First Regular Session
Seventy-fourth General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 23-0703.01 Christopher McMichael x4775
HOUSE BILL 23-1162
House Committees Senate Committees
Business Affairs & Labor
A BILL FOR AN ACT
C
ONCERNING THE REGULATION OF CONSUMER LEGAL FUNDING101
TRANSACTIONS.102
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
The bill establishes the "Colorado Consumer Legal Funding Act"
(act). A consumer legal funding transaction occurs when a consumer legal
funding company (company) purchases, for an amount not to exceed
$500,000, an interest in an individual's (consumer) associated legal claim.
The money provided by the company must be repaid from the proceeds,
if any, resulting from the settlement or judgment of the consumer's
HOUSE SPONSORSHIP
Woodrow,
SENATE SPONSORSHIP
Rodriguez,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law. associated legal claim. The company may also receive a funding fee as
part of the contract. The funding fee may not exceed 36% of the funded
amount. The money provided to a consumer is meant to cover living
expenses while the consumer awaits resolution of the associated legal
claim.
The bill provides the requirements for a consumer legal funding
contract. A consumer legal funding contract is satisfied when a
consumer's associated legal claim has been resolved or settled. The
consumer must pay the company a predetermined amount, as specified in
the contract, and the amount may not be calculated as a percentage of the
judgment or settlement. The consumer is not required to repay the
company if the consumer does not prevail on or settle the consumer's
associated legal claim. The bill also details disclosures that are required
as part of a consumer legal funding contract.
The bill prohibits certain actions of consumer legal funding
companies and describes how these companies are regulated by the
attorney general's office, including registration requirements and
associated registration fees and surcharges. The registration fees are
credited to a new consumer legal funding cash fund and used to pay the
attorney general's costs to implement and administer the bill. The
surcharges are credited to the Colorado identity theft and financial fraud
cash fund for use in enforcing the "Identity Theft and Financial Fraud
Deterrence Act".
The attorney general may fine a company, suspend or revoke a
company's license, or prohibit a company from recovering funding fees
for violating the bill.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds and declares that:3
(a) Coloradans faced with lengthy legal battles as a result of an4
accident or injury often encounter difficulties in paying for rent, bills,5
groceries, and other everyday living expenses. Court cases and legal6
settlements can take years to resolve, and Coloradans in these situations7
often need funds immediately in order to pay their everyday living8
expenses.9
(b) Traditional lending and loan products fail to address this need10
HB23-1162-2- because the consumer's credit history, current compensation, and job1
history are used as deciding factors for approval. These products also2
require a consumer to make periodic payments during the course of3
litigation.4
(c) As a result, throughout litigation, many Coloradans who do not5
qualify for traditional lending products are forced to rely on public6
assistance for support. It is critical that Coloradans have access to a7
nonrecourse source of funding in advance of a legal settlement.8
(d) Consumer legal funding allows Coloradans in litigation as a9
result of an accident or injury to immediately access funds to support their10
everyday needs while the litigation is pending. Consumer legal funding11
would be available only to consumers who are in litigation, and these12
funds may not be used to pay for any costs or fees associated with the13
consumer's litigation.14
(2) Therefore, the general assembly declares that it is prudent for15
the state to regulate consumer legal funding to ensure its availability to16
Coloradans and to create adequate consumer protections for Coloradans17
that use the product.18
SECTION 2. In Colorado Revised Statutes, add article 9.6 to title19
5 as follows:20
ARTICLE 9.621
Consumer Legal Funding Transactions22
5-9.6-101. Short title. T
HE SHORT TITLE OF THIS ARTICLE 9.6 IS23
THE "COLORADO CONSUMER LEGAL FUNDING ACT".24
5-9.6-102. Definitions. A
S USED IN THIS ARTICLE 9.6, UNLESS THE25
CONTEXT OTHERWISE REQUIRES :26
(1) "A
DVERTISE" MEANS TO PUBLISH, DISPLAY, OR DISSEMINATE27
HB23-1162
-3- INFORMATION, SIGNS, OR MARKINGS IN PUBLIC; IN ANY NEWSPAPER,1
MAGAZINE, DIRECTORY, OR OTHER PRINTED COMMUNICATION ; OR ON2
RADIO, TELEVISION, THE INTERNET, OR OTHER COMMUNICATIONS MEDIA3
FOR THE PURPOSE OF INDUCING A CONSUMER TO ENTER INTO A CONSUMER4
LEGAL FUNDING CONTRACT .5
(2) "A
SSOCIATED LEGAL CLAIM" MEANS A BONA FIDE CIVIL CLAIM6
OR CAUSE OF ACTION, THE POTENTIAL PROCEEDS OF WHICH ARE THE7
SUBJECT OF A CONSUMER LEGAL FUNDING TRANSACTION .8
(3) "C
ONSUMER" MEANS A NATURAL PERSON WHO HAS A PENDING9
ASSOCIATED LEGAL CLAIM AND WHO RESIDES OR IS DOMICILED IN10
C
OLORADO.11
(4) (a) "C
ONSUMER LEGAL FUNDING COMPANY " OR "COMPANY"12
MEANS A PERSON THAT ENTERS INTO A CONSUMER LEGAL FUNDING13
TRANSACTION WITH A CONSUMER .14
(b) "C
ONSUMER LEGAL FUNDING COMPANY " DOES NOT INCLUDE:15
(I) A
N IMMEDIATE FAMILY MEMBER OF THE CONSUMER ;16
(II) A
FINANCIAL INSTITUTION THAT DOES NOT PROVIDE CONSUMER17
LEGAL FUNDING TRANSACTIONS ;18
(III) A
BANK, A LENDER, A FINANCING ENTITY, OR OTHER SPECIAL19
PURPOSE ENTITY:20
(A) T
HAT PROVIDES FINANCING TO A CONSUMER LEGAL FUNDING21
COMPANY; OR22
(B) T
O WHICH A CONSUMER LEGAL FUNDING COMPANY GRANTS A23
SECURITY INTEREST OR TRANSFERS ANY RIGHTS OR INTEREST IN A24
CONSUMER LEGAL FUNDING TRANSACTION ; OR25
(IV) A
N ATTORNEY OR ACCOUNTANT WHO PROVIDES SERVICES TO26
A CONSUMER.27
HB23-1162
-4- (5) "CONSUMER LEGAL FUNDING CONTRACT " OR "FUNDING1
CONTRACT" MEANS A CONTRACT THAT ESTABLISHES MUTUALLY BINDING2
TERMS BETWEEN PARTIES TO A CONSUMER LEGAL FUNDING TRANSACTION .3
(6) "C
ONSUMER LEGAL FUNDING TRANSACTION " OR "FUNDING4
TRANSACTION" MEANS A NONRECOURSE TRANSACTION IN AN AMOUNT5
THAT DOES NOT EXCEED FIVE HUNDRED THOUSAND DOLLARS AND IN6
WHICH A COMPANY PURCHASES AND A CONSUMER TRANSFERS TO THE7
COMPANY AN UNVESTED , CONTINGENT FUTURE INTEREST IN THE8
POTENTIAL NET PROCEEDS OF A S ETTLEMENT OR JUDGMENT OBTAINED9
FROM THE CONSUMER'S ASSOCIATED LEGAL CLAIM.10
(7) (a) "F
UNDED AMOUNT" MEANS THE AMOUNT OF MONEY11
PROVIDED TO, OR ON BEHALF OF, A CONSUMER PURSUANT TO A CONSUMER12
LEGAL FUNDING CONTRACT .13
(b) "F
UNDED AMOUNT" DOES NOT INCLUDE A FUNDING FEE.14
(8) "F
UNDING DATE" MEANS THE DATE ON WHICH A FUNDED15
AMOUNT IS:16
(a) T
RANSFERRED TO A CONSUMER BY A CONSUMER LEGAL17
FUNDING COMPANY BY PERSONAL DELIVERY OR VIA WIRE , ELECTRONIC18
FUND TRANSFER, OR OTHER ELECTRONIC MEANS; OR19
(b) M
AILED TO THE CONSUMER BY INSURED , CERTIFIED, OR20
REGISTERED UNITED STATES MAIL.21
(9) "F
UNDING FEE" MEANS A FEE CHARGED BY A CONSUMER LEGAL22
FUNDING COMPANY IN ASSOCIATION WITH A FUNDED AMOUNT .23
(10) "I
MMEDIATE FAMILY MEMBER " MEANS AN INDIVIDUAL WHO24
IS RELATED TO A CONSUMER BY BLOOD , MARRIAGE, CIVIL UNION, OR25
ADOPTION.26
(11) "R
ESOLUTION AMOUNT" MEANS A FUNDED AMOUNT PLUS THE27
HB23-1162
-5- AMOUNT OF THE ASSOCIATED FUNDING FEE .1
(12) "R
ESOLUTION DATE" MEANS THE DATE UPON WHICH A2
RESOLUTION AMOUNT IS DELIVERED TO A CONSUMER LEGAL FUNDING3
COMPANY.4
5-9.6-103. Registration required - application - fees -5
surcharge - forms - hearing. (1) (a) O
N OR AFTER FEBRUARY 1, 2024,6
A COMPANY SHALL NOT ENGAGE IN THE BUSINESS OF ADVERTISING OR7
SELLING CONSUMER LEGAL FUNDING TRANSACTIONS IN THIS STATE UNLESS8
IT IS REGISTERED PURSUANT TO THIS ARTICLE 9.6.9
(b) A
CONSUMER LEGAL FUNDING COMPANY THAT IS REGISTERED10
WITH THE ATTORNEY GENERAL AS A SUPERVISED LENDER PURSUANT TO11
SECTION 5-2-302 PRIOR TO FEBRUARY 1, 2024, MAY ENGAGE IN CONSUMER12
LEGAL FUNDING TRANSACTIONS WHILE THE COMPANY 'S REGISTRATION IS13
AWAITING APPROVAL BY THE ATTORNEY GENERAL .14
(2) (a) A
COMPANY MUST APPLY FOR REGISTRATION IN THE15
MANNER PRESCRIBED BY THE ATTORNEY GENERAL BY RULE PURSUANT TO16
SECTION 5-9.6-114. EACH APPLICATION MUST CONTAIN THE INFORMATION17
THE ATTORNEY GENERAL REQUIRES TO MAKE AN EVALUATION OF THE18
FINANCIAL RESPONSIBILITY AND THE CHARACTER AND FITNESS OF THE19
APPLICANT COMPANY. A COMPANY THAT OPERATES MULTIPLE LOCATIONS20
MUST APPLY FOR A SEPARATE REGISTRATION FOR EACH LOCATION . A21
REGISTRATION IS VALID FOR TWO YEARS.22
(b) T
HE APPLICATION FEE, INCLUDING THE FEE FOR A RENEWAL23
APPLICATION, IS ONE THOUSAND FIVE HUNDRED DOLLARS PER LOCATION ,24
WHICH INCLUDES A MANDATORY TWO -HUNDRED-DOLLAR SURCHARGE.25
T
HE ATTORNEY GENERAL SHALL TRANSMIT THE TWO -HUNDRED-DOLLAR26
SURCHARGE TO THE STATE TREASURER FOR DEPOSIT IN THE COLORADO27
HB23-1162
-6- IDENTITY THEFT AND FINANCIAL FRAUD CASH FUND ESTABLISHED IN1
SECTION 24-33.5-1707 AND SHALL TRANSMIT THE REMAINDER OF THE2
APPLICATION OR RENEWAL FEE TO THE STATE TREASURER FOR DEPOSIT IN3
THE CONSUMER LEGAL FUNDING CASH FUND CREATED IN SECTION4
5-9.6-113.5
(3) T
HE ATTORNEY GENERAL SHALL NOT ISSUE A REGISTRATION TO6
A COMPANY UNTIL THE ATTORNEY GENERAL FINDS , FOLLOWING AN7
INVESTIGATION, THAT THE FINANCIAL RESPONSIBILITY AND THE8
CHARACTER AND FITNESS OF THE APPLICANT COMPANY , AND OF THE9
MANAGERS, PARTNERS, OFFICERS, AND DIRECTORS OF THE COMPANY ,10
WARRANT BELIEF THAT THE COMPANY WILL BE OPERATED HONESTLY AND11
FAIRLY IN ACCORDANCE WITH THIS ARTICLE 9.6.12
(4) T
HE ATTORNEY GENERAL MAY REQUIRE EACH APPLICANT TO13
SUBMIT WITH ITS APPLICATION A BOND SATISFACTORY TO THE ATTORNEY14
GENERAL IN AN AMOUNT NOT TO EXCEED FIFTY THOUSAND DOLLARS . THE15
TERMS OF THE BOND MUST RUN CONCURRENT WITH THE PERIOD OF TIME16
DURING WHICH THE REGISTRATION WILL BE IN EFFECT . THE BOND MUST17
STIPULATE THAT THE REGISTRANT WILL FAITHFULLY COMPLY WITH THIS18
ARTICLE 9.6 AND WITH ALL RULES PROMULGATED BY THE ATTORNEY19
GENERAL PURSUANT TO SECTION 5-9.6-114.20
(5) (a) U
PON WRITTEN REQUEST TO THE ATTORNEY GENERAL , AN21
APPLICANT IS ENTITLED TO A HEARING CONCERNING THE DENIAL OF THE22
APPLICANT'S REGISTRATION AS PROVIDED IN SECTION 24-4-104 IF:23
(I) T
HE ATTORNEY GENERAL HAS NOTIFIED THE APPLICANT IN24
WRITING THAT THE APPLICATION HAS BEEN DENIED ; OR25
(II) T
HE ATTORNEY GENERAL HAS NOT ISSUED A REGISTRATION26
WITHIN SIXTY DAYS AFTER THE APPLICATION FOR THE REGISTRATION WAS27
HB23-1162
-7- FILED.1
(b) A
REQUEST FOR A HEARING MAY NOT BE MADE MORE THAN2
SIXTY DAYS AFTER THE ATTORNEY GENERAL HAS NOTIFIED THE APPLICANT3
IN WRITING THAT THE ATTORNEY GENERAL HAS DENIED THE APPLICATION .4
T
HE ATTORNEY GENERAL SHALL INCLUDE IN THE NOTICE THE SUBSTANCE5
OF THE FINDINGS SUPPORTING THE DENIAL OF THE APPLICATION .6
5-9.6-104. Consumer legal funding companies - prohibited7
acts. (1) A
CONSUMER LEGAL FUNDING COMPANY SHALL NOT :8
(a) P
AY OR OFFER TO PAY A COMMISSION, REFERRAL FEE, REBATE,9
OR OTHER FORM OF CONSIDERATION TO ANY ATTORNEY , LAW FIRM,10
MEDICAL PROVIDER, CHIROPRACTOR, OR PHYSICAL THERAPIST OR TO ANY11
EMPLOYEE OF AN ATTORNEY , LAW FIRM, MEDICAL PROVIDER ,12
CHIROPRACTOR, OR PHYSICAL THERAPIST IN EXCHANGE FOR REFERRING A13
CONSUMER TO THE COMPANY ;14
(b) A
CCEPT A COMMISSION, REFERRAL FEE, REBATE, OR OTHER15
FORM OF CONSIDERATION FROM AN ATTORNEY , LAW FIRM, MEDICAL16
PROVIDER, CHIROPRACTOR, OR PHYSICAL THERAPIST OR FROM ANY17
EMPLOYEE OF AN ATTORNEY , LAW FIRM, MEDICAL PROVIDER ,18
CHIROPRACTOR, OR PHYSICAL THERAPIST;19
(c) I
NTENTIONALLY ADVERTISE MATERIALLY FALSE OR20
MISLEADING INFORMATION REGARDING THE COMPANY 'S PRODUCTS OR21
SERVICES;22
(d) (I) E
XCEPT AS PROVIDED IN SUBSECTION (1)(d)(II) OF THIS23
SECTION, REFER A CONSUMER OR A POTENTIAL CONSUMER TO A SPECIFIC24
ATTORNEY, LAW FIRM, MEDICAL PROVIDER, CHIROPRACTOR, OR PHYSICAL25
THERAPIST OR TO ANY EMPLOYEE OF A SPECIFIC ATTORNEY , LAW FIRM,26
MEDICAL PROVIDER, CHIROPRACTOR, OR PHYSICAL THERAPIST IN27
HB23-1162
-8- FURTHERANCE OF AN INITIAL CONSUMER LEGAL FUNDING TRANSACTION .1
(II) I
F A CONSUMER NEEDS LEGAL REPRESENTATION , A COMPANY2
MAY REFER THE CONSUMER TO A LOCAL OR STATE BAR ASSOCIATION3
REFERRAL SERVICE.4
(e) F
AIL TO SUPPLY A COPY OF THE EXECUTED FUNDING CONTRACT5
TO THE CONSUMER'S ATTORNEY IN THE ASSOCIATED LEGAL CLAIM , THE6
POTENTIAL PROCEEDS OF WHICH ARE THE SUBJECT OF THE FUNDING7
TRANSACTION;8
(f) (I) E
XCEPT AS PROVIDED IN SUBSECTION (1)(f)(II) OF THIS9
SECTION, KNOWINGLY PROVIDE A CONSUMER LEGAL F UNDING10
TRANSACTION TO A CONSUMER WHO HAS PREVIOUSLY ASSIGNED OR SOLD11
TO ANOTHER CONSUMER LEGAL FUNDING COMPANY A PORTION OF THE12
CONSUMER'S RIGHT TO PROCEEDS FROM THE ASSOCIATED LEGAL CLAIM13
WITHOUT FIRST REIMBURSING THE OTHER CONSUMER LEGAL FUNDING14
COMPANY FOR ITS ENTIRE FUNDED AMOUNT AND FUNDING FEE , UNLESS15
ANOTHER AMOUNT IS AGREED TO IN WRITING BY THE CONSUMER LEGAL16
FUNDING COMPANIES.17
(II) M
ULTIPLE COMPANIES MAY BE PARTIES TO A CONSUMER LEGAL18
FUNDING TRANSACTION IF THE CONSUMER AND THE CONSUMER 'S19
ATTORNEY CONSENT TO THE ARRANGEMENT IN WRITING .20
(g) M
AKE OR INFLUENCE ANY DECISIONS BY THE COURT OR BY THE21
PARTIES WITH RESPECT TO A PENDING ASSOCIATED LEGAL CLAIM OR ANY22
SETTLEMENT OR RESOLUTION OF AN ASSOCIATED LEGAL CLAIM ;23
(h) K
NOWINGLY PAY OR OFFER TO PAY FOR COURT COSTS , FILING24
FEES, ATTORNEY FEES, OR OTHER COSTS RELATED TO THE LITIGATION ,25
SETTLEMENT, OR RESOLUTION OF THE ASSOCIATED LEGAL CLAIM USING26
FUNDS FROM THE CONSUMER LEGAL FUNDING TRANSACTION ; OR27
HB23-1162
-9- (i) REPORT A CONSUMER TO A CREDIT REPORTING AGENCY IF1
INSUFFICIENT FUNDS REMAIN FROM THE NET PROCEEDS FROM THE2
CONSUMER'S ASSOCIATED LEGAL CLAIM TO REPAY THE COMPANY .3
5-9.6-105. Contract requirements - right of recision -4
attestation by attorney - when contract void. (1) A
CONSUMER LEGAL5
FUNDING CONTRACT MUST :6
(a) N
OT CONTAIN BLANK SPACES OR UNDETERMINED DETAILS7
WHEN IT IS PRESENTED TO A CONSUMER FOR SIGNATURE ;8
(b) I
NCLUDE AND DISPLAY IN BOLD -FACED AND BOXED TYPE A9
RIGHT OF RESCISSION THAT ALLOWS THE CONSUMER TO CANCEL THE10
FUNDING CONTRACT WITHOUT PENALTY OR FURTHER OBLIGATION IF ,11
WITHIN FIVE BUSINESS DAYS AFTER THE FUNDING DATE , THE CONSUMER: 12
(I) R
ETURNS TO THE CONSUMER LEGAL FUNDING COMPANY THE13
FUNDED AMOUNT BY DELIVERING THE COMPANY 'S UNCASHED CHECK TO14
THE COMPANY'S OFFICE IN PERSON; OR15
(II) M
AILS A NOTICE OF CANCELLATION BY INSURED, CERTIFIED, OR16
REGISTERED UNITED STATES MAIL TO THE COMPANY AT THE ADDRESS17
SPECIFIED IN THE CONTRACT, WHICH NOTICE INCLUDES A RETURN OF THE18
FUNDED AMOUNT IN THE FORM OF THE COMPANY 'S UNCASHED CHECK OR19
A REGISTERED OR CERTIFIED CHECK OR MONEY ORDER ;20
(c) I
NCLUDE THE INITIALS OF THE CONSUMER ON EACH PAGE ;21
(d) I
NDICATE THAT THE CONSUMER HAS RETAINED AN ATTORNEY22
TO REPRESENT THE CONSUMER IN THE ASSOCIATED LEGAL CLAIM AND23
IDENTIFY THE CONSUMER'S ATTORNEY; AND24
(e) C
ONTAIN A WRITTEN ACKNOWLEDGMENT BY THE ATTORNEY25
RETAINED BY THE CONSUMER IN THE ASSOCIATED LEGAL CLAIM THAT26
ATTESTS TO THE FOLLOWING:27
HB23-1162
-10- (I) TO THE BEST OF THE ATTORNEY'S KNOWLEDGE, THE FUNDING1
AMOUNT AND THE FUNDING FEE RELATING TO THE CONSUMER LEGAL2
FUNDING TRANSACTION HAVE BEEN DISCLOSED TO THE CONSUMER ;3
(II) T
HE ATTORNEY IS BEING PAID ON A CONTINGENCY BASIS4
PURSUANT TO A WRITTEN FEE AGREEMENT ;5
(III) A
LL PROCEEDS OF THE ASSOCIATED LEGAL CLAIM WILL BE6
DISBURSED TO THE ATTORNEY'S TRUST ACCOUNT OR TO AN ACCOUNT THAT7
IS ESTABLISHED TO RECEIVE THE PROCEEDS OF THE ASSOCIATED LEGAL8
CLAIM ON BEHALF OF THE CONSUMER ;9
(IV) T
HE ATTORNEY IS FOLLOWING THE WRITTEN INSTRUCTIONS10
OF THE CONSUMER WITH REGARD TO THE CONSUMER LEGAL FUNDING11
TRANSACTION; AND12
(V) T
HE ATTORNEY HAS NOT RECEIVED A REFERRAL FEE OR OTHER13
CONSIDERATION FROM THE CONSUMER LEGAL FUNDING COMPANY IN14
CONNECTION WITH THE CONSUMER LEGAL FUNDING TRANSACTION , NOR15
WILL THE ATTORNEY RECEIVE A FEE OR OTHER CONSIDERATION FROM THE16
COMPANY IN THE FUTURE IN CONNECTION WITH THE CONSUMER LEGAL17
FUNDING TRANSACTION.18
(2) (a) A
FUNDING CONTRACT THAT DOES NOT INCLUDE THE19
ATTORNEY'S ATTESTATION DESCRIBED IN SUBSECTION (1)(e) OF THIS20
SECTION IS VOID AND UNENFORCEABLE .21
(b) I
F A CONSUMER TERMINATES THE CONSUMER 'S22
REPRESENTATION BY THE ATTORNEY WHO MADE THE ATTESTATION23
REQUIRED IN SUBSECTION (1)(e) OF THIS SECTION AND RETAINS A NEW24
ATTORNEY TO REPRESENT THE CONSUMER IN THE ASSOCIATED LEGAL25
CLAIM, THE FUNDING CONTRACT REMAINS VALID AND ENFORCEABLE26
REGARDLESS OF WHETHER THE NEW ATTORNEY ALSO MAKES THE27
HB23-1162
-11- ATTESTATION DESCRIBED IN SUBSECTION (1)(e) OF THIS SECTION.1
5-9.6-106. Resolution amounts to be predetermined -2
repayment terms prohibited. (1) A
RESOLUTION AMOUNT MUST BE SET3
AS A PREDETERMINED AMOUNT BASED UPON INTERVALS OF TIME FROM THE4
DATE OF ORIGINATION OF THE CONSUMER LEGAL FUNDING TRANSACTION5
THROUGH THE DATE OF RESOLUTION OF THE ASSOCIATED LEGAL CLAIM6
AND MAY NOT BE DETERMINED AS A PE RCENTAGE OF THE RECOVERY FROM7
THE ASSOCIATED LEGAL CLAIM.8
(2) A
CONSUMER LEGAL FUNDING TRANSACTION SHALL NOT9
REQUIRE A CONSUMER TO REPAY A COMPANY A FUNDED AMOUNT OR A10
FUNDING FEE IF NO PROCEEDS ARE OBTAINED FROM THE CONSUMER 'S11
ASSOCIATED LEGAL CLAIM.12
5-9.6-107. Funding fee - maximum amount. (1) A
CONSUMER13
LEGAL FUNDING COMPANY SHALL NOT :14
(a) C
HARGE A FUNDING FEE IN AN AMOUNT THAT EXCEEDS15
THIRTY-SIX PERCENT OF THE FUNDED AMOUNT IN A TWELVE -MONTH16
PERIOD;17
(b) R
EQUIRE A CONSUMER TO PAY ANY FEE OTHER THAN A18
FUNDING FEE; OR19
(c) R
EQUIRE A CONSUMER TO PAY A FUNDING FEE MORE THAN20
THREE TIMES IN ASSOCIATION WITH A CONSUMER LEGAL FUNDING21
TRANSACTION.22
5-9.6-108. Required disclosures. (1) A
CONSUMER LEGAL23
FUNDING CONTRACT MUST INCLUDE THE FOLLOWING DISCLOSURES AS24
MATERIAL TERMS OF THE FUNDING CONTRACT AND , UNLESS OTHERWISE25
SPECIFIED, MUST APPEAR IN AT LEAST TWELVE-POINT, BOLD-FACED TYPE26
AND BE PLACED CLEARLY AND CONSPICUOUSLY WITHIN THE CONTRACT :27
HB23-1162
-12- (a) THE FOLLOWING, ON THE FRONT PAGE, UNDER APPROPRIATE1
HEADINGS:2
(I) T
HE FUNDED AMOUNT TO BE PAID TO THE CONSUMER BY THE3
CONSUMER LEGAL FUNDING COMPANY ;4
(II) A
N ITEMIZATION OF THE FUNDING FEE;5
(III) T
HE RESOLUTION AMOUNT TO BE PAID BY THE CONSUMER TO6
THE COMPANY; AND7
(IV) A
PAYMENT SCHEDULE FOR THE CONSUMER TO PAY THE8
RESOLUTION AMOUNT, INCLUDING DUE DATES AND THE AMOUNT DUE AT9
THE END OF EACH SIX -MONTH PERIOD AFTER RESOLUTION OF THE10
ASSOCIATED LEGAL CLAIM, UNTIL THE DATE THE RESOLUTION AMOUNT IS11
DUE TO THE COMPANY BY THE CONSUMER PURS UANT TO THE FUNDING12
CONTRACT;13
(b) A
DESCRIPTION OF THE CONSUMER 'S RIGHT TO CANCEL THE14
FUNDING CONTRACT AS REQUIRED IN SECTION 5-9.6-105 (1)(b), AS15
FOLLOWS:16
C
ONSUMER'S RIGHT TO CANCELLATION:17
Y
OU MAY CANCEL THIS F UNDING CONTRACT WITHOUT18
PENALTY OR FURTHER OBLIGATION WITHIN FIVE19
BUSINESS DAYS AFTER THE FUNDING DATE IF YOU RETURN20
TO THE CONSUMER LEGAL FUNDING COMPANY THE21
FUNDED AMOUNT BY EITHER DELIVERING THE22
COMPANY'S UNCASHED CHECK TO THE COMPANY 'S23
OFFICE IN PERSON OR MAILING TO THE COMPANY AT THE24
ADDRESS SPECIFIED IN THE CONTRACT , VIA INSURED,25
CERTIFIED, OR REGISTERED UNITED STATES MAIL, A26
NOTICE OF CANCELLATION AND A RETURN OF THE27
HB23-1162
-13- FUNDED AMOUNT IN THE FORM OF THE COMPANY 'S1
UNCASHED CHECK OR A REGISTERED OR CERTIFIED2
CHECK OR MONEY ORDER .3
(c) T
HE FOLLOWING DISCLOSURE:4
T
HE CONSUMER LEGAL FUNDING COMPANY HAS NO ROLE5
IN DECIDING WHETHER OR WHEN AN ASSOCIATED LEGAL6
CLAIM IS SETTLED OR FOR HOW MUCH MONEY AN7
ASSOCIATED LEGAL CLAIM IS SETTLED . YOU OR YOUR8
ATTORNEY MUST NOTIFY THE COMPANY OF THE9
OUTCOME OF THE ASSOCIATED LEGAL CLAIM BY10
SETTLEMENT OR ADJUDICATION PRIOR TO THE11
RESOLUTION DATE. THE COMPANY MAY SEEK UPDATED12
INFORMATION ABOUT THE STATUS OF THE ASSOCIATED13
LEGAL CLAIM, BUT THE COMPANY MAY NOT INTERFERE14
WITH THE INDEPENDENT PR OFESSIONAL JUDGMENT OF15
YOUR ATTORNEY IN THE HANDL ING OF THE ASSOCIATED16
LEGAL CLAIM OR IN ANY SETTLEMENT RELATING TO THE17
ASSOCIATED LEGAL CLAIM .18
(d) T
HE FOLLOWING DISCLOSURE, IN ALL CAPITAL LETTERS AND IN19
BOXED TYPE:20
THE
FUNDED AMOUNT AND THE FUNDING FEE21
SHALL
BE PAID ONLY FROM THE PROCEEDS OF22
YOUR
ASSOCIATED LEGAL CLAIM, AND SHALL23
BE
PAID ONLY TO THE EXTENT THAT THERE24
ARE
AVAILABLE PROCEEDS FROM YOUR25
ASSOCIATED
LEGAL CLAIM. YOU WILL NOT26
OWE
[INSERT NAME OF THE CONSUMER LEGAL27
HB23-1162
-14- FUNDING COMPANY] ANYTHING IF THERE ARE1
NO
PROCEEDS FROM YOUR ASSOCIATED2
LEGAL
CLAIM, UNLESS YOU OR YOUR3
ATTORNEY
HAS VIOLATED ANY MATERIAL4
TERM
OF THIS FUNDING CONTRACT OR YOU5
HAVE
COMMITTED FRAUD AGAINST THE6
CONSUMER
LEGAL FUNDING COMPANY.7
(e) L
OCATED IMMEDIATELY ABOVE THE PLACE ON THE FUNDING8
CONTRACT WHERE THE CONSUMER 'S SIGNATURE IS REQUIRED , THE9
FOLLOWING DISCLOSURE:10
D
O NOT SIGN THIS FUNDING CONTRACT BEFORE YOU11
READ IT COMPLETELY OR IF IT CONTAINS ANY BLANK12
SPACES. YOU ARE ENTITLED TO A COMP LETELY FILLED -IN13
COPY OF THE FUNDING CONTRACT . YOU SHOULD OBTAIN14
THE ADVICE OF AN ATTORNEY . DEPENDING ON THE15
CIRCUMSTANCES, YOU MAY WANT TO CONSULT A TAX ,16
PUBLIC OR PRIVATE BENEFITS PLANNING , OR FINANCIAL17
PROFESSIONAL. BY SIGNING THIS DOCUMENT , YOU18
ACKNOWLEDGE THAT YOUR ATTORNEY IN THE19
ASSOCIATED LEGAL CLAIM HAS PROVIDED NO FINANCIAL20
ADVICE OR ADVICE CONCERNING TAXES OR PUBLIC OR21
PRIVATE BENEFIT PLANNING IN REGARD TO YOUR22
CONSUMER LEGAL FUNDING TRANSACTION .23
(f) D
EFINITIONS OF THE TERMS "ASSOCIATED LEGAL CLAIM ",24
"
CONSUMER LEGAL FUNDING COMPANY ", "CONSUMER LEGAL FUNDING25
TRANSACTION", "FUNDED AMOUNT", "FUNDING CONTRACT", "FUNDING26
DATE","FUNDING FEE", "RESOLUTION AMOUNT", AND "RESOLUTION DATE"27
HB23-1162
-15- IN ACCORDANCE WITH SECTION 5-9.6-102.1
5-9.6-109. Penalties - attorney general authority. (1) N
OTHING2
IN THIS ARTICLE 9.6 RESTRICTS THE EXERCISE AND PERFORMANCE OF THE3
POWERS AND DUTIES OF THE ATTORNEY GENERAL . THE ATTORNEY4
GENERAL MAY ENFORCE THIS ARTICLE 9.6 AND PURSUE LEGAL ACTION5
AGAINST CONSUMER LEGAL F UNDING COMPANIES UNDER THIS ARTICLE 9.66
OR OTHER STATE LAWS AND RULES AS NECESSARY .7
(2) (a) (I) A
CONSUMER LEGAL FUNDING COMPANY THAT8
KNOWINGLY VIOLATES THIS ARTICLE 9.6 IS SUBJECT TO A CIVIL PENALTY9
NOT TO EXCEED FIVE THOUSAND DOLLARS FOR EACH VIOLATION , AND10
PENALTIES MAY INCLUDE REVOCATION OR SUSPENSION OF THE CONSUMER11
LEGAL FUNDING COMPANY 'S REGISTRATION AND ABILITY TO OFFER12
CONSUMER LEGAL FUNDING TRANSACTIONS IN THE STATE .13
(II) I
F THE ATTORNEY GENERAL DETERMINES THAT A CONSUMER14
LEGAL FUNDING COMPANY HAS INTENTIONALLY VIOLATED THIS ARTICLE15
9.6
WITH REGARD TO A CONSUMER LEGAL FUNDING TRANSACTION , THE16
ATTORNEY GENERAL SHALL ORDER THAT THE CONSUMER LEGAL FUNDING17
COMPANY IS ONLY ENTITLED TO RECOVER THE FUNDED AMOUNT PROVIDED18
TO THE CONSUMER IN THE CONSUMER LEGAL FUNDING TRANSACTION AND19
IS NOT ENTITLED TO RECOVER ANY PORTION OF THE FUNDING FEE .20
(b) I
F THE ATTORNEY GENERAL , AFTER A FULL INVESTIGATION,21
DETERMINES THAT A CONSUMER LEGAL FUNDING COMPANY HAS22
KNOWINGLY OR INTENTIONALLY VIOLATED THIS ARTICLE 9.6 AND IMPOSES23
PENALTIES AS SPECIFIED IN SUBSECTION (2)(a) OF THIS SECTION, THE24
COMPANY IS ENTITLED TO A HEARING PURSUANT TO SECTION 24-4-104.25
(c) I
F THE ATTORNEY GENERAL IMPOSES A PENALTY AS SPECIFIED26
IN SUBSECTION (2)(a) OF THIS SECTION AGAINST A CONSUMER LEGAL27
HB23-1162
-16- FUNDING COMPANY , THE ATTORNEY GENERAL SHALL NOTIFY THE1
COMPANY OF THE DISCIPLINARY ACTION . THE NOTIFICATION SHALL BE2
GIVEN BY PERSONAL SERVICE OR BY MAIL TO THE LAST -KNOWN ADDRESS3
OF THE CONSUMER LEGAL FUNDING COMPANY AS SHOWN ON THE4
COMPANY'S REGISTRATION.5
(3) T
HE ATTORNEY GENERAL SHALL TRANSMIT ALL PENALTIES6
COLLECTED PURSUANT TO SUBSECTION (2) OF THIS SECTION TO THE STATE7
TREASURER FOR DEPOSIT IN THE GENERAL FUND .8
5-9.6-110. Assignment - liens. (1) (a) A
CONSUMER MAY ASSIGN9
THE CONTINGENT RIGHT TO RECEIVE AN AMOUNT OF THE POTENTIAL10
PROCEEDS OF AN ASSOCIATED LEGAL CLAIM .11
(b) A
N ASSIGNMENT DESCRIBED IN SUBSECTION (1)(a) OF THIS12
SECTION DOES NOT CONSTITUTE AN ASSIGNMENT OF THE ASSOCIATED13
LEGAL CLAIM OR CHOSE IN ACTION.14
(c) A
N ASSIGNMENT DESCRIBED IN SUBSECTION (1)(a) OF THIS15
SECTION IS NOT AN ASSIGNMENT OF ANY PRESENT RIGHT. THE ASSIGNMENT16
IS THE TRANSFER OF AN INVESTED, CONTINGENT FUTURE INTEREST IN AN17
AMOUNT OF THE POTENTIAL PROCEEDS OF AN ASSOCIATED LEGAL CLAIM18
OR CAUSE OF ACTION.19
(2) A
LIEN RELATED TO THE ASSOCIATED LEGAL CLAIM, INCLUDING20
AN ATTORNEY'S LIEN, A MEDICARE CLAIM, OR ANY OTHER STATUTORY21
LIEN, HAS PRIORITY OVER ANY LIEN OF THE CONSUMER LEGAL FUNDING22
COMPANY. ALL OTHER LIENS HAVE PRIORITY BY NORMAL OPERATION OF23
LAW.24
5-9.6-111. Attorneys - no interest in consumer legal funding.25
N
EITHER AN ATTORNEY OR LAW FIRM RETAINED BY A CONSUMER IN AN26
ASSOCIATED LEGAL CLAIM NOR AN ATTORNEY WHO HAS REFERRED A27
HB23-1162
-17- CONSUMER TO THE ATTORNEY REPRESENTING THE CONSUMER IN AN1
ASSOCIATED LEGAL CLAIM SHALL HAVE A FI NANCIAL INTEREST IN A2
CONSUMER LEGAL FUNDING COMPANY THAT OFFERS OR SELLS A3
CONSUMER LEGAL FUNDING TRANSACTION TO THAT CONSUMER IN4
RELATION TO THE ASSOCIATED LEGAL CLAIM .5
5-9.6-112. Communications privileged. C
OMMUNICATIONS6
BETWEEN A CONSUMER 'S ATTORNEY AND A CONSUMER LEGAL FUNDING7
COMPANY PERTAINING TO AN ASSOCIATED LEGAL CLAIM FOR WHICH THE8
COMPANY IS PROVIDING FUNDING ARE PRIVILEGED AND CONFIDENTIAL . A9
CONSUMER'S ATTORNEY MAY NOT BE EXAMINED REGARDING ANY SUCH10
COMMUNICATIONS WITHOUT THE CONSENT OF THE CONSUMER .11
5-9.6-113. Consumer legal funding cash fund - created.12
(1) T
HE CONSUMER LEGAL FUNDING CASH FUND , REFERRED TO IN THIS13
SECTION AS THE "FUND", IS HEREBY CREATED IN THE STATE TREASURY .14
T
HE FUND CONSISTS OF MONEY FROM THE REGISTRATION APPLICATION15
AND RENEWAL FEES COLLECTED FROM CONSUMER LEGAL FUNDING16
COMPANIES PURSUANT TO SECTION 5-9.6-103 (2) AND ANY OTHER MONEY17
THAT THE GENERAL ASSEMBLY MAY APPROPRIATE OR TRANSFER TO THE18
FUND.19
(2) T
HE STATE TREASURER SHALL CREDIT ALL INTEREST AND20
INCOME DERIVED FROM THE DEPOSIT AND INVESTMENT OF MONEY IN THE21
FUND TO THE FUND.22
(3) A
NY UNEXPENDED AND UNENCUMBERED MONEY REMAINING23
IN THE FUND AT THE END OF A FISCAL YEAR REMAINS IN THE FUND .24
(4) S
UBJECT TO ANNUAL APPROPRIATION BY THE GENERAL25
ASSEMBLY, THE ATTORNEY GENERAL MAY EXPEND MONEY IN THE FUND26
FOR THE IMPLEMENTATION AND ADMINISTRATION OF THIS ARTICLE 9.6.27
HB23-1162
-18- 5-9.6-114. Rules. T HE ATTORNEY GENERAL SHALL PROMULGATE1
RULES FOR THE IMPLEMENTATION AND ADMINISTRATION OF THIS ARTICLE2
9.6.3
5-9.6-115. Applicability. T
HIS ARTICLE 9.6 APPLIES TO A4
CONSUMER LEGAL FUNDING CONTRACT EXECUTED ON OR AFTER5
F
EBRUARY 1, 2024. A CONSUMER LEGAL FUNDING CONTRACT EXECUTED6
PRIOR TO FEBRUARY 1, 2024, IS NOT SUBJECT TO THIS ARTICLE 9.6.7
SECTION 3. In Colorado Revised Statutes, 24-33.5-1707,8
amend (1)(a); and add (2)(d) as follows:9
24-33.5-1707. Funding - cash fund created - donations - repeal.10
(1) (a) The department of public safety is authorized to
MAY accept gifts,11
grants, or donations, including in-kind donations from private or public12
sources, for the purposes of this part 17. All private and public funds13
received through gifts, grants, or donations by the department of public14
safety or by the board shall be transmitted to the state treasurer, who shall15
credit the same to the Colorado identity theft and financial fraud cash16
fund, which fund is hereby created and referred to in this part 17 as the17
"cash fund". The cash fund shall also include INCLUDES the moneys18
MONEY collected OR DEPOSITED pursuant to subsection (2) of this section.19
Any moneys MONEY in the cash fund not expended for the purpose of this20
part 17 shall be invested by the state treasurer as provided in section21
24-36-113. All interest and income derived from the investment and22
deposit of moneys MONEY in the cash fund shall be credited to the cash23
fund. Any unexpended and unencumbered moneys MONEY remaining in24
the cash fund at the end of any fiscal year shall remain in the cash fund25
and shall not be credited or transferred to the general fund or any other26
fund.27
HB23-1162
-19- (2) (d) THE ATTORNEY GENERAL SHALL TRANSFER THE CONSUMER1
LEGAL FUNDING COMPANY REGISTRATION SURCHARGE DESCRIBED IN2
SECTION 5-9.6-103 (2) TO THE STATE TREASURER, WHO SHALL DEPOSIT3
THE MONEY IN THE CASH FUND.4
SECTION 4. Act subject to petition - effective date. This act5
takes effect at 12:01 a.m. on the day following the expiration of the6
ninety-day period after final adjournment of the general assembly; except7
that, if a referendum petition is filed pursuant to section 1 (3) of article V8
of the state constitution against this act or an item, section, or part of this9
act within such period, then the act, item, section, or part will not take10
effect unless approved by the people at the general election to be held in11
November 2024 and, in such case, will take effect on the date of the12
official declaration of the vote thereon by the governor.13
HB23-1162
-20-