By: Hernandez H.B. No. 3218
A BILL TO BE ENTITLED
AN ACT
relating to litigation financing transactions.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle B, Title 4, Finance Code, is amended by
adding Chapter 354 to read as follows:
CHAPTER 354. LITIGATION FINANCING AGREEMENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 354.001. DEFINITIONS. In this chapter:
(1) "Charge" or "charges" means the amount paid to a
litigation financing company by or on behalf of the consumer, in
addition to the funded amount provided by or on behalf of the
company to a consumer.
(2) "Consumer" means an individual who has a pending
legal claim and who:
(A) resides in this state; or
(B) has the legal claim in this state.
(3) "Funded amount" means the amount provided to or on
behalf of the consumer under a litigation financing agreement. The
term does not include a charge.
(4) "Funding date" means the date on which the
litigation financing company:
(A) transfers the funded amount to the consumer
by personal delivery or by wire, ACH debit, or other electronic
means; or
(B) mails the funded amount to the consumer by
insured, certified, or registered United States mail.
(5) "Immediate family member" means:
(A) a parent, sibling, spouse, grandparent, or
grandchild of an individual; or
(B) a child related by blood, adoption, or
marriage to an individual.
(6) "Legal claim" includes:
(A) a civil action;
(B) an alternative dispute resolution
proceeding; or
(C) an administrative proceeding before an
agency of this state.
(7) "Litigation financing agreement" means an
agreement under which:
(A) money is provided to or on behalf of a
consumer by a litigation financing company for a purpose other than
prosecuting the consumer's legal claim; and
(B) the repayment of the money is in accordance
with a litigation financing transaction the terms of which are
included as part of the litigation financing agreement.
(8) "Litigation financing company" or "company" means
a person that enters into a litigation financing agreement with a
consumer.
(9) "Litigation financing transaction" means a
non-recourse transaction in which a litigation financing company
purchases, and a consumer assigns to the company, a contingent
right to receive an amount of the potential proceeds of a
settlement, judgment, award, or verdict obtained in the consumer's
legal claim.
(10) "Resolution date" means the date on which the sum
of the amount funded to the consumer and the agreed-to charges is
delivered to the litigation financing company.
Sec. 354.002. NONAPPLICABILITY OF CHAPTER. Except as
specifically provided by this chapter, this chapter does not apply
to the following persons who enter into a litigation financing
agreement with a consumer:
(1) an immediate family member of the consumer;
(2) an accountant who provides accounting services to
the consumer; or
(3) an attorney who, at the time money is provided to
or on behalf of a consumer under a litigation financing agreement,
has an attorney-client relationship with the consumer concerning
the consumer's legal claim.
SUBCHAPTER B. AGREEMENT REQUIREMENTS
Sec. 354.051. FORM OF AGREEMENT. (a) A litigation
financing agreement must:
(1) be in writing;
(2) contain the initials of the consumer on each page;
and
(3) be otherwise complete when presented to the
consumer for signature.
Sec. 354.052. REQUIRED TERMS; DISCLOSURES. (a) On the
front page of the agreement under appropriate headings, the
agreement must disclose:
(1) the funded amount to be paid to the consumer by the
litigation financing company;
(2) an itemization of one-time charges;
(3) the total amount to be assigned by the consumer to
the company, including the funded amount and all charges; and
(4) a payment schedule that:
(A) includes the funded amount and charges; and
(B) lists all dates and the amount due at the end
of each 180-day period from the funding date until the due date of
the maximum amount due to the company by the consumer to satisfy the
amount owed under the agreement.
SECTION 2. The changes in law made by this Act apply only to
a litigation financing agreement entered into on or after the
effective date of this Act. A litigation financing agreement
entered into before the effective date of this Act is governed by
the law in effect on the date the agreement was entered into, and
the former law is continued in effect for that purpose.
SECTION 3. This Act takes effect September 1, 2013.