House Industry, Business and Labor committee rejects litigation-financing licensing bill after debate on disclosures and criminal penalties

The House Industry, Business and Labor Committee voted to recommend a “do not pass” on House Bill 1372, a proposal to license and regulate litigation financers, after lawmakers and witnesses clashed over criminal penalties and contract-disclosure requirements.

The committee rejected the bill after members said they did not have a workable compromise on key provisions, including whether the financing agreements should be treated as loans and whether full litigation-financing contracts should be discoverable in civil cases.

The bill’s supporters and the Department of Financial Institutions told the committee the department’s existing regulatory tools — licensure, examinations and civil penalties — would be used to police financers. “We would establish a license in the process to grant, revoke, deny a license, and the appeals process. [The department] would also have the ability to go in and examine the financing company,” said Ms. Krebs of the department. She told the…