COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:5551H.01I Bill No.:HB 2771 Subject:Consumer Protection; Professional Registration and Licensing Type:Original Date:March 28, 2022Bill Summary:This proposal establishes the Consumer Legal Funding Model Act and the
Civil Litigation Funding Act.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2023FY 2024FY 2025General Revenue
Fund
($58,815 to $61,750)($61,280 to $62,995)($63,133 to $65,554)Total Estimated Net
Effect on General
Revenue
($58,815 to $61,750)($61,280 to $62,995)($63,133 to $65,554)ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Information
Technology Trust
Fund
($76,000)$0$0Division of Finance
Fund
($5,000 to $7,000)($5,000 to $7,000)($5,000 to $7,000)Total Estimated Net
Effect on Other State
Funds
($81,000 to $83,000)($5,000 to $7,000)($5,000 to $7,000)
Numbers within parentheses: () indicate costs or losses. L.R. No. 5551H.01I
Bill No. HB 2771
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2023FY 2024FY 2025General Revenue
Fund
1 FTE1 FTE1 FTETotal Estimated Net
Effect on FTE
1 FTE1 FTE1 FTE
☐ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Local Government$0$0$0 L.R. No. 5551H.01I
Bill No. HB 2771
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FISCAL ANALYSIS
ASSUMPTION
Sections 436.550 – 436.580 - Consumer Legal Funding Model Act
Officials from the Department of Commerce and Insurance (DCI) assume House Bill 2771
establishes the “Consumer Legal Funding Model Act”. Under the provisions of the bill a
consumer legal funding contract is a nonrecourse consensual transaction where a consumer legal
funding company “purchases and a consumer assigns to the company a contingent right to
receive an amount of the potential proceeds of a settlement, judgement, award, or verdict”
obtained in a consumer legal claim against another third party.
House Bill 2771 requires that prior to a consumer legal funding company engaging in the
business of consumer legal funding they must be registered with the Department of Commerce
and Insurance (DCI).
The Division of Finance (DOF) within DCI has issued active licenses to approximately 10 – 15
business that offer this type of product under the provision of Chapter 367. Because of this, it is
assumed that enforcement and implementation of this proposal will be the responsibility of DOF.
If these businesses were required to change their licenses to a registration under
Sections 436.550-436.570, DOF estimates 10-15 licenses would not be renewed under Chapter
367, resulting in a loss to the Division of Finance Fund (0550) $5,000-$7,500 per year.
Under this proposal those same entities would most likely then apply for a consumer legal
funding registration. Section 436.570.2 requires an initial application fee of $500 and a
registration renewal fee every two years of $200.
Based on the current estimated number of businesses of which DOF is aware, this would
generate revenue of $5,000-$7,500 in the first year and $2,000-$3,000 every other fiscal year
thereafter. The bill provides no indication of where these funds would be deposited. It is
assumed this revenue would be credited to General Revenue.
In summary, DCI assumes a loss of $5,000-$7,000 each year to the Division of Finance Fund
and a revenue of $5,000-$7,000 in FY 2023 and $2,000-$3,000 in FY 2025 as a result of the
changes in this proposal.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect the
fiscal impact estimated by DCI in the fiscal note. L.R. No. 5551H.01I
Bill No. HB 2771
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DCI
entities it regulates. Missouri law requires that the expenses incurred by the division “shall be
charged to and paid” by the corporation “for whom they were incurred or performed”. (Section
361.170). Because the bill provides that a consumer legal funding contract is not subject to any
statutory or regulatory provisions governing loans, and due the statutory limitations of the use of
the Division of Finance Fund, an appropriation of general revenue would be needed to
implement the provisions of this bill.
Based on the number of licensees currently licensed under Chapter 367 that would now be
required to seek a registration from DOF it is estimated that for each applicant, investigation by
an Examiner specified in 436.570.3 would require eight hours at $322.80 per applicant (10-15
applicants X $322.80 = $3,228- $4,842). The processing and issuance of registrations by an
Administrative Office Support Assistant would require an hour each at $18.37 per registration
(10-15 applicants X $18.37 = $184-276).
Pursuant to subsection 7, the Consumer Legal Funding companies must file their contract forms
with the department. Review and cataloging of these forms by an Examiner would require an
estimated hour for each form. It is assumed each registrant would file one form per year at
$40.35 per form (10-15 X $40.35 = $404-$605).
In order to implement the provisions of this bill DOF would be required to promulgate and revise
rules. DOF assumes the workload for Sections 436.550-436.570 could be absorbed by existing
staff; however, because of the legal restrictions on the use of the department’s current funding
sources, an appropriation from general revenue will be required to implement the provisions of
the bill.
Listed below is a summary of expenses to the General Revenue Fund as estimated by DCI.
ExpensesFY 2023FY 2024FY 2025Pre-Approval
Investigations
($3,228 - $4,842)$0($3,228 - $4,842)Process Registration($184 - $276)$0($184 - $276)Review Forms($404 - $605)($404 - $605)($404 - $605)Promulgate/Review
Rules – Consumer
Legal Funding
($3,029 - $4,543)($757, - $1,514)($757, - $1,514)Promulgate/Review
Rules – Litigation
Finance
($3,029 - $4,543)($757, - $1,514)($757, - $1,514)Total Expenses –
General Revenue
Fund
($9,874 - $14,809)($1,918 – $3,633)($5,330 – $8,751) L.R. No. 5551H.01I
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Oversight does not have any information to the contrary. Therefore, Oversight will reflect the
expenses provided by DCI to the General Revenue Fund.
Officials from the Office of the Secretary of State (SOS) state this proposal would create a new
type of entity that is required to register with SOS if they are not already registered as a different
entity type, under chapter 436 RSMo. (550-580)
It is estimated that on average 15 new entities will choose to operate as a litigation financer. All
fees will are found in chapter 436. Creations are $100 and amendments are $20. The lowest cost
possible to the company is represented. While there is the potential of other filings, the table
below represents the mandatory filings required to operate in Missouri, generating the following
revenue:
FY 202312$1,200FY 202418$1,800FY 202518$1,800
As these will be a new filing type and will require an individual to, examine, process, and
respond to customer inquiries, one Corporations Specialist 1 FTE is estimated at the base salary
of $35,250 annually. Additional yearly cost for annual reports are included with the notice. No
revenue is stated for the report as the bill does not provide for a fee.
SOS also states that the Secretary of State’s office is a silo IT department. All changes to
software would require working with a third party vendor and/or the Information Technology
department at a cost of $76,000 in FY 2023 to the Technology Trust Fund.
In summary, SOS assumes a cost of $53,941 in FY 2023, $59,362 in FY 2024 and $59,803 in FY
2025 to General Revenue to provide for the implementation of the changes in this proposal. SOS
also assumes a cost of $76,000 in FY 2023 to the Technology Trust Fund.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect the
revenue and cost as estimated by SOS.
Rule Promulgation
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
Officials from the Office of the Secretary of State (SOS) note many bills considered by the
General Assembly include provisions allowing or requiring agencies to submit rules and
regulations to implement the act. The SOS is provided with core funding to handle a certain
amount of normal activity resulting from each year's legislative session. The fiscal impact for
this fiscal note to the SOS for Administrative Rules is less than $5,000. The SOS recognizes that
this is a small amount and does not expect that additional funding would be required to meet L.R. No. 5551H.01I
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these costs. However, the SOS also recognizes that many such bills may be passed by the
General Assembly in a given year and that collectively the costs may be in excess of what the
office can sustain with its core budget. Therefore, the SOS reserves the right to request funding
for the cost of supporting administrative rules requirements should the need arise based on a
review of the finally approved bills signed by the governor.
Officials from the Attorney General’s Office and the Office of the State Courts
Administrator each assume the proposal will have no fiscal impact on their respective
organizations. Oversight does not have any information to the contrary. Therefore, Oversight
will reflect a zero impact in the fiscal note for these agencies. L.R. No. 5551H.01I
Bill No. HB 2771
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FISCAL IMPACT – State GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025GENERAL REVENUE FUNDRevenue – DCI §§436.550-436.580
Chapter 436 Registrations (p.3)
$5,000 to
$7,000
$0$2,000-
$3,000
Revenue – SOS
Filing Fees §§436.550-436.580 (p. 5)
$1,200$1,800$1,800Cost – DCI §§436.550-436.580 (p. 4)
Administrative Expenses
($9,874 to
$14,809)
($1,918 to
$3,633)
($5,330 to
$8,751)
Cost - SOS§§436.550-436.580 (p. 5) Salaries($29,375)($35,603)($35,959) Fringe Benefits($23,251)($25,514)($25,644) Equipment and Expense($2,515)($45)$0Total Cost – SOS($55,141)($61,162)($61,603) FTE Change – SOS1 FTE1 FTE1 FTEESTIMATED NET EFFECT TO
THE GENERAL REVENUE FUND
($58,815 to
$61,750)
($61,280 to
$62,995)
($63,133 to
$65,554)
Estimated Net FTE Change to the
General Revenue Fund
1 FTE1 FTE1 FTETECHNOLOGY TRUST FUNDCost – SOS §§436.550-436.580 (p. 5)
IT software and equipment cost
($76,000)$0$0ESTIMATED NET EFFECT TO
THE TECHNOLGOY TRUST
FUND
($76,000)$0$0 L.R. No. 5551H.01I
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DIVISION OF FINANCE FUND
(0550)
Loss – DCI §§436.550-436.580 (p.3)
Chapter 367 Licenses
($5,000 to
$7,000)
($5,000 to
$7,000)
($5,000 to
$7,000)
ESTIMATED NET EFFECT TO
THE DIVISION OF FINANCE
FUND (0550)
($5,000 to
$7,000)
($5,000 to
$7,000)
($5,000 to
$7,000)
FISCAL IMPACT – Local GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025$0$0$0
FISCAL IMPACT – Small Business
A litigator financer business could have a direct fiscal impact as a result of this proposal.
FISCAL DESCRIPTION
CONSUMER LEGAL FUNDING MODEL ACT (Sections 436.550 to 436.570, RSMo)
This bill creates the Consumer Legal Funding Model Act" and contains several definitional terms
including "Consumer legal funding contract (contract)" in which a consumer legal funding
company (company) purchases and a consumer assigns to the company a contingent right to
receive moneys from the settlement, judgment, award or verdict from a consumer's legal claim.
The bill details the requirements to be included in the contract, which is not considered to be a
loan. The company must provide the consumer's attorney with written notice of the contract
provided to the consumer within 3 business days of the funding date. The contract is valid for a
period of 48 months.
The bill details actions that cannot be taken by the company such as paying or offering to pay or
accepting commissions, referral fees, or other forms of consideration from an attorney, medical
provider, etc. or intentionally advertising false or misleading information; or receiving any right
to or make decisions relating to the conduct of the underlying legal claim or resolution thereof.
The bill provides for disclosures to be included in the contract which are regarded as material
terms of the contract. The bill specifies the written language to be contained in the body of the
contract such as informing the consumer that if there is no recovery or insufficient money to pay
back the company in full, the consumer will not be obligated to pay the company anything in
excess of the recovery, unless the consumer violated the contract. L.R. No. 5551H.01I
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The bill does not restrict the Attorney General's powers or performance of duties. The company
must be registered according to the standards developed by the Department of Commerce and
Insurance (DCI) and the bill details provisions relating to denial of applications for registration.
CIVIL LITIGATION FUNDING ACT (Sections 436.571 to 436.580)
This bill requires all civil litigation funding to meet certain specified requirements. This Act
applies to any class actions but does not apply to litigation financing provided to commercial
enterprises. A "litigation financing transaction" is defined as financing provided to a consumer in
return for the consumer assigning a contingent right to receive moneys from the settlement,
judgment, award, or verdict from a consumer's legal claim. A litigation financier must be
registered with the Secretary of State's Office (SOS) and meet the requirements included in the
bill, including the posting of a surety bond of not less than $50,000. A litigation financier cannot
engage in financing transactions in the state unless it is registered with the SOS. In addition, the
litigation financier shall file annual reports with the SOS as stated in the bill. The SOS shall
release the report and summary to the public after redacting personally identifying information of
any consumer. The bill details actions that cannot be taken by the litigation financier which are
similar to the actions that cannot be taken by the consumer legal funding company. The written
contract must be completely filled in.
The bill provides for disclosures to be included in the contract which are regarded as material
terms of the contract. In addition, the existence of litigation financing arrangements are subject to
discovery in personal injury litigation.
The practice of litigation financing is regulated by the DCI and any violation of the provisions of
the Act make the contract unenforceable by the parties or any successor-in-interest
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space. L.R. No. 5551H.01I
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SOURCES OF INFORMATION
Attorney General’s Office
Office of the Secretary of State
Department of Commerce and Insurance
Joint Committee on Administrative Rules
Office of the State Courts Administrator
Julie MorffRoss StropeDirectorAssistant DirectorMarch 28, 2022March 28, 2022