CONSUM. IN CRISIS PROTECT. ACT./ESOPs MIN. BUS. (NEW)

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View NCGA Bill Details2023-2024 Session
Senate Bill 176 (Public) Filed Tuesday, February 28, 2023
AN ACT TO ENACT THE CONSUMERS IN CRISIS PROTECTION ACT AND TO EXPAND THE DEFINITIONS OF MINORITY BUSINESS AND HISTORICALLY UNDERUTILIZED BUSINESS FOR PURPOSES OF PUBLIC CONTRACTS TO INCLUDE ESOP COMPANIES WITH MAJORITY OWNERSHIP BY MINORITY PERSONS OR SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS.
Intro. by Johnson, Britt, Craven.

Status: Ref To Com On Rules, Calendar, and Operations of the House (House action) (Aug 17 2023)

SOG comments (3):

Long title change

Senate committee substitute to the 1st edition changed the long title. Original title was AN ACT TO ENACT THE CONSUMERS IN CRISIS PROTECTION ACT.

Long title change

Senate committee substitute to the 2nd edition changed the long title. Previous title was AN ACT TO ENACT THE CONSUMERS IN CRISIS PROTECTION ACT AND TO EXPAND THE DEFINITIONS OF MINORITY BUSINESS AND HISTORICALLY UNDERUTILIZED BUSINESS FOR PURPOSES OF PUBLIC CONTRACTS TO INCLUDE ESOP COMPANIES WITH MAJORITY OWNERSHIP BY MINORITY PERSONS OR SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS.

Long title change

Committee substitute to the 3rd edition changed the long title. Previous long title was AN ACT TO ENACT THE CONSUMERS IN CRISIS PROTECTION ACT, TO EXPAND THE DEFINITIONS OF MINORITY BUSINESS AND HISTORICALLY UNDERUTILIZED BUSINESS FOR PURPOSES OF PUBLIC CONTRACTS TO INCLUDE ESOP COMPANIES WITH MAJORITY OWNERSHIP BY MINORITY PERSONS OR SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS, AND TO ALLOW SALESMEN OF SECURITIES TO BE REGISTERED WITH MORE THAN ONE DEALER IF EACH DEALER IS UNDER COMMON OWNERSHIP OR CONTROL.

Bill History:

S 176

Bill Summaries:

  • Summary date: Jun 29 2023 - View Summary

    Senate amendments to the 4th edition make the following changes.

    Senate amendment #1 makes the following changes. 

    Part I. 

    Amends the required acknowledgment/disclosures in GS 58-94-30 (content of a consumer legal funding contract) to now have the consumer-signatory acknowledge that their attorney in the legal claim is not obligated to provide any tax, public, or private benefit planning, or financial advice regarding this transaction (was, acknowledgment that the attorney in the legal claim has not provided any such advice). Makes conforming changes.

    Senate amendment #2 makes the following changes. 

    Part II. 

    Amends GS 143-128.4 (definition of historically underutilized business) to require that an Employee Stock Ownership Company (ESOP) applying for a certification as a historically underutilized business provide an attestation that it meets the statute's requirements along with supporting documentation required by the Secretary of Administration. 

    Senate amendment #3 to the 4th edition makes the following changes. 

    Part I. 

    Amends new GS 58-94-5 (definitions section of the Consumers in Crisis Protection Act) to provide that the definition of legal claim is a civil claim or cause of action filed in a court of law in State or federal court.  Amends the definition of net proceeds to change the second listed prong of what is subtracted from the amount recovered to now be valid health care provider liens, subrogation liens, and ERISA contractual rights of recovery (was, attorney, health care provider, or subrogation liens). 

    Amends GS 58-94-30 to require that a copy of the contract be promptly delivered to the consumer's attorney (was, prompt delivery upon request). Makes conforming change to GS 58-94-40 (prohibited acts). Amends the required acknowledgements that the consumer-signatory must acknowledge in signing the contract by expanding the listing of the types of liens that take priority over any contractual claim of the consumer legal funding company.


  • Summary date: Jun 27 2023 - View Summary

    Senate committee substitute to the 3rd edition makes the following changes. 

    Deletes Part III of the act, which amended GS 78A-36 to prohibit a securities salesman from registering with more than one dealer unless each of the dealers which employs or associates the salesman is under common ownership or control (previously, no exception was given to the prohibition on registering with more than one dealer). Makes conforming organizational changes and changes to the act's long title.


  • Summary date: Jun 22 2023 - View Summary

    Senate committee substitute to the 2nd edition adds the following content.

    Amends GS 78A-36 to prohibit a securities salesman from registering with more than one dealer unless each of the dealers which employs or associates the salesman is under common ownership or control (previously, no exception was given to the prohibition on registering with more than one dealer). Makes conforming changes to the act's long title.


  • Bill S 176
    Summary date: Jun 21 2023 - View Summary

    Senate committee substitute to the 1st edition makes the following changes. Divides the act into two parts, with previous content placed into Part I.

    Part I.

    Amends definition of legal claim under new Article 94 to GS Chapter 58, the Consumers in Crisis Act so that it now means a civil claim or cause of action, including any claim that triggers obligations under GS 58-63-15(11) (unfair methods of competition and unfair or deceptive trade practices) or related regulations (was, a civil claim or cause of action). 

    Adds the following new content.

    Part II.

    Expands the definition of minority business under GS 143-128.2(g)(1) (definition of minority business as it pertains to minority business participation goals) so that it includes an employee stock ownership plan company in which at least 51% of the stock is owned by one or more minority persons or socially and economically disadvantaged individuals. Expands the definition in GS 143-128.4 of historically underutilized businesses so that it includes an employee stock ownership plan company in which at least 51% of the stock is owned by persons who are Black, Hispanic, Asian American, female, disabled, or who are socially and economically disadvantaged.

    Part III.

    Sets general effective date of when the act becomes law, unless otherwise specified.

    Makes organizational and conforming changes. Makes conforming changes to the act’s titles.


  • Summary date: Mar 1 2023 - View Summary

    Enacts new Article 94, Consumers in Crisis Protection Act (Act), in GS Chapter 58, providing as follows.

    Sets out and defines terms as they are used in the act. Defines a consumer legal funding company as a person that enters into a consumer legal funding transaction with a consumer, whether or not the person is registered under this Article. Defines consumer legal funding contract as a contract for a consumer legal funding transaction. Defines consumer legal funding transaction as a nonrecourse transaction in which a consumer sells an unvested, contingent future interest in the potential net proceeds of a settlement or judgment obtained from a legal claim in exchange for no more than $400,000 so long as: (1) the consumer is required to use the funds to address personal needs or household expenses; (2) the consumer is prohibited from using the funds to pay for attorneys' fees, legal filings, legal marketing, legal document preparation or drafting, appeals, expert testimony, or other litigation-related expenses; and (3) the consumer is not required to use the funds in a particular manner, including to make specific payments or secure specific services.

    Requires registering as a consumer legal funding company with the Commissioner of Insurance (Commissioner) before entering into a consumer legal funding transaction with a consumer. Requires submission of a registration fee and proof of financial stability. Voids a consumer legal funding contract between a consumer and a consumer legal funding company that has not registered under this Article. Sets the registration and renewal fee at $1,000 and requires registrations to be renewed every three years. Allows a consumer legal funding company's registration or renewal to be denied for failure to comply with this Article. Exempts from the Article: (1) a consumer’s immediate family member; (2) a bank, lender, financing entity, or other special purpose entity that either provides financing to a consumer legal funding company or receives an interest in a consumer legal funding from a consumer legal funding company; and (3) an attorney or accountant who provides services to a consumer.

    Specifies that a consumer legal funding transaction that complies with this Article is not a loan and is not subject to any provision of law governing loans or investment contracts. Provides that to the extent that this Article conflicts with any other law, this Article supersedes that law for purposes of regulating consumer legal funding transactions in this State.

    Sets out content that must be included in an application for registration. Allows the Commissioner to deem an application abandoned if the applicant fails to respond to a written request for information by the Commissioner within 30 days of the date of the request.

    Requires a consumer legal funding company, before entering into a consumer legal funding transaction in this State, to file a template of a consumer legal funding contract with the Commissioner. Requires the contract to be written using plain language and be understandable to the average consumer who makes a reasonable effort under ordinary circumstances to read and comprehend the terms of the contract without needing professional assistance. Requires that all terms of the consumer legal funding contract be completed when it is presented to the consumer for their signature. Sets out required content for the contract. Requires the contract to include consumer disclosures, including 11 specified disclosures, on the first two pages, including a description of a consumer’s right to recission, total amount due from the consumer in six-month intervals for 36 months, and a statement that, if the net proceeds of the claim are insufficient to repay the consumer's financial obligation to the company, defined as the complete funded amount and charges, the consumer is not responsible to the company for any amount in excess of the net proceeds. Also requires the contract to include a written acknowledgment by the attorney retained by the consumer for the legal claim that attests to seven specified requirements, including that to the best of the attorney's knowledge, the funded amounts and any charges relating to the consumer legal funding transaction have been disclosed to the consumer, and that gross proceeds of the legal claim must be deposited into the client trust account of the attorney or a settlement fund established to receive the gross proceeds of the legal claim on behalf of the consumer. Specifies that failure of the attorney to provide this written attestation renders the contract null and void; however, the contract remains valid and enforceable if subsequent to execution, a consumer moves to substitute counsel or pursue the legal claim pro se.

    Provides that if a consumer obtains no recovery from the consumer's legal claim, the consumer is not required to repay a consumer legal funding company unless the consumer committed fraud against the consumer legal funding company. Provides that if the net proceeds of the claim are insufficient to repay the consumer's financial obligation to the company, defined as the complete funded amount plus authorized charges, the consumer is not responsible to the company for any amount in excess of the net proceeds. Limits the charges a consumer legal funding company may charge a consumer to the following. (1) Upon funding, a charge not to exceed 18% of the funded amount and a servicing charge not to exceed 3.5% of the funded amount. (2) Upon every subsequent six-month anniversary, a charge not to exceed 18% of the funded amount and a servicing charge not to exceed 3.5% of the funded amount. If, however, within five days after the start of a new six-month interval, the consumer legal funding company receives payment of the full amount owed by the consumer for the immediately preceding six-month interval, no additional charges can be charged for the new six-month interval. (3) A document preparation charge, not to exceed $250, that may be deducted from the funded amount. Prohibits charges from accruing on a consumer legal funding transaction more than 36 months after execution of the consumer legal funding contract; however, allows the company to assess charges on any additional funding, whether by amendment to the consumer legal funding contract or by execution of a new consumer legal funding contract, for 36 months after the provision of the additional funding.

    Prohibits a legal funding company from performing 12 specified acts, including (1) paying or offering to pay commissions, referral fees, or any other form of consideration to any attorney, law firm, health care provider, or an employee of a law firm or health care provider for referring a consumer to the company; (2) providing legal advice to the consumer regarding the consumer legal funding transaction or the underlying legal claim; and (3) reporting a consumer to a credit reporting agency if insufficient funds remain from the net proceeds to repay the company unless the consumer has committed fraud against the consumer legal funding company.

    Prohibits an attorney retained by a consumer for a legal claim from having a financial interest in the consumer legal funding company offering consumer legal funding to the consumer. Also prohibits an attorney who has referred the consumer to the consumer's retained attorney from having a financial interest in the consumer legal funding company offering consumer legal funding to the consumer. Specifies that a consumer legal funding contract that violates these requirements is null and void, and no person has a right to collect, attempt to collect, receive, or retain any funded amount or charges related to the consumer legal funding.

    Specifies that communications between a consumer's attorney and a consumer legal funding company necessary to ascertain the status of a legal claim or a legal claim's expected value are not discoverable by a party with whom the claim is filed or against whom the claim is asserted.

    Requires a consumer, within 30 calendar days of receipt of a written request, to disclose to any party to a legal claim whether the consumer has entered into a consumer legal funding transaction. Requires that if a consumer enters into a consumer legal funding transaction after responding to a request, the consumer must disclose this fact to the requesting person within 30 calendar days of entering into the transaction.

    Provides that consumer legal funding contracts are presumed to be discoverable in a civil action; allows a consumer to seek to rebut this presumption. Presumes that consumer legal funding transactions that have been disclosed and consumer legal funding contracts discovered are inadmissible as evidence; allows a party to seek to rebut this presumption.

    Allows the Commissioner to examine a consumer legal funding company and requires the company to reimburse the reasonable costs and expenses of the examination. Allows the Commissioner to waive the reimbursement in unusual circumstances and in the interests of justice.

    Allows the Commissioner to adopt rules necessary for the enforcement of this Article, but requires the Commission to give notice before proposing a rule, to all companies registered or pending registration under this Article.

    Allows the Commissioner, after notice and opportunity for a hearing, to take the following actions against a consumer legal funding company that intentionally violated any provision of this Article: (1) revoke, suspend, or refuse to renew a consumer legal funding company's registration; (2) order a consumer legal funding company to cease and desist from entering into additional consumer legal funding transactions; (3) assess a civil penalty of not more than $10,000 for each violation, the clear proceeds of which must be remitted to the Civil Penalty and Forfeiture Fund; and (4) order the consumer legal financing company to make restitution to an injured consumer.

    Includes a severability clause.

    Effective October 1, 2023.


  • Summary date: Feb 28 2023 - View Summary

    To be summarized.