibitions. A | 3 | | civil justice funding company shall not: | 4 | | (1) pay or offer to pay commissions, referral fees, or | 5 | | other forms of consideration to any attorney, law firm, | 6 | | medical provider, chiropractor, physical therapist, or any | 7 | | of their employees for referring a consumer to the company; | 8 | | (2) accept any commissions, referral fees, rebates, or | 9 | | other forms of consideration from an attorney, law firm, | 10 | | medical provider, chiropractor, physical therapist, or any | 11 | | of their employees;
| 12 | | (3) intentionally advertise materially false or | 13 | | misleading information regarding its products or services;
| 14 | | (4) refer, in furtherance of an initial legal funding, | 15 | | a customer or potential customer to a specific attorney, | 16 | | law firm, medical provider, chiropractor, physical | 17 | | therapist, or any of their employees; however, if a | 18 | | customer needs legal representation, the company may refer | 19 | | the customer to a local or state bar association referral | 20 | | service;
| 21 | | (5) fail to promptly supply a copy of the executed | 22 | | contract to the attorney for the consumer;
| 23 | | (6) knowingly provide funding to a consumer who has | 24 | | previously assigned or sold a portion of the consumer's | 25 | | right to proceeds from his or her legal claim without first |
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| 1 | | making payment to or purchasing a prior unsatisfied civil | 2 | | justice funding company's entire funded amount and | 3 | | contracted charges, unless a lesser amount is otherwise | 4 | | agreed to in writing by the civil justice funding | 5 | | companies, except that multiple companies may agree to | 6 | | contemporaneously provide funding to a consumer provided | 7 | | that the consumer and the consumer's attorney consent to | 8 | | the arrangement in writing;
| 9 | | (7) receive any right to or make any decisions with | 10 | | respect to the conduct of the underlying legal claim or any | 11 | | settlement or resolution thereof; the right to make such | 12 | | decisions shall remain solely with the consumer and the | 13 | | attorney in the legal claim; or
| 14 | | (8) knowingly pay or offer to pay for court costs, | 15 | | filing fees, or attorneys' fees, either during or after the | 16 | | resolution of the legal claim, using funds from the civil | 17 | | justice funding transaction. | 18 | | Section 20. Contracted amounts. A civil justice funding | 19 | | company shall require the contracted amount to be paid to the | 20 | | company to be set as a predetermined amount based upon | 21 | | intervals of time from the funding date through the resolution | 22 | | date, and not be determined as a percentage of the recovery | 23 | | from the legal claim. | 24 | | Section 25. Fees. |
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| 1 | | (a) If the consumer elects to make monthly payments to the | 2 | | civil justice funding company, the funding fee charged by the | 3 | | civil justice funding company shall not exceed 36% of the | 4 | | funded amount in a 12-month period, and the consumer shall make | 5 | | monthly payments to the civil justice funding company.
| 6 | | (b) If the consumer elects to not make monthly payments or | 7 | | defer payment to the civil justice legal funding company, the | 8 | | funding fee charged by the civil justice funding company shall | 9 | | not exceed 36% of the funded amount in a 12-month period, and | 10 | | in addition to this fee, the civil justice funding company may | 11 | | charge a deferral fee of up to 3% of the funded amount per | 12 | | month.
| 13 | | (c) In addition to the funding and deferral fees set forth | 14 | | in subsections (a) and (b), a civil justice funding company | 15 | | shall also collect a one-time fee of $500 in each civil justice | 16 | | funding to defray the ordinary costs of opening, administering, | 17 | | and terminating a civil justice funding, and the civil justice | 18 | | funding company may assess a fee for the expedited delivery of | 19 | | funds, provided that the civil justice funding company shall | 20 | | offer the consumer a free delivery option.
| 21 | | Section 30. Disclosures. | 22 | | (a) All civil justice funding contracts shall contain the | 23 | | disclosures specified in this Section, which shall constitute | 24 | | material terms of the contract. Unless otherwise specified, the | 25 | | disclosures shall be typed in at least 12-point bold type font |
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| 1 | | and be placed clearly and conspicuously within the contract, as | 2 | | follows:
| 3 | | (1) On the front page under appropriate headings, | 4 | | language specifying:
| 5 | | (A) the funded amount to be paid to the consumer by | 6 | | the civil justice funding company;
| 7 | | (B) an itemization of one-time charges;
| 8 | | (C) the total amount to be assigned by the consumer | 9 | | to the company, including the funded amount and all | 10 | | charges; and
| 11 | | (D) a payment schedule to include the funded amount | 12 | | and charges, listing all dates and the amount due at | 13 | | the end of each 180-day period from the funding date, | 14 | | until the date the maximum amount due to the company by | 15 | | the consumer to satisfy the amount due pursuant to the | 16 | | contract.
| 17 | | (2) Pursuant to the provisions set forth in paragraph | 18 | | (2) of subsection (a) of Section 10, within the body of the | 19 | | contract: "Consumer's Right to Cancellation: You may | 20 | | cancel this contract without penalty or further obligation | 21 | | within 5 business days after the funding date if you | 22 | | either:
| 23 | | (A) return to the civil justice funding company the | 24 | | full amount of the disbursed funds by delivering the | 25 | | company's uncashed check to the company's office in | 26 | | person; or
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| 1 | | (B) mail, by insured, certified, or registered | 2 | | United States mail, to the company at the address | 3 | | specified in the contract, a notice of cancellation and | 4 | | include in such mailing a return of the full amount of | 5 | | disbursed funds in the form of the company's uncashed | 6 | | check or a registered or certified check or money | 7 | | order.".
| 8 | | (3) The civil justice funding company shall have no | 9 | | role in deciding whether, when, and how much the legal | 10 | | claim is settled for; however, the consumer and consumer's | 11 | | attorney must notify the company of the outcome of the | 12 | | legal claim by settlement or adjudication prior to the | 13 | | resolution date. The company may seek updated information | 14 | | about the status of the legal claim, but in no event shall | 15 | | the company interfere with the independent professional | 16 | | judgment of the attorney in the handling of the legal claim | 17 | | or any settlement thereof.
| 18 | | (4) Within the body of the contract, in all capital | 19 | | letters in at least 12-point bold type font contained | 20 | | within a box: "THE FUNDED AMOUNT AND AGREED UPON CHARGES | 21 | | SHALL BE PAID ONLY FROM THE PROCEEDS OF YOUR LEGAL CLAIM, | 22 | | AND SHALL BE PAID ONLY TO THE EXTENT THAT THERE ARE | 23 | | AVAILABLE PROCEEDS FROM YOUR LEGAL CLAIM. YOU WILL NOT OWE | 24 | | [INSERT NAME OF THE CIVIL JUSTICE FUNDING COMPANY] ANYTHING | 25 | | IF THERE ARE NO PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU | 26 | | OR YOUR ATTORNEY HAVE VIOLATED ANY MATERIAL TERM OF THIS |
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| 1 | | CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST THE CIVIL | 2 | | JUSTICE FUNDING COMPANY.".
| 3 | | (5) Located immediately above the place on the contract | 4 | | where the consumer's signature is required, in 12-point | 5 | | font: "Do not sign this contract before you read it | 6 | | completely or if it contains any blank spaces. You are | 7 | | entitled to a completely filled-in copy of the contract. | 8 | | Before you sign this contract, you should obtain the advice | 9 | | of an attorney. Depending on the circumstances, you may | 10 | | want to consult a tax, public or private benefits planning, | 11 | | or financial professional. You acknowledge that your | 12 | | attorney in the legal claim has provided no tax, public or | 13 | | private benefit planning, or financial advice regarding | 14 | | this transaction.". | 15 | | Section 35. Violations. | 16 | | (a) Nothing in this Act shall be construed to restrict the | 17 | | exercise of powers or the performance of the duties of the | 18 | | Attorney General that he or she is authorized to exercise or | 19 | | perform by law.
| 20 | | (b) If a court of competent jurisdiction determines that a | 21 | | civil justice funding company has intentionally violated the | 22 | | provisions of this statute with regard to a specific civil | 23 | | justice funding, the civil justice funding company shall only | 24 | | be entitled to recover the funded amount provided to the | 25 | | consumer in such specific civil justice funding and shall not |
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| 1 | | be entitled to any additional charges. | 2 | | Section 40. Assignability; liens. | 3 | | (a) The contingent right to receive an amount of the | 4 | | potential proceeds of a legal claim is assignable by a | 5 | | consumer.
| 6 | | (b) Nothing contained in this Act shall be construed to | 7 | | cause any civil justice funding transaction conforming to this | 8 | | Act to be deemed a loan or to be subject to any of the | 9 | | provisions governing loans contained in this Act. A civil | 10 | | justice funding transaction that complies with this Act is not | 11 | | subject to any other statutory or regulatory provisions | 12 | | governing loans or investment contracts, except as provided by | 13 | | federal law. To the extent that this Act conflicts with any | 14 | | other law, this Act supersedes the other law for the purposes | 15 | | of regulating civil justice fundings in Illinois.
| 16 | | (c) Only attorney's liens related to the legal claim or | 17 | | Medicare or other statutory liens related to the legal claim | 18 | | shall take priority over any lien of the civil justice funding | 19 | | company. All other liens shall take priority by normal | 20 | | operation of law. | 21 | | Section 45. Attorney prohibitions. An attorney or law firm | 22 | | retained by the consumer in the legal claim shall not have a | 23 | | financial interest in the civil justice funding company | 24 | | offering civil justice funding to that consumer. Additionally, |
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| 1 | | any attorney who has referred the consumer to his or her | 2 | | retained attorney shall not have a financial interest in the | 3 | | civil justice funding company offering civil justice funding to | 4 | | that consumer. | 5 | | Section 50. Effect of communication on privileges. No | 6 | | communication between the consumer's attorney in the legal | 7 | | claim and the civil justice funding company as it pertains to | 8 | | the civil justice funding shall limit, waive, or abrogate the | 9 | | scope or nature of any statutory or common-law privilege, | 10 | | including the work-product doctrine and the attorney-client | 11 | | privilege. | 12 | | Section 55. Registration; forms. | 13 | | (a) Unless a civil justice funding company has first | 14 | | registered under this Act, the company may not engage in the | 15 | | business of civil justice funding in this State.
| 16 | | (b) An applicant's registration must be filed in the manner | 17 | | prescribed by the Department of Financial and Professional | 18 | | Regulation and must contain the information the Department | 19 | | requires to make an evaluation of the character and fitness of | 20 | | the applicant company. The initial application must be | 21 | | accompanied by a $250 fee. A renewal registration must include | 22 | | a $200 fee. A registration must be renewed every 2 years and | 23 | | expires on September 30th.
| 24 | | (c) A certificate of registration may not be issued unless |
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| 1 | | the Department of Financial and Professional Regulation, upon | 2 | | investigation, finds that the character and fitness of the | 3 | | applicant company, and of the officers and directors thereof, | 4 | | are such as to warrant belief that the business will be | 5 | | operated honestly and fairly within the purposes of this Act.
| 6 | | (d) Every registrant shall also, at the time of filing such | 7 | | application, file with the Department of Financial and | 8 | | Professional Regulation, if the Department so requires, a bond | 9 | | satisfactory to the Department of Financial and Professional | 10 | | Regulation in an amount not to exceed $50,000. In lieu of the | 11 | | bond at the option of the registrant, the registrant may post | 12 | | an irrevocable letter of credit. The terms of the bond must run | 13 | | concurrent with the period of time during which the | 14 | | registration will be in effect. The bond must provide that the | 15 | | registrant will faithfully conform to and abide by the | 16 | | provisions of this Act and to all rules lawfully made by the | 17 | | Department under this Act and to any such person or persons any | 18 | | and all amounts of money that may become due or owing to the | 19 | | State or to such person or persons from the registrant under | 20 | | and by virtue of this Act during the period for which the bond | 21 | | is given.
| 22 | | (e) Upon written request, the applicant is entitled to a | 23 | | hearing on the question of the applicant's qualifications for a | 24 | | registration if:
| 25 | | (1) the Department of Financial and Professional | 26 | | Regulation has notified the applicant in writing that the |
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| 1 | | application has been denied; or
| 2 | | (2) the Department of Financial and Professional | 3 | | Regulation has not issued a registration within 60 days | 4 | | after the application for the registration was filed.
| 5 | | A request for a hearing may not be made more than 30 days | 6 | | after the Department of Financial and Professional Regulation | 7 | | has mailed a written notice to the applicant that the | 8 | | application has been denied and stating in substance the | 9 | | Department's findings supporting denial of the application.
| 10 | | (f) Notwithstanding the prior approval requirement of | 11 | | subsection (a) of this Section, a civil justice funding company | 12 | | that registered with the Department of Financial and | 13 | | Professional Regulation between the effective date of this Act | 14 | | and December 31, 2016 may engage in civil justice funding while | 15 | | the company's registration is awaiting approval by the | 16 | | Department. All funding agreements prior to the effective date | 17 | | of this Act are not subject to the terms of this Act. | 18 | | Section 60. Preexisting fundings. Nothing in this Act shall | 19 | | in any way affect or invalidate any civil justice fundings | 20 | | previously effectuated prior to the effective date of this Act. | 21 | | Section 97. Severability. The provisions of this Act are | 22 | | severable under Section 1.31 of the Statute on Statutes.
| 23 | | Section 99. Effective date. This Act takes effect July 1, | 24 | | 2015.
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