HLS 14RS-1246 ORIGINAL
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Regular Session, 2014
HOUSE BILL NO. 925
BY REPRESENTATIVES TALBOT AND KATRINA JACKSON
CREDIT/CONSUMER LOANS: Provides relative to consumer litigation loans
AN ACT1
To enact R.S. 9:3512(9), 3560(A)(10), and Chapter 2-C of Code Title XII of Code Book III2
of Title 9 of the Louisiana Revised Statutes of 1950, to be comprised of R.S.3
9:3580.1 through 3580.9, relative to consumer litigation loans; to enact the Louisiana4
Consumer Lending Information and Protection Act – Litigation Lending; to provide5
certain definitions, terms, conditions, procedures, requirements, and prohibitions; to6
provide for legislative findings; to provide for certain maximum finance charges and7
fees; to provide for the form and terms of contracts; to provide for consumers rights8
and remedies; to authorize certain private rights of action; to provide for enforcement9
and remedies; and to provide for related matters.10
Be it enacted by the Legislature of Louisiana:11
Section 1. R.S. 9:3512(9), 3560(A)(10), and Chapter 2-C of Code Title XII of Code12
Book III of Title 9 of the Louisiana Revised Statutes of 1950, comprised of R.S. 9:3580.113
through 3580.9, are hereby enacted to read as follows:14
§3512. Exclusions 15
This law does not apply to: 16
* * *17
(9) Consumer lawsuit loans as defined in R.S. 9:3580.1 et seq., unless such18
loans are made by a Federal Deposit Insurance Corporation insured institution that19
is subject to this Chapter.20
* * *21 HLS 14RS-1246 ORIGINAL
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§3560. Licenses not required1
A. Notwithstanding R.S. 9:3557, the following persons shall be exempt from2
the consumer loan licensing requirements under this Part:3
* * *4
(10) A person who makes only those loans subject to the provisions of R.S.5
9:3580.1 et seq.6
* * *7
CHAPTER 2-C. CONSUMER LENDI NG INFORMATION AND PROTECTION8
ACT-LITIGATION LENDING9
§3580.1. Short title10
This Chapter shall be known and may be cited as the "Consumer Lending11
Information and Protection Act-Litigation Lending".12
§3580.2. Legislative findings13
The legislature finds that there is a need to limit certain consumer litigation14
loan transactions. While these loans may meet a legitimate credit need for many15
consumers, limits are necessary to protect consumers from hidden and excessive16
charges and to enhance transparency to the consumer and affected third parties.17
§3580.3. Scope18
A.(1) Except as provided in Paragraph (2) of this Subsection, the provisions19
of this Chapter shall apply to all consumer lawsuit loans that are entered into with20
a consumer in exchange for an interest in proceeds of the consumer's claim or legal21
action.22
(2) The provisions of this Chapter shall not apply to a Federal Deposit23
Insurance Corporation insured institution that is subject to the Louisiana Consumer24
Credit Law, R.S. 9:3510 et seq.25
B. Nothing in this Chapter shall be deemed to regulate an attorney client26
relationship or any other matter regulated by the Louisiana Supreme Court.27
C. Nothing in this Chapter shall be deemed to affect an attorney lien or28
privilege arising under Louisiana law.29 HLS 14RS-1246 ORIGINAL
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§3580.4. Definitions1
As used in this Chapter, unless the context requires otherwise:2
(1) "Consumer" means any individual person who is or may become a3
plaintiff or claimant in any legal action.4
(2) "Consumer lawsuit loan" means either of the following:5
(a) Providing any money to any consumer to use for any purpose other than6
prosecuting the consumer's legal action, with the repayment of such money7
conditioned upon and sourced from the consumer's proceeds of the legal action by8
judgment or settlement or otherwise.9
(b) Purchasing from any consumer a contingent right to receive a share of10
the potential proceeds of the consumer's legal action, by judgment or settlement or11
otherwise.12
(3) "Consumer lawsuit loan company" means any person or entity that13
engages in providing consumer lawsuit loans. It shall not include an attorney14
licensed in this state. 15
(4) "Consumer lawsuit loan contract" means a written agreement between16
a consumer and a consumer lawsuit loan company providing for a consumer lawsuit17
loan transaction.18
(5) "Consumer lawsuit loan transaction" means a transaction in which both19
of the following apply:20
(a) A consumer lawsuit loan company provides a consumer lawsuit loan to21
a consumer.22
(b) The consumer assigns, conveys, or otherwise confers to the consumer23
lawsuit loan company the right to receive the proceeds, or part thereof, of the24
settlement, insurance payment, or award of damages obtained in the consumer's legal25
action.26
(6) "Legal action" means any civil action, any alternative dispute resolution27
proceeding, or an administrative proceeding before any agency or instrumentality of28
the government of this state.29 HLS 14RS-1246 ORIGINAL
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(7) "Proceeds" means the funds from a settlement, insurance payment, or1
award of damages obtained in the consumer's legal action.2
§3580.5. Maximum finance charges and fees3
A. The maximum loan finance charge for any consumer lawsuit loan4
transaction that may be charged, contracted for, or received by a consumer lawsuit5
loan company may equal but not exceed:6
(1) Thirty-six percent per year for that portion of the unpaid principal7
amount of the loan not exceeding one thousand four hundred dollars.8
(2) Twenty-seven percent per year for that portion of the unpaid principal9
amount of the loan exceeding one thousand four hundred dollars and not exceeding10
four thousand dollars.11
(3) Twenty-four percent per year for that portion of the unpaid principal12
amount of the loan exceeding four thousand dollars and not exceeding seven13
thousand dollars.14
(4) Twenty-one percent per year for that portion of the unpaid principal15
amount of the loan exceeding seven thousand dollars.16
B.(1) A lender may charge an origination fee that does not exceed fifty17
dollars on a consumer lawsuit loan.18
(2) The origination fee may be charged only once in connection with a single19
consumer lawsuit loan to one borrower over any consecutive sixty-day period.20
When a consumer lawsuit loan is paid in full, an origination fee may be charged on21
any subsequent new consumer lawsuit loan without regard to the prior loan's22
consecutive sixty-day period.23
C. Except for reasonable attorney fees and costs awarded by a court, no other24
fees or charges may be assessed or collected on a consumer lawsuit loan.25
§3580.6. Form and terms of contract26
A. Each consumer lawsuit loan contract must be in writing, dated, and signed27
by the consumer, and shall include all of the following:28 HLS 14RS-1246 ORIGINAL
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(1) A statement in bold-typed print of not less than fourteen point font, in1
immediate proximity to the space reserved for the signature of the consumer, as2
follows: "You may cancel this contract at any time before midnight of the fifteenth3
day after the date of the transaction. See the attached notice of cancellation form for4
an explanation of this right."5
(2) The terms and conditions of payment, including the total of all payments6
to be made by the consumer, and annualized rate of interest.7
(3) The address of the lawsuit lender's principal place of business and the8
name and address of its agent in the state authorized to receive service of process.9
B. The contract shall have attached two easily detachable copies of a notice10
of cancellation. The notice shall be in boldfaced type and in the following form:11
"Notice of Cancellation12
You may cancel this contract, without any penalty or obligation, within13
fifteen days after the date the contract is signed.14
To cancel this contract, send by mail, or deliver in person, a signed, dated15
copy of this cancellation notice, or other written notice to:16
(Name of consumer lawsuit loan company) at (address) (place of business)17
not later than midnight (date).18
I hereby cancel this transaction.19
(Date)20
(Consumer's signature)"21
C. The consumer lawsuit loan company shall give to the consumer a copy22
of the completed contract and all other documents the lender requires the consumer23
to sign at the time they are signed.24
D.(1) No consumer lawsuit loan contract with a consumer of this state shall25
contain any condition, stipulation, or agreement:26
(a) Requiring it to be construed according to the laws of any other state or27
country.28 HLS 14RS-1246 ORIGINAL
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(b) Depriving the courts of this state of the jurisdiction of action against the1
consumer lawsuit loan company.2
(c) Stipulating to the venue of any particular court of this state.3
(2) Any such condition, stipulation, or agreement in violation of this4
Subsection shall be void, but such voiding shall not affect the validity of the other5
provisions of the contract.6
E. All consumer lawsuit loan transactions shall comply with federal7
Regulation Z of the Board of Governors of the Federal Reserve System. Failure to8
comply with Regulation Z is a violation of this Chapter.9
F. All consumer lawsuit loan transactions shall accurately reflect the actual10
terms, conditions, applicable amount of fees, and repayment schedule agreed to by11
the parties. If a loan is to be repaid on demand, in a lump sum, or at undefined12
intervals of time, interest on the loan shall be computed by the actuarial or simple13
interest method when allocating payments made on the loan.14
§3580.7. Waiver15
A. A consumer lawsuit loan company shall not cause nor attempt to cause16
a consumer to waive a right under this Chapter.17
B. A waiver by a consumer of any part of this Chapter shall be null and void.18
§3580.8. Prohibited Conduct19
A. A consumer lawsuit loan company or a salesperson, agent, or20
representative of a consumer lawsuit loan company shall not enter into a consumer21
lawsuit loan transaction with a consumer unless the funds extended to the consumer22
pursuant to the terms of the consumer lawsuit loan transaction are used for that23
consumer's personal expenses.24
B. A consumer lawsuit loan company shall not do either of the following:25
(1) Directly or indirectly instigate or encourage litigation, by engaging in26
referring consumers who have entered into a consumer lawsuit loan transaction with27
such consumer lawsuit loan company.28 HLS 14RS-1246 ORIGINAL
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(2) Directly or indirectly control or participate in the conduct of the legal1
action that is related to a consumer lawsuit loan transaction.2
§3580.9. Enforcement and Remedies3
A. Violation of any provision of this Chapter shall constitute an unfair or4
deceptive act or practice for purposes of the Unfair Trade and Consumer Protection5
Law, R.S. 51:1401 et seq.6
B. The remedies and rights provided under this Chapter are in addition to7
and do not preclude any remedy otherwise available under law to a consumer.8
C. The provisions of this Chapter shall not be subject to regulation or9
enforcement by the office of financial institutions.10
Section 2. This Act shall become effective upon signature by the governor or, if not11
signed by the governor, upon expiration of the time for bills to become law without signature12
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If13
vetoed by the governor and subsequently approved by the legislature, this Act shall become14
effective on the day following such approval.15
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Talbot HB No. 925
Abstract: Creates the Consumer Lending Information and Protection Act – Litigation
Lending Act
Present law provides for the La. Consumer Credit Law.
Present law provides for exclusions to and licensing requirements under the La. Consumer
Credit Law.
Proposed law excludes consumer lawsuit loans as defined in proposed law from the La.
Consumer Credit Law and provides that any person who only makes such consumer credit
loans is exempted from licensure under the La. Consumer Credit Law, unless such loans are
made by a FDIC insured institution subject to proposed law.
Proposed law provides for the Consumer Lending Information and Protection Act –
Litigation Lending (act).
Proposed law applies to all consumer lawsuit loans that are entered into with a consumer in
exchange for an interest in proceeds of the consumer's claim or legal action. HLS 14RS-1246 ORIGINAL
HB NO. 925
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are additions.
Proposed law provides an exemption from proposed law for a FDIC insured institution that
is subject to the La. Consumer Credit Law.
Proposed law provides that nothing in proposed law shall be deemed to regulate an attorney
client relationship or any other matter regulated by the La. Supreme Court.
Proposed law further provides that nothing in the act shall be deemed to affect an attorney
lien or privilege arising under La. law.
Proposed law provides for certain legislative findings and definitions.
Proposed law provides that the maximum loan finance charge for any consumer lawsuit loan
transaction that may be charged, contracted for, or received by a consumer lawsuit loan
company may equal but not exceed:
(1)35% per year for that portion of the unpaid principal amount of the loan not
exceeding $1,400.
(2)27% per year for that portion of the unpaid principal amount of the loan exceeding
$1,400 and not exceeding $4,000.
(3)24% per year for that portion of the unpaid principal amount of the loan exceeding
$4,000 and not exceeding $7,000.
(4)21% per year for that portion of the unpaid principal amount of the loan exceeding
$7,000.
Proposed law provides that a lender may charge an origination fee that does not exceed $50
on a consumer lawsuit loan. Further provides that the origination fee may be charged only
once in connection with a single consumer lawsuit loan to one borrower over any
consecutive 60-day period. Proposed law provides that, when a consumer lawsuit loan is
paid in full, an origination fee may be charged on any subsequent new consumer lawsuit loan
without regard to the prior loan's consecutive 60-day period.
Proposed law provides that, except for reasonable attorney fees and costs awarded by a
court, no other fees or charges may be assessed or collected on a consumer lawsuit loan.
Proposed law provides that each consumer lawsuit loan contract must be in writing, dated,
and signed by the consumer, and must include:
(1)A statement in bold-typed print of not less than 14-point font, in immediate
proximity to the space reserved for the signature of the consumer, as follows:
"You may cancel this contract at any time before midnight of the
fifteenth day after the date of the transaction. See the attached notice
of cancellation form for an explanation of this right."
(2)The terms and conditions of payment, including the total of all payments to be made
by the consumer, and annualized rate of interest.
(3)The address of the lawsuit lender's principal place of business and the name and
address of its agent in the state authorized to receive service of process.
Proposed law provides that a consumer lawsuit loan contract must have attached two easily
detachable copies of a notice of cancellation. Further provides that the notice must be in
boldfaced type and in the following form: HLS 14RS-1246 ORIGINAL
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"Notice of Cancellation
You may cancel this contract, without any penalty or obligation, within fifteen days
after the date the contract is signed. To cancel this contract, send by mail, or deliver
in person, a signed dated copy of this cancellation notice, or other written notice to:
(Name of consumer lawsuit loan company) at (address) (place of business) not later
than midnight (date).
I hereby cancel this transaction.
(Date)
(Consumer's Signature)"
Proposed law provides that the consumer lawsuit loan company shall give to the consumer
a copy of the completed contract and all other documents the lender requires the consumer
to sign at the time they are signed.
Proposed law provides that no consumer lawsuit loan contract with a consumer of this state
shall contain any condition, stipulation, or agreement:
(1)Requiring it to be construed according to the laws of any other state or country.
(2)Depriving the courts of this state of the jurisdiction of action against the consumer
lawsuit loan company.
(3)Stipulating to the venue of any particular court of this state.
Proposed law provides that any such condition, stipulation, or agreement in violation of
proposed law shall be void, but such voiding shall not affect the validity of the other
provisions of the contract.
Proposed law provides that all consumer lawsuit loan transactions shall comply with federal
Regulation Z of the Board of Governors of the Federal Reserve System. Failure to comply
with Regulation Z is a violation of the proposed law.
Proposed law provides that all consumer lawsuit loan transactions shall accurately reflect
the actual terms, conditions, applicable amount of fees, and repayment schedule agreed to
by the parties. Further provides that, if a loan is to be repaid on demand, in a lump sum, or
at undefined intervals of time, interest on the loan shall be computed by the actuarial or
simple interest method when allocating payments made on the loan.
Proposed law provides that a consumer lawsuit loan company shall not attempt to cause a
consumer to waive a right under proposed law. Further provides that a waiver by a
consumer of any part of proposed law is void.
Proposed law provides that a consumer lawsuit loan company or a salesperson, agent, or a
representative of a consumer lawsuit loan company shall not enter into a consumer lawsuit
loan transaction with a consumer unless the funds extended to the consumer pursuant to the
terms of the consumer lawsuit loan transaction are used for that consumer's personal living
expenses.
Proposed law provides that a consumer lawsuit loan company shall not directly or indirectly
instigate or encourage litigation, by engaging in referring consumers that have entered into
a consumer lawsuit loan transaction with that consumer lawsuit loan company, or directly
or indirectly control or participate in the conduct of the legal action that is related to a
consumer lawsuit loan transaction. HLS 14RS-1246 ORIGINAL
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Proposed law further provides that a violation of any provision of proposed law shall
constitute an unfair or deceptive act or practice for purposes of the Unfair Trade and
Consumer Protection Law.
Proposed law further provides that the remedies and rights provided under proposed law are
in addition to and do not preclude any remedy otherwise available under law to a consumer
claiming relief under any provision of law.
Proposed law provides that the provisions of proposed law shall not be subject to regulation
or enforcement by the office of financial institutions.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Adds R.S. 9:3512(9), 3560(A)(10), and 3580.1-3580.9)