Attempts to regulate litigation funding and provide additional oversight into the practice have been gaining momentum, not only on a national level in several countries, but also by individual state legislatures in the United States. As LFJ reported in March, one such attempt has begun in California where State Senator Anna M. Caballero introduced the Predatory Lawsuit Lending Prevention Act, SB 581. However, a new development suggests that the scope of this bill will be significantly reduced if it does become state law.
Does Consumer Legal Funding Put Consumers in Debt?
Attempts to regulate litigation funding and provide additional oversight into the practice have been gaining momentum, not only on a national level in several countries, but also by individual state legislatures in the United States. As LFJ reported in March, one such attempt has begun in California where State Senator Anna M. Caballero introduced the Predatory Lawsuit Lending Prevention Act, SB 581. However, a new development suggests that the scope of this bill will be significantly reduced if it does become state law.
Reporting in Bloomberg Law highlights the news that a new version of SB 581, which was unveiled last week, had removed the requirement for mandatory disclosure of third-party funding in all cases. The latest draft of the bill has softened these requirements, by only requiring disclosure where it is ordered by a judge in situations where they believe the funding violates state law. Additionally, these disclosures will also be permitted to be made in private to the court, rather than disclosed publicly.
Senator Caballero also clarified that the types of funding arrangements included in the bill’s oversight has been narrowed ‘to the situations where the plaintiff needs some kind of financial support in order to get them through the litigation process.’ As a result, Caballero stated the new law would provide an exemption for ‘business-to-business kinds of transactions that help attorneys pay for the litigation costs’.
Groups who have been lobbying in favour of amendments to the bill included Consumer Attorneys of California, whose legislative director Nancy Peverini, described the changes as ‘a big victory’. Consumer Attorneys of California has been working with industry associations including the International Legal Finance Association (ILFA), the Alliance for Responsible Consumer Legal Funding and the American Legal Finance Association, to lobby for appropriate changes to the bill.
ILFA’s executive director, Gary Barnett, stated that a key concern around the bill’s scope was ensuring that it ‘does not conflate the consumer litigation funding industry and the separate and distinct commercial legal finance industry’.
