Lawsuit funding companies would face registration and consumer protection rules

Lawsuit funding companies would allow cancellation and cap extra charges when customers meet the required conditions. This covers New Jersey residents with legal claims and estates pursuing wrongful-death claims or claims that continue after death for people who lived or had their legal home in New Jersey at death. Cancellation requires returning all funds through the required check-return or mailing methods. Customers or their lawyers must request the charge cap in writing and confirm the final case payout before deductions. These rules would start 90 days after enactment and exclude funding agreements made before that date.

Lawsuit funding companies would register with the state and pay application and renewal fees. This covers companies offering consumer lawsuit funding in New Jersey. Companies would pay $500 to apply and $200 to renew every two years. The state would review whether the company could operate honestly and fairly. Companies applying within six months after the rules take effect could operate pending approval. Companies active in the previous 12 months could continue while applications are pending if they follow the requirements. The registration rules would start 90 days after enactment.

Funding companies would face bans on referral payments, control over case decisions, and using advances for legal costs. Customers and their lawyers would keep control of case decisions. Companies could neither pay nor accept referral payments involving lawyers, health care providers, or their employees. Companies could not knowingly pay or offer to pay court costs, filing fees, or lawyer fees using the advance. If a court found an intentional violation involving a funding deal, the company could recover only its advance, without extra charges. These rules would start 90 days after enactment and exclude funding agreements made before that date.

Funding deals that follow the bill’s rules would be exempt from laws governing loans and investment contracts. This covers advances exchanged for a right to possible lawsuit payouts. The exemption would apply only to funding deals that follow the bill’s requirements. The funding law would override conflicting laws when regulating consumer legal funding in New Jersey. The exemption would start 90 days after enactment and exclude funding agreements made before that date.

Customers’ lawyers would disclose that funding exists and identify the company after a formal written request for case information. The required disclosure would identify the funding company and the existence of funding. Customers could challenge the assumption that the existence of funding must be shared. Funding deals would be presumed inadmissible, meaning courts would generally keep them out of evidence. Communications between the lawyer and funder would preserve existing protections for private lawyer-client communications and lawyers’ case preparation. Lawyers would have 30 calendar days after receiving the request. These rules would start 90 days after enactment and exclude earlier funding agreements.