Bill Text: IL SB3322 | 2009-2010 | 96th General Assembly | Engrossed

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Bill Title: Creates the Non-Recourse Civil Litigation Funding Act. Provides that all contracts for non-recourse civil litigation funding must meet specified criteria. Provides that the contract shall provide that the consumer may cancel the contract within 5 business days following the consumer's receipt of funds, without penalty or further obligation. Specifies the notice requirements for contracts. Contains provisions concerning the dispute of contracts. Provides that each non-recourse civil litigation funding company shall adhere to specified best practices. Contains provisions concerning (1) the sale and assignment of proceeds of legal claims and (2) the requirements for non-recourse civil litigation funding companies by the Department of Financial and Professional Regulation. Provides that the Department shall maintain a list of all non-recourse civil litigation funding companies. Contains provisions concerning the power of the Department to issue cease and desist orders. Specifies penalties for violation of the Act. Contains provisions concerning judicial review and application of the Act. Amends the Consumer Installment Loan Act to exclude non-recourse civil litigation funding. Contains a severability clause. Effective immediately.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed - Dead) 2010-11-17 - Held on Calendar Order of Second Reading - Short Debate [SB3322 Detail]

Download: Illinois-2009-SB3322-Engrossed.html

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AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Non-Recourse Civil Litigation Funding Act.
Section 5. Definitions. In this Act:
"Civil litigation funding company" means a person or entity
that enters into a non-recourse civil litigation funding
transaction with a consumer.
"Consumer" means a person residing or domiciled in Illinois
or who elects to enter into a transaction under this Act,
whether it be in-person, over the internet, by facsimile, or
any other electronic means, and who has a pending legal claim
and is represented by an attorney at the time he or she
receives the non-recourse civil litigation funding.
"Department" means the Department of Financial and
Professional Regulation.
"Legal claim" means a civil or statutory claim or action.
"Non-recourse civil litigation funding" means a
transaction in which a civil litigation funding company
purchases and a consumer assigns the contingent right to
receive an amount of the potential proceeds of a settlement,
judgment, award, or verdict obtained in the consumer's legal

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claim to the civil litigation funding company.
Section 10. Contract provisions. All contracts for
non-recourse civil litigation funding shall comply with the
following requirements:
(1) The contract shall contain on the front page,
appropriately headed and in at least 12-point bold face
type, the following disclosures:
(A) the total dollar amount of funds to be paid to
the consumer;
(B) an itemization of one-time fees; and
(C) the total dollar amount being assigned by the
consumer to the civil litigation funding company, set
forth in 6-month intervals for 36 months.
(2) The contract shall provide that the consumer may
cancel the contract within 5 business days following the
consumer's receipt of funds, without penalty or further
obligation. The contract shall contain the following
notice written in at least 12-point, bold face type:
"Consumer's right to cancellation: You may cancel this
contract without penalty or further obligation within 5
business days after the date you receive funds from (insert
name of civil litigation funding company).".
The contract also shall specify that in order for the
cancellation to be effective, the consumer must either return
to the civil litigation funding company the full amount of

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disbursed funds by delivering the civil litigation funding
company's uncashed check to the civil litigation company's
offices in person within 5 business days after the disbursement
of the funds or mail a notice of cancellation and include in
that mailing a return of the full amount of disbursed funds in
the form of the civil litigation funding company's uncashed
check, or a registered or certified check or money order, by
insured, registered, or certified United States mail,
postmarked within 5 business days after the receipt of those
funds from the civil litigation funding company, at the address
specified in the contract for cancellation.
(3) The contract shall contain all of the following
statements in at least 12-point bold face type:
(A) (Insert name of civil litigation funding
company) agrees that it shall have no right to and will
not make any decisions with respect to the conduct of
the underlying legal claim or any settlement or
resolution thereof and that the right to make those
decisions remains solely with you and your attorney in
the legal claim.
(B) (Insert name of civil litigation funding
company) agrees that it shall only accept an assignment
of an amount of the potential proceeds, rather than an
assignment of the consumer's legal claim. (Insert name
of civil litigation funding company) agrees that it
shall have no right to pursue the legal claim on behalf

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of or in lieu of the consumer.
(4) All contracts to the consumer must contain the
following statement, in plain language in a box with
15-point, bold face type, in all capitalized letters,
stating the following:
"THE CIVIL LITIGATION FUNDING COMPANY SHALL ONLY BE
PAID FROM THE PROCEEDS OF THE LEGAL CLAIM. YOU WILL NOT OWE
THE CIVIL LITIGATION FUNDING COMPANY ANYTHING IF THERE IS
NO RECOVERY OF PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU
VIOLATE THE TERMS OF THIS AGREEMENT. IF THERE ARE
INSUFFICIENT PROCEEDS TO PAY THE CIVIL LITIGATION FUNDING
COMPANY IN FULL, THE CIVIL LITIGATION FUNDING COMPANY SHALL
ONLY BE PAID TO THE EXTENT THAT THERE ARE AVAILABLE
PROCEEDS FROM THE LEGAL CLAIM, UNLESS YOU VIOLATE THE TERMS
OF THIS AGREEMENT.".
(5) The contract shall contain the following statement
in at least 12-point bold face type located immediately
above the space where the consumer signature is required:
"Do not sign this Agreement before you read it
completely or if it contains any blank spaces. You are
entitled to a completely filled-in copy of this contract.
Before you sign this Agreement you should obtain the advice
of an attorney. Depending on the circumstances, you may
want to consult a tax, public, or private benefit planning
or financial professional. You acknowledge that your
attorney in the legal claim has provided no tax, public, or

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private benefit planning regarding this transaction.".
The contract shall contain the following statement
located above the signature line: "The consumer
understands and agrees that the funds received from this
Non-Recourse Civil Litigation Funding shall not be used to
pay for litigation costs related to the underlying Legal
claim."
(6) The contract for nonrecourse civil litigation
funding shall contain a written acknowledgement by the
consumer that he or she has reviewed the contract in its
entirety, that he or she shall notify his or her current
attorney and any successor attorneys representing him or
her in the legal claim of the existence of the transaction
and shall instruct the nonrecourse civil litigation
funding company to provide the attorney with a copy of the
contract. Additionally, before obtaining any additional or
subsequent nonrecourse civil litigation funding, the
consumer will notify his or her attorney and receive prior
written permission for such transaction from the prior
civil litigation funding company.
Section 15. Priorities. Any attorney's lien, Medicare
lien, Medicaid lien, or health care provider lien against the
consumer's legal claim shall take priority over any lien of the
civil litigation funding company.

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Section 20. Standards and practices. Each civil litigation
funding company shall adhere to the following:
(1) The civil litigation funding company shall not pay
or offer to pay commissions or referral fees to any
attorney or employee of a law firm or to any medical
provider, chiropractor, or physical therapist or their
employees for referring a consumer to the civil litigation
funding company. The civil litigation funding company
agrees not to accept any commissions, referral fees, or
rebates from any attorney or employee of a law firm or any
medical provider, chiropractor, or physical therapist or
their employees, other than what is agreed to be paid to
the civil litigation funding company out of the proceeds of
the legal claim pursuant to the signed contract between the
consumer and the civil litigation funding company.
(2) The civil litigation funding company shall not
advertise false or intentionally misleading information
regarding its product or services.
(3) The civil litigation funding company shall not
knowingly provide funding to a consumer who has previously
sold and assigned an amount of his potential proceeds from
his legal claim to another civil litigation funding company
without first purchasing that civil litigation funding
company's entire accrued balance unless otherwise agreed
in writing by the civil litigation funding companies and
the consumer.

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(4) The civil litigation funding company shall not
offer single premium credit life, disability, or
unemployment insurance that is to be financed through a
civil litigation funding transaction.
(5) For non-English speaking consumers, upon the
written request of the consumer, the principal terms of the
contract must be translated in writing into the consumer's
primary language, the consumer must sign the translated
document containing the principal terms and initial each
page, and the translator or lawyer must sign an affirmation
confirming that the principal terms have been presented to
the consumer in the consumer's primary language and
acknowledged by the consumer. Principal terms shall
include all items that must be disclosed by this Section.
Section 25. Sale and assignment of proceeds of legal
claims. The contingent right to receive an amount of the
potential proceeds of a legal claim is assignable and that
assignment is valid for the purposes of obtaining funding from
a civil litigation funding company.
Section 30. Civil litigation funding companies;
requirements.
(a) It is unlawful to enter into a non-recourse civil
litigation funding transaction unless the civil litigation
funding company (i) is licensed by the Department in accordance

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with the licensure requirements of the Consumer Installment
Loan Act, (ii) has received special authorization in the form
of an Other Business Authorization for non-recourse civil
litigation funding certificate from the Department, and (iii)
complies with all Sections of this Act.
(b) Nothing in this Act shall cause any non-recourse civil
litigation funding transaction conforming to this Act to be
deemed to be a "loan" or subject to the restrictions or
provisions governing loans set forth in the Interest Act, the
Consumer Installment Loan Act, or other provisions of Illinois
law.
Section 35. List of civil litigation funding companies. The
Department shall maintain a list of all persons operating in
accordance with Section 30 of this Act that have notified the
Department that they intend to be civil litigation funding
companies. This list shall be posted on the Department's
website and shall be made available by the Department to any
person who requests the list.
Section 40. Reporting.
(a) The Department shall require a civil litigation funding
company operating in accordance with Section 30 of this Act to
annually submit data regarding the number of non-recourse civil
litigation funding transactions and the amount of funding
provided to Illinois consumers during the year. This data must

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be submitted to the Department no later than February 15 of
each year the civil litigation funding company does business in
this State for the previous year of activity.
(b) Every civil litigation funding company shall retain and
use in its business, or at another location approved by the
Director, such records as may be required by the Director to
enable the Director to determine whether the civil litigation
funding company is complying with the provisions of this Act
and the rules adopted pursuant to this Act. Every civil
litigation funding company shall preserve the records of any
non-recourse civil litigation funding for at least 2 years
after making the final entry for such transaction. Accounting
systems maintained in whole or in part by mechanical or
electronic data processing methods that provide information
equivalent to that otherwise required and follow generally
accepted accounting principles are acceptable for that
purpose, if approved by the Director in writing.
Section 45. Cease and desist.
(a) The Department may issue a cease and desist order to
any person doing business without the required license or to
any licensee, who, in the opinion of the Department, is
violating or is about to violate the best practices or
licensure requirements of this Act.
(b) The Department shall serve notice of its action,
designated as a cease and desist order made pursuant to this

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Section, including a statement of the reasons for the action,
either personally or by certified mail, return receipt
requested. Service by certified mail shall be deemed completed
when the notice is deposited in the U.S. mail.
(c) Within 15 days of service of the cease and desist
order, the licensee or other person may request, in writing, a
hearing.
(d) The Department shall schedule a hearing within 30 days
after the request for a hearing unless otherwise agreed to by
the parties.
(e) If it is determined that the Department had the
authority to issue the cease and desist order, it may issue
such orders as may be reasonably necessary to correct,
eliminate, or remedy such conduct, limited to the penalties
listed in Section 30 of this Act.
(f) The powers vested in the Department by this Section are
additional to any and all other powers and remedies vested in
the Department by law, and nothing in this Section shall be
construed as requiring that the Department shall employ the
power conferred in this Section instead of or as a condition
precedent to the exercise of any other power or remedy vested
in the Department.
Section 50. Penalties.
(a) Any person who engages in business as a civil
litigation funding company without the license required by this

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Act shall be guilty of a Class 4 felony.
(b) A license issued under this Act may be revoked if the
licensee, or any directors, managers of a limited liability
company, partners, or officer thereof is convicted of a felony.
(c) Any person engaging in non-recourse litigation funding
without the required license and found in violation of this
Act, may be subject to fines assessed by the Department,
limited to a maximum of $50,000, after an administrative
hearing on the case is heard. No fines can be imposed by the
Department until the results of the administrative hearing are
concluded.
(d) No provision of this Section imposing any liability
shall apply to any act done or omitted in conformity with any
rule or regulation or written interpretation thereof by the
Department, notwithstanding that after such act or omission has
occurred, the rule, regulation or interpretation is amended,
rescinded, or determined by judicial or other authority to be
invalid for any reason.
Section 55. Judicial review. All final administrative
decisions of the Department hereunder shall be subject to
judicial review pursuant to the provisions of the
Administrative Review Law, and all amendments and
modifications thereof, and any rules adopted pursuant thereto.
Section 60. Application of the Act. During the first 90

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days after the effective date of this Act, any person who has
applied for a license under this Act, or filed written notice
of intention to apply for such license with the Department, and
who has not been denied, shall be subject to all provisions of
this Act and may engage in non-recourse litigation funding as
if he were a licensee under this Act. This Act shall not apply
to any loan transaction entered into by a civil litigation
funding company that conforms to the Consumer Installment Loan
Act entered into prior or subsequent to such effective date of
this Act.
Section 900. The Consumer Installment Loan Act is amended
by changing Section 21 as follows:
(205 ILCS 670/21) (from Ch. 17, par. 5427)
Sec. 21. Application of Act. This Act does not apply to any
person, partnership, association, limited liability company,
or corporation doing business under and as permitted by any law
of this State or of the United States relating to banks,
savings and loan associations, savings banks, credit unions, or
licensees under the Residential Mortgage License Act for
residential mortgage loans made pursuant to that Act. This Act
does not apply to business loans. This Act does not apply to
payday loans. This Act does not apply to non-recourse civil
litigation funding, except for its licensure requirements.
(Source: P.A. 94-13, eff. 12-6-05.)

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Section 970. Severability. The provisions of this Act are
severable under Section 1.31 of the Statute on Statutes.
Section 999. Effective date. This Act takes effect upon
becoming law.