"Consumer Legal Funding Act."
The bill introduces strict requirements for consumer legal funding companies, including mandates for fully completed contracts that must be given to consumers at the time of signing. Companies will also need to provide explicit information regarding the costs associated with funding, and they must obtain acknowledgment from the consumer's attorney regarding the disclosure of all relevant costs. This measure is expected to enhance consumer protections and provide greater clarity for those considering legal funding, particularly low-income individuals who may resort to such options amidst financial distress linked to ongoing litigation.
Senate Bill S3512, also known as the Consumer Legal Funding Act, seeks to regulate the practices of consumer legal funding companies in New Jersey. Under this bill, a consumer legal funding company provides funds to individuals who have a pending legal claim, in exchange for a portion of the potential proceeds from any settlement or judgment. This form of funding is non-recourse, meaning if the consumer does not win their case, they are not required to repay the funding. The bill aims to protect consumers from predatory practices, ensuring transparency in funding agreements and required disclosures about fees and rights.
One notable point of contention surrounding S3512 involves the imposition of significant regulations on consumer legal funding companies, which some may argue could hinder access to much-needed financial resources for individuals with valid legal claims. Some stakeholders contend that while consumer protections are essential, overregulation could lead to fewer funding options and higher costs for consumers. Further, the bill restricts how much a company can charge for legal funding, which could impact the viability of some funding entities to operate in New Jersey, raising concerns about the balance between consumer protection and market sustainability.