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2023 - 2024 LEGISLATURE
2023 ASSEMBLY BILL 464
September 28, 2023 - Introduced by Representatives TUSLER, O'CONNOR, BORN,
ALLEN, STEFFEN, KITCHENS and CALLAHAN, cosponsored by Senators
WIMBERGER and BALLWEG. Referred to Committee on Consumer Protection.
***AUTHORS SUBJECT TO CHANGE***
AN ACT to amend 138.04; and to create 100.56 of the statutes; relating to:
nonrecourse civil litigation advances and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill creates provisions governing nonrecourse civil litigation advance
transactions. Under the bill, a “consumer" is an individual who is or may become a
plaintiff or claimant in a civil action or other proceeding (dispute), and a “company”
is a person that enters into a nonrecourse civil litigation advance transaction with
a consumer. A “nonrecourse civil litigation advance" (advance) is a transaction in
which a company makes a cash payment to or on behalf of a consumer who has a
pending dispute in exchange for the right to receive an amount out of the proceeds
of any realized settlement, judgment, or award the consumer may receive in the
dispute. In a nonrecourse civil litigation advance transaction, all of the following
apply: 1) there must be a written contract between the company and the consumer
governing the transaction; 2) the company may not contract for, or otherwise require,
repayment in an amount that would result in a finance charge greater than the prime
interest rate plus 10 percent; 3) the consumer may prepay the advance at any time
and, upon a prepayment, is entitled to a pro rata reduction in the finance charge
imposed; 4) the contract may not provide for repayment of the advance later than 36
months after the contract is entered into; 5) the company may not pay commissions
or referral fees to attorneys or health care providers; and 6) the contract must contain
specified information, including the annual percentage rate of the finance charge
imposed and the consumer's right to receive a reduction in the finance charge
imposed if prepayment is made, as well as provisions that disclose all one-time fees
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charged to the consumer, disclose the amount to be received by the consumer and the
amount the consumer assigns to the company, state that the consumer has a right
to cancel the contract within five days, state that the company has no right to make
decisions or otherwise participate in the dispute, and state that, except for the
consumer's prepayments, the company may be paid only from the consumer's
proceeds of the dispute and is not entitled to be repaid if there are no such proceeds.
A company that violates any of these requirements or restrictions is subject to a civil
forfeiture of not less than $25 nor more than $5,000, unless the company establishes
that the violation was the result of an unintentional good faith error and the
company had in place policies or procedures designed to achieve compliance. The
Department of Trade, Agriculture and Consumer Protection has enforcement
authority over violations.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SECTION 1. 100.56 of the statutes is created to read:
100.56 Nonrecourse civil litigation advances. (1) In this section:
(a) “Company” means a person that enters into a nonrecourse civil litigation
advance transaction with a consumer.
(b) “Consumer" means an individual who is or may become a plaintiff or
claimant or demandant in any dispute.
(c) “Dispute" means any of the following:
1. Any civil claim or action.
2. Any alternative dispute resolution proceeding.
3. Any administrative proceeding before any agency or instrumentality of the
state.
(d) “Finance charge" means the sum of all charges, including interest, fees, and
assigned proceeds from a dispute, payable directly or indirectly by the consumer to
the company as an incident to or as a condition of the company's cash payment
described in par. (e).
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(e) “Nonrecourse civil litigation advance" means a transaction in which a
company makes a cash payment to or on behalf of a consumer who has a pending
dispute in exchange for the right to receive an amount out of the proceeds of any
realized settlement, judgment, award, or verdict the consumer may receive in the
dispute.
(2) (a) A company may not enter into a nonrecourse civil litigation advance
transaction unless there is a written contract between the company and the
consumer governing the transaction.
(b) A company may not contract for, or otherwise require, repayment of a
nonrecourse civil litigation advance in an amount that would result in the finance
charge imposed by the company exceeding the weekly prime interest rate for the
week prior to the date on which the contract was entered into, as reported by the
federal reserve board in federal reserve statistical release H.15, plus 10 percent.
(c) A nonrecourse civil litigation advance may be prepaid by the consumer at
any time in whole or in part. Upon a prepayment of the nonrecourse civil litigation
advance, the consumer is entitled to a pro rata reduction in any finance charge
imposed as part of the nonrecourse civil litigation advance transaction.
(3) A contract under sub. (2) (a) may not provide for repayment of the
nonrecourse civil litigation advance later than 36 months after the contract is
entered into.
(4) (a) A contract under sub. (2) (a) shall include all of the following:
1. The annual percentage rate of the finance charge imposed under the
contract, determined consistently with the provisions of section 107 of the federal
Truth in Lending Act, 15 USC 1606, and federal Regulation Z adopted under that act,
12 CFR 226.
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2. A statement that the nonrecourse civil litigation advance may be prepaid in
full or in part and that, if the nonrecourse civil litigation advance is prepaid, the
consumer may receive a pro rata reduction in any finance charge imposed as part of
the nonrecourse civil litigation advance transaction.
3. On the front page of the contract, a disclosure of the total amount of money
to be provided to the consumer and the total amount of money to be assigned by the
consumer to the company, described in 6-month intervals for a total period not
exceeding 36 months, along with an itemization of all one-time fees to be charged to
the consumer.
4. A provision that the consumer may cancel the contract, without penalty or
further obligation, within 5 business days after entering into the contract if, during
this period, the consumer returns to the company the cash payment described in sub.
(1) (e) with a notice of cancellation.
5. A provision that the company has no right to, and will not, make any
decisions with respect to the conduct of the dispute or any settlement or resolution
of the dispute and that those decisions remain solely with the consumer and the
consumer's attorney.
6. A provision that the company has no right to participate in the prosecution
of the dispute or to obtain documents or evidence connected with the dispute.
7. A provision that the company accepts only an assignment of an amount of
the potential proceeds from the dispute and does not accept an assignment of the
consumer's legal claim. This provision shall also specify that the company has no
right to pursue the consumer's legal claim on behalf of or in lieu of the consumer.
8. A provision that, except for any amount prepaid by the consumer, the
company may be paid only from the consumer's proceeds of the dispute. This
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provision shall also specify that the consumer does not owe the company anything
if there is no recovery by the consumer in the dispute unless the consumer violates
the terms of the contract. This provision shall also specify that, if there are
insufficient proceeds to pay the company in full, the company may be paid only to the
extent that there are available proceeds from the dispute, unless the consumer
violates the terms of the contract.
9. A provision that, if the consumer is represented by an attorney, any proceeds
from the dispute paid to the company may be paid only from the trust account of the
consumer's attorney.
(b) Each provision or disclosure required under this subsection shall be in
boldface type and of a type size no smaller than 12-point, except that the provision
under par. (a) 8. shall be of a type size no smaller than 15-point.
(5) (a) In this subsection, “health care provider" has the meaning given in s.
146.81 (1), but also includes any individual licensed or certified in another state for
the same or equivalent profession.
(b) A company may not pay or offer to pay commissions or referral fees to any
attorney or employee of a law firm, or to any health care provider or employee of a
health care provider, for referring a consumer to the company.
(6) (a) Except as provided in par. (b), any company that violates this section is
subject to a forfeiture of not less than $25 nor more than $5,000 for each violation.
(b) It is a defense to a violation of this section if the company establishes that
the violation was the result of an unintentional good faith error and, at the time of
the violation, the company had in place policies or procedures designed to achieve
compliance with this section.
SECTION 2. 138.04 of the statutes is amended to read:
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SECTION 2 ASSEMBLY BILL 464
138.04 Legal rate. The rate of interest upon the loan or forbearance of any
money, goods, or things in action shall be $5 upon the $100 for one year and according
to that rate for a greater or less sum or for a longer or a shorter time; but parties may
contract for the payment and receipt of a rate of interest not exceeding the rate
allowed in ss. 100.56 (2) (b), 138.041 to 138.056, 138.09 to 138.14, 218.0101 to
218.0163, or 422.201, in which case such rate shall be clearly expressed in writing.
SECTION 3.0Initial applicability.
(1) NONRECOURSE CIVIL LITIGATION ADVANCE TRANSACTIONS. This act first applies
to nonrecourse civil litigation advance transactions entered into on the effective date
of this subsection.
(END)
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