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Committee advances consumer-legal-funding bill after removing mandatory disclosure
Summary
The committee heard industry testimony and advanced a bill regulating consumer legal funding; the sponsor and industry representatives emphasized consumer protections, an attorney-signoff requirement, average funding amounts of about $3,000–$5,000, and a prohibition on quid pro quo with attorneys. An amendment to strike a mandatory disclosure provision (section 7) carried before the bill was advanced.
Eric Schueller, president of the Alliance Responsible Consumer Legal Funding, described the product for the committee: companies provide household funds ("about 3 to $5,000" on average) to consumers during litigation and collect a share of settlement proceeds only if the consumer recovers. He told the committee the bill draws a line between consumer legal funding and litigation financing, prohibits quid pro quo arrangements with attorneys, bars foreign money from certain sources, and requires a consumer's attorney to sign off on the transaction.
Committee members questioned the bill's disclosure and discovery language. Senator Simmons and others asked why section 7 requires the disclosures in discovery; Schueller said the industry worked with insurers and that the bill's disclosure approach is meant to be limited, with additional discovery only available if justified. Senator Thompson moved to strike section 7 (eliminate the disclosure requirement) on the grounds that disclosure could be used in discovery to devalue plaintiffs' claims; the amendment carried on a committee vote.
After the amendment carried, the committee advanced the bill as a committee substitute (title submission; due pass). Sponsor and industry representatives said the measure is intended as consumer protection and to give legitimate companies regulatory clarity.
