Purpose of the Bill

The purpose of this bill is to establish the "Consumers in Crisis Protection Act" to regulate consumer and commercial litigation funding in Minnesota. The bill aims to ensure fair practices in the litigation funding industry, protect consumers from exploitative agreements, and increase transparency through mandatory reporting and disclosures.

Main Provisions

• Definitions: The bill defines key terms such as "consumer," "consumer litigation funding," and "commercial litigation financier" to clarify who and what is covered under the law.
• Contract Requirements: It sets specific requirements for consumer litigation funding contracts, including clear wording, a right of rescission, and no prepayment penalties. Contracts must also include attorney acknowledgment of understanding and compliance with the law.
• Prohibitions: The bill prohibits certain practices, such as paying referral fees to attorneys, accepting such fees, and advertising misleading information. It also bans consumer litigation funding companies from influencing legal proceedings.
• Finance and Charges: It limits the manner in which charges are calculated within consumer litigation funding agreements and prohibits determining repayment based on the legal claim's recovery percentage.
• Disclosure and Discovery: Litigation financing agreements must be disclosed to all relevant parties and are subject to discovery, but are generally inadmissible as evidence unless a challenge is successful.
• Violations and Penalties: Willful violations by funding companies can lead to the waiver of the right to recover the funding amount and the imposition of civil penalties.
• Registration and Reporting: Companies must register with the state and submit annual reports detailing their funding activities. Reports will be public, excluding the names of companies and consumers, to maintain privacy.
• Foreign Entity Restrictions: The bill restricts dealings with foreign entities deemed a concern due to security reasons.
• Rulemaking: The Department of Commerce is authorized to create rules for the enforcement and implementation of this chapter.

Significant Changes to Existing Law

The bill introduces new legal frameworks and regulations specific to consumer and commercial litigation funding that were previously unregulated. A new chapter in the Minnesota Statutes (chapters 45B and 48B) is proposed, encompassing comprehensive guidelines and policies to oversee the industry.

Relevant Terms

• Consumer Litigation Funding
• Commercial Litigation Financier
• Contract Requirements
• Right of Rescission
• Nonrecourse Transaction
• Funding Agreement
• Attorney Acknowledgment
• Disclosure and Discovery
• Foreign Entity of Concern
• Rulemaking Authority