Relating to transactions involving the assignment of rights in an individual's legal claim; authorizing the imposition of a fee.
This legislation imposes regulatory requirements on civil justice funding companies, mandating them to register with the Texas Department of Licensing and Regulation before engaging in funding transactions. It specifies that these transactions are not classified as loans, thus exempting them from state loan regulations, which simplifies compliance for funding companies. Additionally, the bill includes provisions for consumer disclosures, ensuring that individuals are aware of all charges, terms, and their rights, including a right of rescission that permits consumers to cancel the contract within five days without penalty.
House Bill 3454, known as the Civil Justice Funding Act, introduces new regulations for transactions involving the assignment of rights in an individual's legal claim. The bill establishes a framework that allows civil justice funding companies to engage in non-recourse transactions where they provide funds to consumers based on anticipated proceeds from their legal claims. It creates a clear definition of involved terms, such as 'civil justice funding transaction' and outlines the roles and responsibilities of the parties involved, particularly emphasizing consumer rights and protections.
One notable area of contention surrounding HB 3454 may arise from the balance between consumer protection and the operational flexibility of civil justice funding companies. While proponents of the bill argue that it establishes necessary oversight to protect consumers from exploitative practices, opponents might contend that excessive regulation could hinder company operations and reduce access to needed financial resources for individuals in legal disputes. Furthermore, concerns could be raised regarding the implications of regulatory compliance costs on smaller funding companies and their ability to compete in the market.