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Regular Session, 2014
SENATE BILL NO. 414
BY SENATOR MURRAY
LOANS. Provides relative to consumer litigation loans. (gov sig)
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 form and terms of contract; to provide for consumers rights and8
remedies; to authorize certain private rights of action; to provide for enforcement and9
remedies; to provide for an effective date; 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. Exclusions15
This law does not apply to:16
* * *17 SB NO. 414
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(9) Consumer lawsuit loans as defined in R.S. 9:3580.1 et seq., unless1
such loans are made by an institution insured by the Federal Deposit Insurance2
Corporation that is subject to this Chapter.3
* * *4
§3560. Licenses not required5
A. Notwithstanding R.S. 9:3557, the following persons shall be exempt from6
the consumer loan licensing requirements under this Part:7
* * *8
(10) A person who makes only those loans subject to the provisions of9
R.S. 9:3580.1 et seq.10
* * *11
CHAPTER 2-C. CONSUMER LENDING INFORMATION & PROTECTION12
ACT – LITIGATION LENDING13
§3580.1. Short title14
This Chapter shall be known and may be cited as the "Consumer15
Lending Information & Protection Act – Litigation Lending".16
§3580.2. Legislative findings17
The legislature finds that there is a need to limit certain consumer18
litigation loan transactions. While these loans may meet a legitimate credit need19
for many consumers, limits are necessary to protect consumers from hidden and20
excessive charges and to enhance transparency to the consumer and affected21
third parties.22
§3580.3. Scope23
A.(1) Except as provided in Paragraph (2) of this Subsection, the24
provisions of this Chapter shall apply to all consumer lawsuit loans that are25
entered into with a consumer in exchange for an interest in proceeds of the26
consumer's legal claim or action.27
(2) The provisions of this Chapter shall not apply to an institution28
insured by the Federal Deposit Insurance Corporation that is subject to the29 SB NO. 414
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Louisiana Consumer Credit Law, R.S. 9:3510 et seq.1
B. Nothing in this Chapter shall be deemed to regulate an attorney client2
relationship or any other matter regulated by the Louisiana Supreme Court.3
C. Nothing in this Chapter shall be deemed to affect an attorney lien or4
privilege arising under Louisiana law.5
§3580.4. Definitions6
As used in this Chapter, unless the context requires otherwise:7
(1) "Consumer" means any individual person who is or may become a8
plaintiff or claimant in any legal action.9
(2) "Consumer lawsuit loan" means either of the following:10
(a) Providing any money to any consumer to use for any purpose other11
than prosecuting the consumer's legal action, with the repayment of such money12
conditioned upon and sourced from the consumer's proceeds of the legal action13
by judgment or settlement or otherwise.14
(b) Purchasing from any consumer a contingent right to receive a share15
of the potential proceeds of the consumer's legal action, by judgment or16
settlement or otherwise.17
(3) "Consumer lawsuit loan company" means any person or entity that18
engages in providing consumer lawsuit loans. It shall not include an attorney19
licensed in this state.20
(4) "Consumer lawsuit loan contract" means a written agreement21
between a consumer and a consumer lawsuit loan company providing for a22
consumer lawsuit loan transaction.23
(5) "Consumer lawsuit loan transaction" means a transaction in which24
both of the following apply:25
(a) A consumer lawsuit loan company provides a consumer lawsuit loan26
to a consumer.27
(b) The consumer assigns, conveys, or otherwise confers to the consumer28
lawsuit loan company the right to receive the proceeds, or part thereof, of the29 SB NO. 414
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settlement, insurance payment, or award of damages obtained in the consumer's1
legal action.2
(6) "Legal action" means any civil action, any alternative dispute-3
resolution proceeding, or an administrative proceeding before any agency or4
instrumentality of the government of this state.5
(7) "Proceeds" means the funds from a settlement, insurance payment,6
or award of damages obtained in the consumer's legal action.7
§3580.5. Maximum finance charges and fees8
A. The maximum loan finance charge for any consumer lawsuit loan9
transaction that may be charged, contracted for, or received by a consumer10
lawsuit loan company may equal but not exceed:11
(1) Thirty-six percent per year for that portion of the unpaid principal12
amount of the loan not exceeding one thousand four hundred dollars.13
(2) Twenty-seven percent per year for that portion of the unpaid14
principal amount of the loan exceeding one thousand four hundred dollars and15
not exceeding four thousand dollars.16
(3) Twenty-four percent per year for that portion of the unpaid17
principal amount of the loan exceeding four thousand dollars and not exceeding18
seven thousand dollars.19
(4) Twenty-one percent per year for that portion of the unpaid principal20
amount of the loan exceeding seven thousand dollars.21
B.(1) A lender may charge an origination fee that does not exceed fifty22
dollars on a consumer lawsuit loan.23
(2) The origination fee may be charged only once in connection with a24
single consumer lawsuit loan to one borrower over any consecutive sixty-day25
period. When a consumer lawsuit loan is paid in full, an origination fee may be26
charged on any subsequent new consumer lawsuit loan without regard to the27
prior loan's consecutive sixty-day period.28
C. Except for reasonable attorney fees and costs awarded by a court, no29 SB NO. 414
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other fees or charges may be assessed or collected on a consumer lawsuit loan.1
§3580.6. Form and terms of contract2
A. Each consumer lawsuit loan contract must be in writing, dated,3
signed by the consumer, and shall include all of the following:4
(1) A statement in boldfaced type of not less than fourteen point font, in5
immediate proximity to the space reserved for the signature of the consumer,6
as follows: "You may cancel this contract at any time before midnight of the7
fifteenth day after the date of the transaction. See the attached notice of8
cancellation form for an explanation of this right."9
(2) The terms and conditions of payment, including the total of all10
payments to be made by the consumer, and annualized rate of interest.11
(3) The address of the lawsuit lender's principal place of business and12
the name and address of its agent in the state authorized to receive service of13
process.14
B. The contract shall have attached two easily detachable copies of a15
notice of cancellation. The notice shall be in boldfaced type and in the following16
form:17
"Notice of Cancellation18
You may cancel this contract, without any penalty or obligation, within19
fifteen days after the date the contract is signed.20
To cancel this contract, send by mail, or deliver in person, a signed dated21
copy of this cancellation notice, or other written notice to:22
(Name of consumer lawsuit loan company) at (address) (place of23
business) not later than midnight (date).24
I hereby cancel this transaction.25
(Date)26
(Consumer's signature)"27
C. The consumer lawsuit loan company shall give to the consumer a28
copy of the completed contract and all other documents the lender requires the29 SB NO. 414
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consumer to sign at the time they are signed.1
D.(1) No consumer lawsuit loan contract with a consumer of this state2
shall contain any condition, stipulation, or agreement:3
(a) Requiring it to be construed according to the laws of any other state4
or country.5
(b) Depriving the courts of this state of the jurisdiction of action against6
the consumer lawsuit loan company.7
(c) Stipulating to the venue of any particular court of this state.8
(2) Any such condition, stipulation, or agreement in violation of this9
Subsection shall be void, but such voiding shall not affect the validity of the10
other provisions of the contract.11
E. All consumer lawsuit loan transactions shall comply with federal12
Regulation Z of the Board of Governors of the Federal Reserve System. Failure13
to comply with Regulation Z is a violation of this Chapter.14
F. All consumer lawsuit loan transactions shall accurately reflect the15
actual terms, conditions, applicable amount of fees, and repayment schedule16
agreed to by the parties. If a loan is to be repaid on demand, in a lump sum, or17
at undefined intervals of time, interest on the loan shall be computed by the18
actuarial or simple interest method when allocating payments made on the loan.19
§3580.7. Waiver20
A. A consumer lawsuit loan company shall not cause nor attempt to21
cause a consumer to waive a right under this Chapter.22
B. A waiver by a consumer of any part of this Chapter shall be null and23
void.24
§3580.8. Prohibited Conduct25
A. A consumer lawsuit loan company or a salesperson, agent, or26
representative of a consumer lawsuit loan company shall not enter into a27
consumer lawsuit loan transaction with a consumer unless the funds extended28
to the consumer pursuant to the terms of the consumer lawsuit loan transaction29 SB NO. 414
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are used for the consumer's personal expenses.1
B. A consumer lawsuit loan company shall not do either of the following:2
(1) Directly or indirectly instigate or encourage litigation, by engaging3
in referring consumers who have entered into a consumer lawsuit loan4
transaction with such consumer lawsuit loan company.5
(2) Directly or indirectly control or participate in the conduct of the6
legal action that is related to a consumer lawsuit loan transaction.7
§3580.9. Enforcement and Remedies8
A. Violation of any provision of this Chapter shall constitute an unfair9
or deceptive act or practice for purposes of the Unfair Trade and Consumer10
Protection Law, R.S. 51:1401 et seq.11
B. The remedies and rights provided under this Chapter are in addition12
to and do not preclude any remedy otherwise available under law to a13
consumer.14
C. The provisions of this Chapter shall not be subject to regulation or15
enforcement by the office of financial institutions.16
Section 2. This Act shall become effective upon signature by the governor or, if not17
signed by the governor, upon expiration of the time for bills to become law without signature18
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If19
vetoed by the governor and subsequently approved by the legislature, this Act shall become20
effective on the day following such approval.21
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Michelle Ducharme.
DIGEST
Murray (SB 414)
Present law provides for the Louisiana 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 an institution insured by the FDIC subject to proposed law. SB NO. 414
SLS 14RS-795 ORIGINAL
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
Proposed law provides for the Consumer Lending Information & 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.
Proposed law provides an exemption from proposed law for an institution insured by the
FDIC that is subject to the La. Consumer Credit Law.
Proposed law provides that nothing in the act 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)36% 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,
signed by the consumer, and include:
(1)A statement in boldfaced type 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
andaddress of its agent in the state authorized to receive service of process. SB NO. 414
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words in boldface type and underscored are additions.
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:
"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 SB NO. 414
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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.
Proposed law 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 the governor or lapse of time for gubernatorial action.
(Adds R.S. 9:3512(9), 3560(A)(10), and 3580.1–3580.9)