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North Carolina House Bill H925

North Carolina 2025-2026 Regular Session

North Carolina House Bill H925 Compare Versions

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11 GENERAL ASSEMBLY OF NORTH CAROLINA
22 SESSION 2025
3-H 1
4-HOUSE BILL 925
3+H D
4+HOUSE BILL DRH10419-MUf-45
5+
56
67
78 Short Title: Consumers in Crisis Protection Act. (Public)
8-Sponsors: Representatives Eddins, Huneycutt, Humphrey, and Lowery (Primary Sponsors).
9-For a complete list of sponsors, refer to the North Carolina General Assembly web site.
10-Referred to: Insurance, if favorable, Finance, if favorable, Rules, Calendar, and Operations of
11-the House
12-April 14, 2025
13-*H925 -v-1*
9+Sponsors: Representative Eddins.
10+Referred to:
11+
12+*DRH10419 -MUf-45*
1413 A BILL TO BE ENTITLED 1
1514 AN ACT TO ENACT THE CONSUMERS IN CRISIS PROTECTION ACT. 2
1615 The General Assembly of North Carolina enacts: 3
1716 SECTION 1. Chapter 58 of the General Statutes is amended by adding a new Article 4
1817 to read: 5
1918 "Article 94. 6
2019 "Consumers in Crisis Protection Act. 7
2120 "§ 58-94-1. Short title. 8
2221 This Article may be cited as the "Consumers in Crisis Protection Act." 9
2322 "§ 58-94-5. Definitions. 10
2423 The following definitions apply in this Article: 11
2524 (1) Affiliate. – As defined in G.S. 53-244.030. 12
2625 (2) Charges. – Any fees permitted by this Article to be charged to a consumer by 13
2726 a consumer legal funding company, regardless of how denominated, including 14
2827 fees denominated as interest or rate. 15
2928 (3) Commissioner. – The Commissioner of Insurance. 16
3029 (4) Consumer. – An individual residing in this State. 17
3130 (5) Consumer legal funding company. – A person that enters into a consumer 18
3231 legal funding transaction with a consumer, whether or not the person is 19
3332 registered under this Article. 20
3433 (6) Consumer legal funding contract. – A contract for a consumer legal funding 21
3534 transaction. 22
3635 (7) Consumer legal funding transaction. – A nonrecourse transaction in which a 23
3736 consumer sells an unvested, contingent future interest in the potential net 24
3837 proceeds of a settlement or judgment obtained from a legal claim so long as 25
3938 all of the following apply: 26
4039 a. The consumer is required to use the funds to address personal needs or 27
4140 household expenses. 28
4241 b. The consumer is prohibited from using the funds to pay for attorneys' 29
4342 fees, legal filings, legal marketing, legal document preparation or 30
4443 drafting, appeals, expert testimony, or other litigation-related 31
4544 expenses. 32
4645 c. The consumer is not required to use the funds in a particular manner, 33
47-including to make specific payments or secure specific services. 34 General Assembly Of North Carolina Session 2025
48-Page 2 House Bill 925-First Edition
46+including to make specific payments or secure specific services. 34
47+H.B. 925
48+Apr 10, 2025
49+HOUSE PRINCIPAL CLERK General Assembly Of North Carolina Session 2025
50+Page 2 DRH10419-MUf-45
4951 (8) Funded amount. – The amount of money provided to, or on behalf of, a 1
5052 consumer pursuant to a consumer legal funding contract. The term excludes 2
5153 charges. 3
5254 (9) Gross proceeds. – The total amount of proceeds recovered by a consumer as 4
5355 a result of a legal claim. 5
5456 (10) Health care provider. – As defined in G.S. 90-21.50. 6
5557 (11) Legal claim. – A civil claim or cause of action, including any claim arising 7
5658 under G.S. 58-63-15(11). 8
5759 (12) Net proceeds. – The amount recovered by a consumer as a result of a legal 9
5860 claim, less the following associated costs and liens: 10
5961 a. Attorneys' fees and litigation costs associated with the legal claim. 11
6062 b. Attorney, health care provider, or subrogation liens. 12
6163 c. Child support, Medicare, tax, or other statutory or governmental liens. 13
6264 "§ 58-94-10. Relationship with other law. 14
6365 A consumer legal funding transaction that complies with this Article is not a loan and is not 15
6466 subject to any provision of law governing loans or investment contracts. To the extent that this 16
6567 Article conflicts with any other law, this Article supersedes that law for purposes of regulating 17
6668 consumer legal funding transactions in this State. 18
6769 "§ 58-94-15. Exemptions. 19
6870 All of the following are exempt from this Article's requirements: 20
6971 (1) An immediate family member of the consumer. 21
7072 (2) A bank, lender, financing entity, or other special purpose entity that either 22
7173 provides financing to a consumer legal funding company or receives an 23
7274 interest in a consumer legal funding from a consumer legal funding company. 24
7375 (3) An attorney or accountant who provides services to a consumer. 25
7476 "§ 58-94-20. Registration; fee; financial stability. 26
7577 (a) No person shall enter into a consumer legal funding transaction with a consumer 27
7678 without first registering as a consumer legal funding company with the Commissioner, in a 28
7779 format prescribed by the Commissioner, and submitting a registration fee and proof of financial 29
7880 stability, as required by this Article. A consumer legal funding contract between a consumer and 30
7981 a consumer legal funding company that has not registered under this Article is void and 31
8082 unenforceable. 32
8183 (b) A consumer legal funding company shall pay a nonrefundable fee of one thousand 33
8284 dollars ($1,000) at the time of registration and at the time of each renewal. Registrations shall be 34
8385 renewed every three years. 35
8486 (c) The Commissioner may deny a consumer legal funding company's registration or 36
8587 renewal of registration for failure to comply with this Article. 37
8688 "§ 58-94-25. Registration application. 38
8789 (a) Application. – Applications for registration under this Article shall be filed in a form 39
8890 determined by the Commissioner. To be considered complete, the application shall be verified 40
8991 by attestation of the applicant or a designee of the applicant and shall include all of the following: 41
9092 (1) The applicant's legal name, along with any assumed business name, principal 42
9193 address, including street address and mailing address, contact information, 43
9294 and social security number or taxpayer identification number. 44
9395 (2) The applicant's form and place of organization, if applicable. 45
9496 (3) A certificate of good standing from the state in which the applicant was 46
9597 organized, if applicable. 47
9698 (4) A certificate of authority from the Secretary of State to conduct business in 48
9799 this State or other evidence of the applicant's registration or qualification to 49
98100 do business in this State. 50 General Assembly Of North Carolina Session 2025
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100102 (5) The qualifications and business history of the applicant, including a 1
101103 description of any injunction or administrative order by any state or federal 2
102104 authority to which the person is or has been subject for the past 10 years. 3
103105 (6) A record of any criminal convictions for the applicant, or in the case of an 4
104106 applicant that is an entity, every officer of the applicant, for a 10-year period 5
105107 prior to the date of the application, including the applicant's consent to a 6
106108 federal and State criminal background check and a set of the applicant's 7
107109 fingerprints in a form acceptable to the Commissioner. 8
108110 (7) Evidence of its financial stability in the form of certified financial statements 9
109111 by the chief financial officer, or equivalent, of the applicant that include proof 10
110112 of a surety bond or irrevocable letter of credit issued and confirmed by a 11
111113 financial institution authorized by law to transact business in this State for 12
112114 fifty thousand dollars ($50,000). 13
113115 (8) Any additional information that the Commissioner deems relevant. 14
114116 (b) Abandoned Application. – The Commissioner may deem an application abandoned if 15
115117 the applicant fails to respond to a written request for information by the Commissioner within 30 16
116118 days of the date of the request. 17
117119 "§ 58-94-30. Contents of consumer legal funding contract. 18
118120 (a) Prior to entering into a consumer legal funding transaction in this State, a consumer 19
119121 legal funding company shall file with the Commissioner a template of a consumer legal funding 20
120122 contract. 21
121123 (b) A consumer legal funding contract shall be written using plain language and 22
122124 understandable to the average consumer who makes a reasonable effort under ordinary 23
123125 circumstances to read and comprehend the terms of the contract without having to obtain the 24
124126 assistance of a professional. 25
125127 (c) All terms of the consumer legal funding contract shall be completed when presented 26
126128 to the consumer for signature. 27
127129 (d) Each consumer legal funding contract shall include the following provisions: 28
128130 (1) Definitions of the terms "consumer," "consumer legal funding company," and 29
129131 "consumer legal funding transaction," as set forth in this Article. 30
130132 (2) An acknowledgement that the consumer is represented by an attorney for the 31
131133 legal claim and has had an opportunity to discuss the contract with the 32
132134 consumer's attorney. 33
133135 (3) A right of rescission, allowing the consumer to cancel the contract without 34
134136 penalty or further obligation if, within 10 business days following the 35
135137 execution of the contract or the consumer's initial receipt of any portion of the 36
136138 funded amount, the consumer gives notice of the rescission to the company 37
137139 and returns all funds provided to the consumer by the company. 38
138140 (4) Located immediately above the place on the contract where the consumer's 39
139141 signature is required, the following in 12-point bold font: 40
140142 "Do not sign this contract before you have read it completely or if it 41
141143 contains any blank spaces. You are entitled to a completely filled-in copy of 42
142144 the contract. Before you sign this contract, you should obtain the advice of an 43
143145 attorney. Depending on the circumstances, you may want to consult a tax, 44
144146 public or private benefits planning, or financial professional. You 45
145147 acknowledge that your attorney in the legal claim has provided no tax, public 46
146148 or private benefit planning, or financial advice regarding this transaction. 47
147149 You shall not use funds from this transaction to pay attorneys' fees or costs 48
148150 related to the litigation of your claim." 49
149151 (5) A requirement that a copy of the executed consumer legal funding contract 50
150152 shall promptly be delivered to the consumer's attorney upon request. 51 General Assembly Of North Carolina Session 2025
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152154 (e) Each contract shall include consumer disclosures on the first two pages, to the extent 1
153155 possible. The consumer disclosures shall be in a form prescribed by the Commissioner and shall 2
154156 include all of the following: 3
155157 (1) Notification that some or all of the funded amount may be taxable. 4
156158 (2) A description of the consumer's right of rescission. 5
157159 (3) The total funded amount provided to the consumer under the contract. 6
158160 (4) An itemization of charges. 7
159161 (5) The total amount due from the consumer, in six-month intervals for 36 8
160162 months, including all charges. 9
161163 (6) A statement that no additional charges may accrue 36 months after execution 10
162164 of the consumer legal funding contract. 11
163165 (7) A statement that there are no payments owed by the consumer other than what 12
164166 is disclosed on the disclosure form. 13
165167 (8) In the event the consumer seeks more than one consumer legal funding 14
166168 contract, a disclosure providing the cumulative amount due from the consumer 15
167169 for all transactions, including charges under all contracts, if repayment is made 16
168170 any time after the contracts are executed. 17
169171 (9) A statement that the company has no influence over any aspect of the 18
170172 consumer's legal claim or any settlement or resolution of the consumer's legal 19
171173 claim and that all decisions related to the consumer's legal claim remain solely 20
172174 with the consumer and the consumer's attorney. 21
173175 (10) A statement that if there is no recovery of any money from the consumer's 22
174176 legal claim, the consumer has no further financial obligation to the company 23
175177 unless the consumer committed fraud against the consumer legal funding 24
176178 company. 25
177179 (11) A statement that, if the net proceeds of the claim are insufficient to repay the 26
178180 consumer's financial obligation to the company, defined as the complete 27
179181 funded amount and charges, the consumer is not responsible to the company 28
180182 for any amount in excess of the net proceeds. 29
181183 (f) The consumer legal funding contract shall contain a written acknowledgement by the 30
182184 attorney retained by the consumer for the legal claim that attests to the following: 31
183185 (1) To the best of the attorney's knowledge, the funded amounts and any charges 32
184186 relating to the consumer legal funding transaction have been disclosed to the 33
185187 consumer. 34
186188 (2) The attorney is being paid pursuant to a separate written fee agreement 35
187189 between the consumer and the attorney, and the consumer legal funding 36
188190 company is not a party to that agreement. 37
189191 (3) Gross proceeds of the legal claim shall be deposited into the client trust 38
190192 account of the attorney or a settlement fund established to receive the gross 39
191193 proceeds of the legal claim on behalf of the consumer. 40
192194 (4) The attorney shall comply with the written irrevocable instructions of the 41
193195 consumer with regard to the consumer legal funding transaction. 42
194196 (5) The attorney is obligated to disburse proceeds from the legal claim and pay 43
195197 the funded amount and charges due per the terms of the consumer legal 44
196198 funding contract. 45
197199 (6) Only liens related to the legal claim, including attorney liens, Medicare, or 46
198200 other statutory liens, take priority over any lien of the consumer legal funding 47
199201 company. All other liens take priority by operation of law. 48
200202 (7) The attorney for the legal claim has provided no tax, public or private benefit 49
201203 planning, or financial advice regarding the consumer legal funding 50
202204 transaction. 51 General Assembly Of North Carolina Session 2025
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204206 (g) The failure of the attorney retained by the consumer for the legal claim to provide 1
205207 written attestation as required by this section renders the contract null and void. 2
206208 (h) A consumer legal funding contract remains valid and enforceable in the event that, 3
207209 subsequent to execution, a consumer moves to substitute counsel or pursues a legal claim pro se. 4
208210 "§ 58-94-35. Nonrecourse obligation; authorized charges. 5
209211 (a) If a consumer obtains no recovery from the consumer's legal claim, the consumer is 6
210212 not required to repay a consumer legal funding company unless the consumer committed fraud 7
211213 against the consumer legal funding company. If the net proceeds of the claim are insufficient to 8
212214 repay the consumer's financial obligation to the company, defined as the complete funded amount 9
213215 plus charges authorized by this section, the consumer is not responsible to the company for any 10
214216 amount in excess of the net proceeds. 11
215217 (b) A consumer legal funding company may charge a consumer only the following: 12
216218 (1) Upon funding, a charge not to exceed eighteen percent (18%) of the funded 13
217219 amount and a servicing charge not to exceed three and one-half percent (3.5%) 14
218220 of the funded amount. 15
219221 (2) Upon every subsequent six-month anniversary, a charge not to exceed 16
220222 eighteen percent (18%) of the funded amount and a servicing charge not to 17
221223 exceed three and one-half percent (3.5%) of the funded amount. If, however, 18
222224 within five days after the start of a new six-month interval, the consumer legal 19
223225 funding company receives payment of the full amount owed by the consumer 20
224226 for the immediately preceding six-month interval, no additional charges shall 21
225227 be charged for the new six-month interval. 22
226228 (3) A document preparation charge, not to exceed two hundred fifty dollars 23
227229 ($250.00), that may be deducted from the funded amount, to be used to defray 24
228230 the cost of opening, funding, administering, and terminating a consumer legal 25
229231 funding transaction. 26
230232 (c) No charges shall accrue on a consumer legal funding transaction more than 36 months 27
231233 after execution of the consumer legal funding contract. A consumer legal funding company, 28
232234 however, may assess charges on any additional funding, whether by amendment to the consumer 29
233235 legal funding contract or by execution of a new consumer legal funding contract, for 36 months 30
234236 after the provision of the additional funding. 31
235237 "§ 58-94-40. Prohibited acts. 32
236238 A consumer legal funding company shall not do any of the following: 33
237239 (1) Pay or offer to pay commissions, referral fees, or any other form of 34
238240 consideration to any attorney, law firm, health care provider, or an employee 35
239241 of a law firm or health care provider for referring a consumer to the company. 36
240242 (2) Accept any commissions, referral fees, or any other form of consideration 37
241243 from any attorney, law firm, health care provider, or an employee of a law 38
242244 firm or health care provider. 39
243245 (3) Refer, in furtherance of the initial legal funding, a consumer or potential 40
244246 consumer to an attorney, law firm, health care provider, or an employee of a 41
245247 law firm or health care provider; however, a consumer legal funding company 42
246248 may direct a consumer or potential consumer to a local or state bar association 43
247249 referral service or bona fide nonprofit legal aid organization. 44
248250 (4) Advertise false or misleading information regarding its products or services. 45
249251 (5) Receive any right to make any decisions with respect to or attempt to influence 46
250252 a decision relating to the conduct, settlement, or resolution of the consumer's 47
251253 legal claim. The right to make these decisions remains solely with the 48
252254 consumer and the consumer's attorney. 49
253255 (6) Knowingly pay or offer to pay for case expenses, including court costs, filing 50
254256 fees, or attorneys' fees, either during or after the resolution of the legal claim. 51 General Assembly Of North Carolina Session 2025
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256258 (7) Fail to promptly provide copies of contract documents to the consumer or the 1
257259 consumer's attorney upon request. 2
258260 (8) Provide legal advice to the consumer regarding the consumer legal funding 3
259261 transaction or the underlying legal claim. 4
260262 (9) Report a consumer to a credit reporting agency if insufficient funds remain 5
261263 from the net proceeds to repay the company unless the consumer has 6
262264 committed fraud against the consumer legal funding company. 7
263265 (10) Knowingly provide funding to a consumer who has previously assigned or 8
264266 sold a portion of the consumer's right to proceeds from the consumer's legal 9
265267 claim without first purchasing a prior unsatisfied consumer legal funding 10
266268 company's entire funded amount and contracted charges, unless a lesser 11
267269 amount is otherwise expressly agreed to in writing by the consumer legal 12
268270 funding companies. Multiple consumer legal funding companies, however, 13
269271 may agree to contemporaneously provide funding to a consumer so long as 14
270272 the consumer and the consumer's attorney consent to the agreement in writing. 15
271273 (11) Collect from a consumer any fees or charges not authorized under this Article. 16
272274 (12) Sell a contract in whole or in part to a third party. However, if the consumer 17
273275 legal funding company retains responsibility for collecting payment, 18
274276 administering, and otherwise enforcing the consumer legal funding contract, 19
275277 this prohibition does not apply to any of the following: 20
276278 a. An assignment to a wholly owned subsidiary of the consumer legal 21
277279 funding company. 22
278280 b. An assignment to an affiliate of the consumer legal funding company 23
279281 that is under common control. 24
280282 c. The granting of a security interest under Article 9 of Chapter 25 of the 25
281283 General Statutes or as otherwise permitted by law. 26
282284 "§ 58-94-45. Attorney prohibitions. 27
283285 An attorney retained by a consumer for a legal claim shall not have a financial interest in the 28
284286 consumer legal funding company offering consumer legal funding to the consumer. Additionally, 29
285287 any attorney who has referred the consumer to the consumer's retained attorney shall not have a 30
286288 financial interest in the consumer legal funding company offering consumer legal funding to the 31
287289 consumer. A consumer legal funding contract that violates this section is null and void, and no 32
288290 person has a right to collect, attempt to collect, receive, or retain any funded amount or charges 33
289291 related to the consumer legal funding. 34
290292 "§ 58-94-50. Effect of communication on privileges. 35
291293 Communications between a consumer's attorney and a consumer legal funding company 36
292294 necessary to ascertain the status of a legal claim or a legal claim's expected value shall not be 37
293295 discoverable by a party with whom the claim is filed or against whom the claim is asserted. This 38
294296 section does not limit, waive, or abrogate the scope or nature of any statutory or common-law 39
295297 privilege, including the work-product doctrine and the attorney-client privilege. 40
296298 "§ 58-94-55. Disclosure of consumer legal funding transactions. 41
297299 (a) Within 30 calendar days of receipt of a written request, a consumer shall disclose to 42
298300 any party to a legal claim whether the consumer has entered into a consumer legal funding 43
299301 transaction. 44
300302 (b) If a consumer enters into a consumer legal funding transaction after responding to a 45
301303 request pursuant to subsection (a) of this section, the consumer shall disclose this fact to the 46
302304 requesting person within 30 calendar days after the consumer entered into the transaction. 47
303305 "§ 58-94-60. Discovery and admission of consumer legal funding contracts. 48
304306 (a) Discovery. – Consumer legal funding contracts are presumed to be discoverable in a 49
305307 civil action, notwithstanding any agreement or provision with respect to confidentiality. A 50
306308 consumer may seek to rebut this presumption. 51 General Assembly Of North Carolina Session 2025
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308310 (b) Admission. – Consumer legal funding transactions disclosed pursuant to 1
309311 G.S. 58-94-55 and consumer legal funding contracts discovered pursuant to subsection (a) of this 2
310312 section are presumed to be inadmissible as evidence. A party may seek to rebut this presumption. 3
311313 "§ 58-94-65. Examinations; charges. 4
312314 For the purpose of protecting consumer interests and determining a consumer legal funding 5
313315 company's financial stability and compliance with the requirements of this Article, the 6
314316 Commissioner may conduct an examination of a consumer legal funding company. The company 7
315317 shall reimburse the Department of Insurance all reasonable costs and expenses of the 8
316318 examination. In unusual circumstances and in the interests of justice, the Commissioner may 9
317319 waive reimbursement for the costs and expenses of an examination under this section. 10
318320 "§ 58-94-70. Rules. 11
319321 The Commissioner may adopt rules necessary for the proper enforcement of this Article. 12
320322 Before proposing a rule, the Commissioner shall notify all companies registered or pending 13
321323 registration under this Article. 14
322324 "§ 58-94-75. Penalties; enforcement. 15
323325 (a) After notice and an opportunity for hearing, the Commissioner may do any of the 16
324326 following if the Commissioner determines that a consumer legal funding company willfully 17
325327 violated any provision of this Article: 18
326328 (1) Revoke, suspend, or refuse to renew a consumer legal funding company's 19
327329 registration. 20
328330 (2) Order a consumer legal funding company to cease and desist from entering 21
329331 into additional consumer legal funding transactions. 22
330332 (3) Assess a civil penalty of not more than ten thousand dollars ($10,000) for each 23
331333 violation. The clear proceeds of any penalty assessed pursuant to this section 24
332334 shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with 25
333335 G.S. 115C-457.2. 26
334336 (4) Order the consumer legal financing company to make restitution to an injured 27
335337 consumer. 28
336338 (b) The powers vested in the Commissioner by this Article are in addition to and do not 29
337339 limit the ability of the Commissioner or any other officer, employee, or agent of the State to take 30
338340 enforcement action." 31
339341 SECTION 2. If any provision of this act or its application to any person or 32
340342 circumstance is held invalid, the invalidity does not affect other provisions or applications of this 33
341343 act that can be given effect without the invalid provision or application and, to this end, the 34
342344 provisions of this act are severable. 35
343345 SECTION 3. This act becomes effective October 1, 2025. 36