Senate committee substitute to the 1st edition makes the following changes.
Amends the definitions that apply to new Article 94, the "Helping Consumers in Crisis Act," to GS Chapter 58, as follows. Amends the definition of charges so it is defined as any fees allowed by the Article to be charged to a consumer by a consumer legal funding company, regardless of how denominated, including charges denominated as interest or rate (was, the amount a consumer owes to a person in addition to the funded amount, including an administrative fee, origination fee, underwriting fee, processing fee, and any other fee regardless of how the fee is denominated, including amounts denominated as interest or rate). Adds and defines the term control as it is defined in GS 53-244.030. Changes the definition of legal claim to a civil claim or cause of action (was, a bona fide civil claim or cause of action). Instead of defining Nationwide Multistate License System and Registry as it is defined under GS 53-244.030, sets out that full definition instead of using the statutory cross-reference. Amends the definition of net proceeds to now be defined as the amount recovered by a consumer as a result of a legal claim less the following costs and liens associated with the legal claim (was, less costs and liens associated with either the legal claim or the underlying events giving rise to the legal claim), including any of the following: (1) attorneys' fees and litigation costs associated with the legal claim and (2) the specified liens. Adds and defines the term person as it is defined in GS 53-244.030.
Makes a clarifying change in GS 58-94-15.
Amends GS 58-94-25, which requires a legal funding contract to contain seven attestations by the attorney retained by the consumer for the legal claim, by providing that the failure of the attorney or the law firm retained by the consumer in the legal claim to provide the written attestation (was, to comply with the written acknowledgement) renders the contract null and void. Amends the items that must be included in the contract's consumer disclosures as follows: (1) requires including the total amount due from the consumer, in 180-day (was, six-month) intervals for 1,080 days (was, 36 months), including all charges; (2) requires including a statement that there are no payments owed by the consumer (there are no fees or charges to be paid by the consumer) other than what is disclosed on the disclosure form; and (3) requires a statement that if the net proceeds of the claim are insufficient to repay the consumer's indebtedness to the company, defined as the complete funded amount and charges, the company shall accept the amount that can be repaid from the net proceeds (was, a reduced sum) as full payment of its funded amount and charges.
Amends GS 58-94-30 by adding to the prohibited acts by consumer legal funding companies, collecting from the consumer any fee that is not authorized under new GS 58-94-27.
Amends GS 58-94-50 (Confidentiality of information) by providing that as a condition of reporting or sharing information as provided for in the statute, the Commissioner must require as part of the agreement that any confidential record or information shared with the entity be treated as confidential under the applicable laws and regulations governing the recipient entity. Provides that any privilege that arises under any other federal or State law with respect to the shared reports or information applies to that information after it has been disclosed to an entity described in the statute.
Deletes proposed GS 58-94-65, which required each consumer legal funding company to report annually to the Commissioner on the company's business and operations during the preceding calendar year in this state, including specified information.
Thu, 25 Mar 2021 Senate: Filed
Mon, 29 Mar 2021 Senate: Passed 1st Reading
Mon, 29 Mar 2021 Senate: Ref To Com On Rules and Operations of the Senate
Mon, 20 Sep 2021 Senate: Withdrawn From Com
Tue, 21 Sep 2021 Senate: Reptd Fav Com Substitute
Tue, 21 Sep 2021 Senate: Com Substitute Adopted
Tue, 21 Sep 2021 Senate: Re-ref Com On Finance
Bill S 357 (2021-2022)Summary date: Sep 22 2021 - View Summary
Bill S 357 (2021-2022)Summary date: Mar 25 2021 - View Summary
Enacts Article 94, titled the "Helping Consumers in Crisis Act," to GS Chapter 58. Sets forth 13 defined terms. Authorizes consumer legal funding companies registered under the Article to enter into a consumer legal funding transaction for an amount not exceeding $500,000. Defines consumer legal funding transaction to mean a nonrecourse transaction in which a consumer assigns to a person the consumer's contingent right to receive an amount of potential net proceeds of a settlement of judgment obtained from the consumer's legal claim (defined to mean a bona fide civil claim or cause of action); excludes transactions between immediate family members. Provides that a consumer is not required to repay such a company if the consumer obtains no net proceeds from the consumer's legal claim. Provides that transactions that comply with the Article are not loans and therefore not subject to laws governing loans or investment contracts. Deems the Article to supersede conflicting law.
Requires registration with the Commissioner of Insurance (Commissioner) as a consumer legal funding company (company) before entering into a consumer legal funding transaction. Deems legal funding contracts entered into without prior company registration void. Sets a $1,000 registration and renewal fee, with renewal required every three years. Details registration application content and procedure, requiring application through the Nationwide Mortgage Licensing System and Registry (NMLS). Application requirements include a criminal history background check of applicants or individuals who control entity applicants, and proof of financial stability in the form of a $50,000 surety bond or irrevocable letter of credit. Provides for abandonment of an application after failure to respond to the Commissioner's written request for information within 30 days.
Details requirements and limitations of legal funding contracts, including that the contract be written in plain language and completed when presented to the consumer for signature. Requires the contract to contain seven attestations by the attorney retained by the consumer for the legal claim, with failure to make the required attestations rendering the contract void. Provides for the contract to remain enforceable if the consumer terminates the consumer's attorney and proceeds pro se or retains a new attorney for the legal claim. Requires contracts to include consumer disclosures on the first two pages, as possible, and contain the 10 specified disclosures such as notification that some or all of the funded amount is taxable, an itemization of charges, and the total amount due from the consumer. Details further require terms of the contract, including defined terms, the consumer's right of rescission, acknowledgement of legal representation and advice, and other standard legal advisories. Requires prompt delivery of a copy of the executed contract to the consumer's attorney.
Identifies 10 prohibited acts of companies, such as (1) paying consideration to attorneys, law firms, and health care providers or their employees for referrals to the company; (2) accepting commissions from attorneys, law firms, or health care providers or their employees; (3) providing legal advice to the consumer regarding the transaction or underlying legal claim; (4) reporting a consumer to a credit reporting agency; and (5) knowingly providing funding to a consumer for a claim in a pending class action lawsuit. Bars attorneys representing consumers in transactions from having a financial interest in the company or receiving a referral fee or other consideration from the company, its employees or affiliates. Provides for communications with a consumer legal funding company to have no affect on the consumer's statutory or common-law privileges.
Authorizes the Commissioner to examine a company, at cost to the company unless the Commissioner waives the costs and expenses in the interests of justice. Requires registration through the NMLS. Authorizes the Commissioner to participate in the NMLS; establish rules for registration as specified; contract with NMLS or other entities regarding recordkeeping and processing transaction fees; and contract to license the use of the proprietary software of the Department of Insurance to supervisory agencies of other states. Allows the Commission to waive, modify, or add to the Article's requirements for NMLS participation.
Requires reporting enforcement actions to NMLS, with other reporting authorized. Provides for agreements or arrangements with other governmental agencies to share confidential information, with strict confidentiality maintained. Provides for these confidentiality statutes to supersede any conflicting public records law. Excludes from confidentiality employment history and publicly adjudicated disciplinary and enforcement actions against companies that are included in the NMLS for public access.
Grants the Commissioner the Authority to adopt rules necessary to enforce the Article, with notice to companies either registered or pending registration under the Article before proposing a rule.
In addition to other enforcement powers vested in the Commissioner, grants the Commissioner disciplinary authority ranging from disciplinary action on the company's registration, assessing a civil penalty of $1,000 per violation or $10,000 for willful violations, and ordering the company to cease and desist from entering into additional transactions or making restitution to an injured consumer. Provide notice and hearing requirements. Deems noncompliance with the Article a fair and deceptive trade practice under GS Chapter 75.
Establishes annual reporting requirements for consumer legal funding companies to report its business and operations during the preceding calendar year to the Commissioner as specified. Authorizes the Commissioner to summarize and analyze relevant submitted data and publish the summary and analysis of the Department of Insurance and the Department of Justice's website.
Provides a severability clause.
Effective October 1, 2021.