Illinois General Assembly - Full Text of SB3322
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Full Text of SB3322  96th General Assembly




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



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



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



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1         of or in lieu of the consumer.
2         (4) All contracts to the consumer must contain the
3     following statement, in plain language in a box with
4     15-point, bold face type, in all capitalized letters,
5     stating the following:
16         (5) The contract shall contain the following statement
17     in at least 12-point bold face type located immediately
18     above the space where the consumer signature is required:
19         "Do not sign this Agreement before you read it
20     completely or if it contains any blank spaces. You are
21     entitled to a completely filled-in copy of this contract.
22     Before you sign this Agreement you should obtain the advice
23     of an attorney. Depending on the circumstances, you may
24     want to consult a tax, public, or private benefit planning
25     or financial professional. You acknowledge that your
26     attorney in the legal claim has provided no tax, public, or



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



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



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



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



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



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



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



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



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