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SENATE DOCKET, NO. 2170 FILED ON: 1/17/2025
SENATE . . . . . . . . . . . . . . No. 680
The Commonwealth of Massachusetts
_________________
PRESENTED BY:
Nick Collins
_________________
To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:
The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
An Act to provide transparency in third party litigation financing.
_______________
PETITION OF:
NAME:DISTRICT/ADDRESS :Nick CollinsFirst Suffolk 1 of 18
SENATE DOCKET, NO. 2170 FILED ON: 1/17/2025
SENATE . . . . . . . . . . . . . . No. 680
By Mr. Collins, a petition (accompanied by bill, Senate, No. 680) of Nick Collins for legislation
to provide transparency in third party litigation financing. Financial Services.
The Commonwealth of Massachusetts
_______________
In the One Hundred and Ninety-Fourth General Court
(2025-2026)
_______________
An Act to provide transparency in third party litigation financing.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
of the same, as follows:
1 SECTION 1: Chapter 167 of the General Laws is hereby amended by adding the
2following Chapter after Chapter 167J:
3 Chapter 167K: Litigation Financing
4 Section 1. As used in this Chapter, the following terms shall have the following
5meanings:
6 Section 1. As used in this Chapter, the following terms shall have the following
7meanings:
8 1. "Advertise" means publishing or disseminating any written, oral, electronic or printed
9communication or any communication by means of recorded telephone messages or transmitted
10or broadcast on radio, television, the internet or similar communications media, including audio
11recordings, film strips, motion pictures and videos, published, disseminated, circulated or placed 2 of 18
12before the public, directly or indirectly, for the purpose of inducing a consumer to enter into a
13consumer litigation funding.
14 2. "Charges" means the amount of money to be paid to the consumer litigation funding
15company by or on behalf of the consumer, above the funded amount provided by or on behalf of
16the company to a consumer pursuant to this Chapter. Charges include all administrative,
17origination, underwriting or other fees, including interest, no matter how denominated. Such
18charges shall annually not exceed 36% and a one-time document preparation fee as established
19by the Division of Banks. Any contract which exceeds such rate shall be considered usurious as
20defined by Chapter 271, Section 49 of the Massachusetts General Laws.
21 3. "Commercial litigation financier" means a person that enters into, or offers to enter
22into, a commercial litigation financing agreement with a plaintiff or with lawyers or law firms
23asserting legal claims on behalf of the plaintiff in a civil proceeding. The term does not include a
24nonprofit organization exempt from federal income tax under section 501(c)(3) of the United
25States Internal Revenue Code.
26 4. "Commercial litigation financing agreement":
27 (a) The term “commercial litigation financing agreement” means, with respect to any
28civil action or group of civil actions, a written agreement—
29 (i) whereby a third party agrees to provide funds to one of the named parties or any law
30firm affiliated with the action or group of civil actions, and
31 (ii) which creates a direct or collateralized interest in the proceeds of a civil action or
32group of civil actions—by settlement, verdict, judgment or otherwise—and whose interest is 3 of 18
33based in whole or part on a funding-based obligation to the action or group of actions or the
34appearing counsel or any contractual co-counsel or the law firm(s) of the counsel or co-counsel
35executed with:
36 (A) any attorney representing a party; or
37 (B) any co-counsel in the litigation with a contingent fee interest in the representation of
38that party; or
39 (C) any third-party who has a collateral-based interest in the contingency fees of the
40counsel or co-counsel firm related in whole or part to the fees derived from
41 representing that party.
42 (b) The term “litigation financing agreement” shall also include any contract, including
43any option, forward contract, futures contract, short position, swap, or similar contract, or other
44agreement that is substantially similar to a litigation financing agreement.
45 (c) The term does not include a consumer litigation funding transaction, an agreement
46between an attorney and a client for the attorney to provide legal services on a contingency fee
47basis or to advance the client's legal costs, a health insurance plan or agreement, a repayment
48agreement of a financial institution if repayment is not contingent upon the outcome of the civil
49proceeding, a funding agreement to a nonprofit organization that represents a client on a pro
50bono basis, or an agreement of an assigned claim to prosecute an environmental contamination
51matter seeking remediation of, or to recover the cost of remediating, a site that is or has been on
52the U.S. Environmental Protection Agency’s Superfund National Priorities List.
53 5. “Commissioner” means the commissioner of the Division of Banks. 4 of 18
54 6. "Consumer" means a natural person who resides or is domiciled in Massachusetts or is
55a plaintiff in a civil action in Massachusetts. The term includes estate for a decedent related to
56wrongful death claims.
57 7. "Consumer litigation funding" means a non-recourse transaction in which a consumer
58litigation funding company purchases, with funds paid directly to the consumer, and a consumer
59assigns to the company a contingent right to receive an amount of the potential proceeds of a
60settlement, judgment, award, or verdict obtained in the consumer's legal claim.
61 8. "Consumer litigation funding company" or "company" means a person or entity that
62enters into a consumer litigation funding contract with a consumer. This term shall not include:
63 (a) an immediate family member of the consumer;
64 (b) a bank, lender, financing entity, or other special purpose entity:
65 (i) that provides financing to a consumer litigation funding company; or
66 (ii) to which a consumer litigation funding company grants a security interest or transfers
67any rights or interest in a consumer litigation funding; or
68 (c) an attorney or accountant who provides services to a consumer.
69 9. “Division” means the Division of Banks.
70 10. “Foreign country or person of concern” includes the following:
71 (a) A foreign government or person listed in 15 CFR 791.4.
72 (b) A country designated as a threat to critical infrastructure by the governor. 5 of 18
73 11. “Foreign entity of concern” means a partnership, association corporation,
74organization, or other combination of persons:
75 (a) organized or incorporated in a foreign country of concern;
76 (b) owned or controlled by the government, a political subsection, or a political party of a
77foreign country of concern;
78 (c) that has a principal place of business in a foreign country of concern; or
79 (d) that is owned, organized, or controlled by or affiliated with a foreign organization that
80has been:
81 (i) placed on the federal Office of Foreign Assets Control specially
82 designated nationals and blocked persons list (“SDN List”); or
83 (ii) designated by the United States Secretary of State as a foreign terrorist
84 organization.
85 (e) “Foreign entity of concern” shall also include any individual that owns, has a
86 controlling interest in, or is a director or senior officer of any entity that falls within
87 subsections 9(a) through (d) of this section.
88 12. "Funded amount" means the amount of monies provided to, or on behalf of, the
89consumer in the consumer litigation funding contract. "Funded amount" excludes charges. 6 of 18
90 13. "Funding date" means the date on which the funded amount is transferred to the
91consumer by the consumer litigation funding company either by personal delivery or via wire,
92ACH or other electronic means or mailed by insured, certified or registered United States mail.
93 14. "Immediate family member" means a parent; sibling; child by blood, adoption, or
94marriage; spouse; grandparent; or grandchild.
95 15. "Legal claim" means a civil claim or cause of action.
96 16. "Resolution date" means the date the funded amount, plus the agreed upon charges,
97are
98 delivered to the consumer litigation funding company by the consumer, the consumer's
99attorney or otherwise.
100 Section 2 1. All consumer litigation funding contracts shall meet the following
101requirements:
102 (a) a contract shall be written in a clear and coherent manner using words with common,
103everyday meanings to enable the average consumer who makes a reasonable effort under
104ordinary circumstances to read and understand the terms of the contract without having to obtain
105the assistance of a professional;
106 (b) the contract shall be completely filled in when presented to the consumer for
107signature;
108 (c) the contract shall contain, in twelve-point bold type font, a right of rescission,
109allowing the consumer to cancel the contract without penalty or further obligation if, within ten 7 of 18
110business days after the funding date, the consumer returns to the consumer litigation funding
111company the full amount of the disbursed funds;
112 (d) the contract shall contain the initials of the consumer on each page;
113 (e) a statement that there are no fees or charges to be paid by the consumer other than
114what is disclosed on the disclosure form;
115 (f) in the event the consumer seeks more than one litigation funding contract from the
116same company, a disclosure providing the cumulative amount due from the consumer for all
117transactions, including charges under all contracts, if repayment is made any time after the
118contracts are executed;
119 (g) a statement of the maximum amount the consumer may be obligated to pay under the
120contract other than in a case of material breach, fraud or misrepresentation by or on behalf of the
121consumer; and
122 (h) clear and conspicuous detail of how charges, including any applicable fees, are
123incurred or accrued.
124 2. The contract shall contain a written acknowledgement by the attorney retained by the
125 consumer in the legal claim that attests to the following:
126 (a) the attorney has reviewed the mandatory disclosures in Section 7 of this Chapter with
127the consumer;
128 (b) the attorney is being paid on a contingency basis pursuant to a written fee agreement; 8 of 18
129 (c) all proceeds of the legal claim will be disbursed via either the trust account of the
130attorney or a settlement fund established to receive the proceeds of the legal claim on behalf of
131the consumer;
132 (d) the attorney is obligated to disburse funds from the legal claim and take any other
133steps to ensure that the terms of the litigation funding contract are fulfilled;
134 (e) the attorney has not received a referral fee or other consideration from the consumer
135litigation funding company in connection with the consumer litigation funding, nor will the
136attorney receive such fee or other consideration in the future; and
137 (f) the attorney in the legal claim has provided no tax, public or private benefit planning,
138or financial advice regarding this transaction.
139 3. In the event that the acknowledgement required pursuant to subsection two of this
140section is not provided by the attorney or firm retained by the consumer in the legal claim, the
141contract shall be null and void. The contract shall remain valid and enforceable in the event the
142consumer terminates the initial attorney or retains a new attorney with respect to the legal claim.
143 4. Notwithstanding any law to the contrary, no prepayment penalties or fees shall be
144charged or collected on consumer litigation funding. A prepayment penalty on consumer
145litigation funding shall be unenforceable.
146 Section 3. 1. Consumer litigation funding companies shall be prohibited from:
147 (a) paying or offering to pay commissions, referral fees, or other forms of consideration
148to any attorney, law firm, healthcare provider, chiropractor or physical therapist or any of their
149employees for referring a consumer to the company; 9 of 18
150 (b) accepting any commissions, referral fees, rebates or other forms of consideration from
151an attorney, law firm, healthcare provider, chiropractor or physical therapist or any of their
152employees;
153 (c) intentionally advertising materially false or misleading information regarding its
154products or services;
155 (d) referring, in furtherance of an initial legal funding, a customer or potential customer
156to a specific attorney, law firm, healthcare provider, chiropractor or physical therapist or any of
157their employees; provided, however, if a customer needs legal representation, the company may
158refer the customer to a local or state bar association referral service;
159 (e) knowingly providing funding to a consumer who has previously assigned or sold a
160portion of the consumer's right to proceeds from his or her legal claim without first making
161payment to or purchasing a prior unsatisfied consumer litigation funding company's entire
162funded amount and contracted charges, unless a lesser amount is otherwise agreed to in writing
163by the consumer litigation funding companies, except that multiple companies may agree to
164contemporaneously provide funding to a consumer provided that the consumer and the
165consumer's attorney consent to the arrangement in writing;
166 (f) having any influence, receiving any right to, or making, any decisions with respect to
167the conduct of the underlying legal claim or any settlement or resolution thereof. The right to
168make such decisions shall remain solely with the consumer and the attorney in the legal claim;
169 (g) attempting to obtain a waiver of any remedy or right by the consumer, including but
170not limited to the right to trial by jury; and 10 of 18
171 (h) knowingly paying or offering to pay for court costs, filing fees or attorney's fees
172either during or after the resolution of the legal claim, using funds from the consumer litigation
173funding transaction.
174 2. An attorney or law firm retained by the consumer in the legal claim shall not have a
175financial interest in the consumer litigation funding company offering consumer litigation
176funding to that consumer.
177 3. Any attorney who has referred the consumer to his or her retained attorney shall not
178have a financial interest in the consumer litigation funding company offering consumer litigation
179funding to that consumer.
180 4. The attorney may only disclose privileged information to the consumer litigation
181funding company with the written consent of the consumer.
182 5. A consumer litigation funding company may not provide funding to a consumer
183litigation funding transaction that is directly or indirectly financed by anyone included within
184Section 3.(8) or (9).
185 Section 4. The contracted amount to be paid to the consumer litigation funding company
186shall be a predetermined amount based upon intervals of time from the funding date through the
187resolution date, and shall not be determined as a percentage of the recovery from the legal claim.
188 Section 5. 1. In a civil proceeding in which a plaintiff enters into a consumer litigation
189financing agreement, and thus the contracted funds are not provided for the prosecution of the
190litigation, the plaintiff or the plaintiff’s attorney shall provide to each of the other parties in the 11 of 18
191civil proceeding, and each insurer that has a duty to defend another party in the civil proceeding,
192written notice that the plaintiff has entered into a consumer litigation funding contract.
193 2. In a civil proceeding in which a plaintiff enters into a consumer litigation funding
194contract, the contents of the consumer litigation funding contract are subject to discovery under
195the Massachusetts Rules of Civil Procedure and Evidence, subject to this legislative finding that
196said contents are relevant to the civil proceeding, by a party other than the plaintiff, or an insurer
197that has a duty to defend another party in the civil proceeding.
198 3. A plaintiff or the plaintiff’s attorney shall provide the written notice required by
199subsection 1. of this section within 30 days after the date on which the consumer litigation
200funding contract was executed.
201 4. The written notice provided under subsection 1. of this section is presumed not
202admissible as evidence in a court proceeding, subject to rebuttal
203 5. All consumer litigation funding contracts shall contain the disclosures specified in this
204section, which shall constitute material terms of the contract. Unless otherwise specified, such
205disclosures shall be typed in at least twelve-point bold type font and be placed clearly and
206conspicuously within the contract, as follows:
207 (a) On the front page under appropriate headings, language specifying:
208 (i) the funded amount to be paid to the consumer by the consumer litigation funding
209company;
210 (ii) an itemization of one-time charges; 12 of 18
211 (iii) the maximum total amount to be assigned by the consumer to the company,
212including the funded amount and all charges; and
213 (iv) a payment schedule to include the funded amount and charges, listing all dates and
214the amount due at the end of each six month period from the funding date, until the date the
215maximum amount due to the company pursuant to the contract is paid.
216 (b) Pursuant to the provisions set forth in this section, within the body of the contract:
217"Consumer's right to cancellation: you may cancel this contract without penalty or further
218obligation within ten business days after the funding date if you return to the consumer litigation
219funding company the full amount of the disbursed funds."
220 (c) The consumer litigation funding company shall have no role in deciding whether,
221when and how much the legal claim is settled for, however, the consumer and consumer's
222attorney must notify the company of the outcome of the legal claim by settlement or adjudication
223prior to the resolution date. The company may seek updated information about the status of the
224legal claim but in no event shall the company interfere with the independent professional
225judgement of the attorney in the handling of the legal claim or any settlement thereof.
226 (d) Within the body of the contract, in all capital letters in at least twelve-point bold type
227font contained within a box: "THE FUNDED AMOUNT AND AGREED UPON CHARGES
228SHALL BE PAID ONLY FROM THE PROCEEDS OF YOUR LEGAL CLAIM, AND SHALL
229BE PAID ONLY TO THE EXTENT THAT THERE ARE AVAILABLE PROCEEDS FROM
230YOUR LEGAL CLAIM. YOU WILL NOT OWE (INSERT NAME OF THE CONSUMER
231LITIGATION FUNDING COMPANY) ANYTHING IF THERE ARE NO PROCEEDS FROM
232YOUR LEGAL CLAIM, UNLESS YOU HAVE VIOLATED ANY MATERIAL TERM OF 13 of 18
233THIS CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST (INSERT NAME OF
234CONSUMER LITIGATION FUNDING COMPANY)."
235 (e) Located immediately above the place on the contract where the consumer's signature
236is required, in twelve-point bold type font: "Do not sign this contract before you read it
237completely. Do not sign this contract if it contains any blank spaces. You are entitled to a
238completely filled-in copy of the contract before you sign this contract. You should obtain the
239advice of any attorney. Depending on the circumstances, you may want to consult a tax, public
240or private benefits planning, or financial professional. You acknowledge that your attorney in the
241legal claim has provided no tax, public or private benefit planning, or financial advice regarding
242this transaction. You further acknowledge that your attorney has explained the terms and
243conditions of the consumer litigation funding contract."
244 (f) A copy of the executed contract shall promptly be delivered to the attorney for the
245consumer.
246 Section 6. 1. Any consumer litigation funding company found in willful violation of any
247provision of this article in a specific funding case:
248 (a) waives its right to recover both the funded amount and any and all charges, as defined
249in Section 3 of this Chapter, in that particular case; and
250 (b) shall be liable for a civil penalty for each violation, which shall accrue to the general
251fund and may be recovered in a civil action brought by the attorney general. 14 of 18
252 2. Nothing in this Chapter shall be construed to restrict the exercise of powers or the
253performance of the duties of the Massachusetts attorney general, which he or she is authorized to
254exercise or perform by law.
255 Section 7. 1. The contingent right to receive an amount of the potential proceeds of a
256legal claim is assignable by a consumer to a consumer litigation funding company.
257 2. Only attorney's liens related to the legal claim which is the subject of the consumer
258litigation funding or Medicare or other statutory liens related to the legal claim shall take priority
259over any lien of the consumer litigation funding company.
260 Section 8. Communications between a consumer's attorney and a consumer litigation
261funding company to allow the consumer litigation funding company to ascertain the status of a
262legal claim or a legal claim’s expected value shall not be discoverable by a person against whom
263the legal claim is asserted or filed.
264 Section 9. 1. Unless a consumer litigation funding company or commercial litigation
265financier has first registered with the Division of Banks pursuant to this Chapter, the company or
266financier may not engage in the business of consumer or commercial litigation funding in this
267state.
268 2. An applicant's registration must be filed in the manner prescribed by the commissioner
269of the Division of Banks and must contain all the information required by the division to make
270an evaluation of the character and fitness of the applicant company or financier, including but not
271limited to any beneficial ownership exceeding 20%. The initial application must be accompanied
272by a fee established by the commissioner. A renewal registration must include a fee established 15 of 18
273by the commissioner. A registration must be renewed every two years and expires on the thirtieth
274of September.
275 3. A certificate of registration may not be issued unless the division, upon investigation,
276finds that the character and fitness of the applicant company or financier, and of the officers and
277directors thereof, are such as to warrant belief that the business will be operated honestly and
278fairly within the purposes of this Chapter.
279 4. Every registrant shall also, at the time of filing such application, file with the division,
280if the division so requires, a bond satisfactory to the division. In lieu of the bond at the option of
281the registrant, the registrant may post an irrevocable letter of credit. The terms of the bond must
282run concurrent with the period of time during which the registration will be in effect. The bond
283must provide that the registrant will faithfully conform to and abide by
284 the provisions of this Chapter and to all rules lawfully made by the administrator under
285this Chapter and to any such person or persons any and all amounts of money that may become
286due or owing to the state or to such person or persons from the registrant under and by virtue of
287this Chapter during the period for which the bond is given.
288 5. Upon written request, the applicant shall be entitled to a hearing on the question of the
289applicant's qualifications for registration if:
290 (a) the division has notified the applicant in writing that the application has been denied,
291or
292 (b) the division has not issued a registration within sixty days after the application for the
293registration was filed. 16 of 18
294 6. A request for a hearing may not be made more than fifteen days after the department
295has mailed a written notice to the applicant that the application has been denied and stating in
296substance the division findings supporting denial of the application.
297 7. Notwithstanding the prior approval requirement of subsection 1 of this section, a
298consumer litigation funding company or commercial litigation financier that registered with the
299division between the effective date of this article or when the division has made applications
300available to the public, whichever is later, and one hundred eighty days thereafter may engage in
301consumer or commercial litigation funding while the registration is pending approval with the
302division. All funding and financing agreements entered into prior to the effective date of this
303Chapter are not subject to the terms of this Chapter.
304 8. No consumer litigation funding company or commercial litigation financier may use
305any form of consumer litigation funding or commercial litigation funding contract in this state
306unless it has been filed with the division in accordance with the filing procedures set forth by the
307commissioner of the division. Such procedures shall designate a reasonable timeframe for the
308state to raise objections to any filed form.
309 9. The commissioner of the division is hereby authorized to adopt rules and regulations
310to implement the provisions of this section as needed.
311 Section 10. 1. Each consumer litigation funding company and commercial litigation
312financier that engages in business in the state shall submit a report to the division no later than
313the thirty-first of January of each year specifying:
314 (a) number of litigation fundings by the company or financier; 17 of 18
315 (b) summation of funded amounts in dollar figure; and
316 (c) annual percentage charged to each consumer or commercial funding recipient where
317repayment was made.
318 2. The division shall make such information available to the public, in a manner which
319maintains the confidentiality of the name of each company, financier, customer, and consumer,
320no later than ninety days after the reports are submitted.
321 Section 11. A commercial litigation financier may not enter into a commercial litigation
322financing agreement directly or indirectly with a foreign entity of concern, or a foreign country
323or person of concern.
324 Section 12. A party or an attorney or law firm for a party shall not disclose or share any
325documents or information subject to a court order to seal or protect that is received in the course
326of the civil proceeding with a commercial litigation financier.
327 Section 13. A commercial litigation financier may not make any decision, have any
328influence, or direct the plaintiff or the plaintiff's attorney with respect to the conduct of the
329underlying civil proceeding or any settlement or resolution of the civil proceeding, or make any
330decision with respect to the conduct of the underlying civil proceeding or any settlement or
331resolution of the civil proceeding. The right to make these decisions remains solely with the
332plaintiff and the plaintiff's attorney in the civil proceeding.
333 Section 14. 1. A party or his or her counsel shall, without awaiting a discovery request,
334provide to the other parties, and each insurer that has a duty to defend another party in the civil
335proceeding, any agreement under which any commercial litigation financier, other than an 18 of 18
336attorney permitted to charge a contingent fee representing a party, has a right to receive
337compensation that is contingent in any respect on the outcome of the legal claim.
338 2. Commercial litigation financing agreements shall be admissible at trial.
339 3. A plaintiff or the plaintiff’s attorney shall provide the agreement required by
340subsection 1. of this section within a reasonable time after the date on which the commercial
341litigation financing agreement was executed.
342 Section 15. If any provision of this Chapter is, for any reason, declared unconstitutional
343or invalid, in whole or in part, by any court of competent jurisdiction, such portion shall be
344deemed severable, and such unconstitutionality or invalidity shall not affect the validity of the
345remaining portions of this Chapter, which remaining portions shall continue in full force and
346effect.
347 Section 16. The division of banks shall have authority to promulgate rules necessary to
348effectuate the purposes of this Chapter.
349 Section 17. This Act shall take effect 90 days after the Governor’s signature; provided,
350however, it shall not apply or in any way affect or invalidate any consumer or commercial
351litigation funding previously effectuated prior to the effective date of this Act.