An Act To Regulate Presettlement Lawsuit Funding
Maine Legislature, Session 123, LD 1703
Committee Amendment CA_A_H511 (House)

COMMITTEE AMENDMENT" n" to H.P. 1186, L.D. 1703, Bill, "An Act To 
Regulate Presettlement Lawsuit Funding" 
Amend the bill by striking out everything after the enacting clause and before the 
summary and inserting the following: 
'Sec. 1. 9-A MRSA art. 12 is enacted to read: 
ARTICLE 12 
LEGAL FUNDING PRACTICES 
§12-101. Short title 
This article may be known and cited as "the Maine Consumer Credit Code Legal 
Funding Practices." 
§12-102. Definitions 
As used in this article, unless the context otherwise indicates, the following terms 
have the following meanings. 
1. "Consumer" means a person or entity residing or domiciled in this State with a 
pending civil claim or action and represented by an attorney. 
2. "Legal funding" means a transaction in which a company makes a cash payment to 
a consumer in exchange for the right to receive an amount out of the potential proceeds of 
any realized settlement, judgment, award or verdict the consumer may receive in a civil 
claim or action. If no proceeds in the civil claim or action are received, the consumer is 
not required to pay the company. 
3. "Litigation funding provider" means a person or entity, wherever located, that 
provides legal funding to a consumer. 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT" ~ "to H.P. 1186, L.D. 1703 
§12-103. Application of law 
1. This article does not apply to an advance made by a consumer's attorney to pay for 
expenses related to preparation for trial. 
2. Legal funding that is made pursuant to this article is not a consumer credit 
transaction as defined in section 1-301, subsection 12. 
3. An advance made to a consumer other than pursuant to the terms of this article is a 
supervised loan as defined in section 1-301, subsection 40. 
§12-104. Requirements for legal funding contracts 
The following provisions govern the legal funding contracts used by a litigation 
funding provider. 
1. All contracts must be written in a clear and coherent manner using words with 
common, everyday meanings to enable the average consumer who makes a reasonable 
effort under ordinary circumstances to read and understand the terms of the legal funding 
contract without having to obtain the assistance of a professional. The contract must have 
a meaningful arrangement that is appropriately divided and captioned by its various 
sections. 
This subsection applies to any agreement signed by the consumer in connection with a 
legal funding contract entered into in this State. This subsection does not apply to any 
acknowledgment or representation signed by an attorney. This subsection does not apply 
to legal funding contracts when an organization is the plaintiff; to language or 
arrangements that are specifically required by federal or state law, regulation or official 
agency interpretation; or to agreements, the form or any part of which is required by a 
governmental instrumentality as a condition of the assignability of the agreement. 
2. All contracts must be completely filled in and must contain a disclosure form on 
the front page in at least 12-point bold type, in the following format: 
DISCLOSURE STATEMENT 
1. Total amount of legal funding received by consumer under this 
.$: ___ _ 
contract: 
2. Itemized fees: 
.$ 
Application 
~ 
Processing 
i 
Attorney review 
~ 
Broker 
i 
Other ( 
) 
~ 
Total fees: 
~ 
COMMITTEE AMENDMENT 
COMMITTEE AMENDMENT ,A "to H.P. 1186, L.D. 1703 
3. Annual percentage fee (rate of return) on advance, 
compounded semiannually: 
4. Total amount to be repaid by consumer 
if at 6 months: 
if at 12 months: 
if at 18 months: 
if at 24 months: 
if at 30 months: 
if at 36 months: 
if at 42 months: 
---_% 
i 
$ 
i 
$ 
$ 
$ 
$ 
3. All contracts must provide that the consumer may cancel the contract within 5 
business days following the consumer's receipt of funds without penalty or further 
obligation. 
The contract must contain the following notice written in a clear and 
conspicuous manner: "MAINE CONSUMER'S RIGHT TO CANCELLATION: YOU 
MAY CANCEL THIS 
CONTRACT WITHOUT PENALTY OR FURTHER 
OBLIGATION WITHIN FIVE BUSINESS DAYS FROM THE DATE YOU RECEIVE 
FUNDING FROM [insert name of litigation funding provider]." The contract must also 
specify that in order for the cancellation to be effective, the consumer must either return 
the full amount of disbursed funds to the company by delivering the litigation funding 
provider's uncashed check to the provider's offices in person within 5 business days of the 
disbursement of funds or mail a notice of cancellation and include in the mailing a return 
of the full amount of disbursed funds in the form of the provider's check, or a registered 
or certified check or money order, by insured, registered or certified United States mail 
postmarked within 5 business days of receiving funds from the litigation funding 
provider, at the address specified for such cancellation in the contract. 
4. The consumer shall initial each page of the contract. 
5. All contracts must contain a legend above the consumer's signature in at least 12-
point bold type to read: 
"NOTICE: 
LEGAL FUNDING PROVIDERS MUST REGISTER 
WITH MAINE REGULATORS. 
GO TO www.maine.gov/pfr/ 
consumercredit AND SELECT THE "ROSTERS" LINK TO VERIFY A 
LITIGA TION FUNDING PROVIDER'S REGISTRATION OR TO 
CONTACT PROVIDERS TO OBTAIN COMPARATIVE RATE 
QUOTES." 
6. All contracts must contain a legend immediately above the consumer's signature in 
at least 12-point bold type to read: 
"DO NOT SIGN THIS CONTRACT BEFORE YOU READ IT 
COMPLETELY OR IF IT CONTAINS ANY BLANK SPACES. 
BEFORE YOU SIGN THIS CONTRACT YOU SHOULD OBTAIN 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT A 
.. t. H.P. 1186, L.D. 1703 
THE ADVICE OF YOUR ATTORNEY. YOU ARE ENTITLED TO A 
COMPLETELY FILLED-IN COpy OF THIS CONTRACT." 
7. AlI contracts for legal funding must contain the following in at least 12-point bold 
type to read: 
"THE LITIGATION FUNDING PROVIDER AGREES THAT IT HAS 
NO RIGHT TO AND WILL NOT MAKE ANY DECISIONS WITH 
RESPECT TO THE CONDUCT OF THE UNDERLYING CIVIL 
ACTION OR CLAIM OR ANY SETTLEMENT OR RESOLUTION 
THEREOF AND THAT THE RIGHT TO MAKE SUCH DECISIONS 
REMAINS 
SOLELY 
WITH 
THE 
CONSUMER 
AND 
THE 
CONSUMER'S ATTORNEY. " 
8. A contract may not require mandatory arbitration to resolve disputes under the 
contract. 
9. All contracts for legal funding must contain a written acknowledgment by an 
attorney that states that: 
A. The attorney has reviewed the contract and all costs and fees have been disclosed, 
including the amount to be paid by the consumer; 
B. The attorney is being paid per a written fee agreement; 
C. All proceeds of the civil claim or action will be disbursed via the attorney's trust 
account; and 
D. The attorney is following written instructions of the consumer with regard to the 
legal funding. 
10. 
For English-speaking, French-speaking and Spanish-speaking consumers. 
contracts must be written in the same language in which the oral negotiations are 
conducted between the company and the consumer. 
For consumers whose primary 
language is neither English, French nor Spanish, the principal terms of the contract must 
be translated by a certified translator in the consumer's native language and the translator 
must sign a notarized affirmation confirming that the principal terms have been presented 
to the consumer in the consumer's native language and acknowledged by the consumer in 
writing. Principal terms must include all of the items required to be disclosed by this 
section. 
11. To the extent the contract provides for attorney's fees and costs in addition to the 
amount due and owing under the contract, the contract must provide that in case of a 
breach of the contract by either party attorney's fees and costs may be recoverable by the 
prevailing party and must be reasonable. Any contractual cap on such attorney's fees and 
costs must apply equally to both parties. 
§12-10S. Fee requirements 
1. A litigation funding provider may not assess fees for any period exceeding 42 
months from the date of the contract with the civil litigant. 
2. Fees assessed by a litigation funding provider may compound semiannually but 
may not compound based on any lesser time period. 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT .(:1 " 
to H.P. 1186, L.D. 1703 
3. In calculating the annual percentage fee or rate of return, a litigation funding 
provider must include all charges payable directly or indirectly by the consumer, and 
must compute the rate based only on amounts actually received and retained by a 
consumer. 
§12-106. Registration of litigation funding provider; fees 
1. Unless a litigation funding provider has first registered pursuant to this article, the 
litigation funding provider may not engage in the business of legal funding. 
2. Registration must be filed in the manner prescribed by the administrator and must 
contain the information the administrator requires to make an evaluation of the character. 
fitness and financial responsibility of the applicant. 
The initial application must be 
accompanied by a $500 fee. 
A renewal registration must include a $200 fee. 
A 
registration must be renewed every 2 years and expires on September 30th. 
3. Registration may not be issued unless the administrator, upon investigation, finds 
that the character and fitness of the applicant, and of the members thereof if the applicant 
is a copartnership or association, and of the officers and directors thereof if the applicant 
is a corporation, are such as to warrant belief that the business will be operated honestly 
and fairly within the purposes of this article. 
4. For purposes of this section, an applicant demonstrates financial responsibility if: 
A. The applicant has available for the operation of the registered business net assets 
of at least $25,000; and 
B. Following the issuance of a registration under this section. the registrant maintains 
net assets of at least $25,000 that are either used or readily available for use in the 
conduct of the business of each office of the registrant in which a legal funding is 
made. 
5. Every applicant shall also, at the time of filing such an application, file with the 
administrator, if the administrator so requires, a bond satisfactory to the administrator in 
an amount not to exceed $50,000. In lieu of the bond at the option of the registrant, the 
registrant may post an irrevocable letter of credit. The terms of the bond must run 
concurrent with the period of time during which the registration will be in effect. The 
bond must run to the State for the use of the State and of any person who may have a 
cause of action against the registrant under this article. The bond must be conditional that 
the registrant will faithfully conform to this article and to all rules made by the 
administrator under this article and will pay to the State and to any person all money that 
may become due or owing to the State or to such a person from the registrant under and 
by virtue of this article during the period for which the bond is given. 
6. A separate registration is required for each place of business. A registration fee of 
$200 may be imposed for any registration issued for a place of business other than that of 
the first registered location of the registrant. 
7. A registrant may conduct the business of legal funding only at or from any place 
of business for which the registrant holds a license, including the names of other "doing 
business as" entities listed on the registration, and not under any other name than that on 
the registration. 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT" A " 
to H.P. 1186. L.D. 1703 
8. Upon written request, the applicant is entitled to a hearing on the question of the 
applicant's qualifications for a registration if: 
A. The administrator has notified the applicant in writing that the application has 
been denied; or 
B. The administrator has not issued a registration within 60 days after the application 
for the registration was filed. 
A request for a hearing may not be made more than 15 days after the administrator has 
mailed a written notice to the applicant that the application has been denied and stating in 
substance the administrator's findings supporting denial of the application. 
§12-107. Powers and functions of the administrator 
1. The powers and functions of the administrator are as set forth in Article 6, except 
that references to "consumer credit transactions" in Article 6 are considered to be 
references to advances made pursuant to legal funding. 
2. The administrator shall maintain a list of all registered companies and make that 
list available to consumers, attorneys and others on a publicly accessible website. 
3. The administrator shall require a litigation funding provider registered pursuant to 
section 12-106 to annually submit certain data, in a form and manner acceptable to the 
administrator, regarding the number of legal fundings, the amount of legal [undings, the 
number of legal fundings required to be repaid by the consumer and the amount charged 
to the consumer, including but not limited to the annual percentage fee charged to the 
consumer and the itemized fees charged to the consumer. 
4. Beginning March 1, 2009 and annually thereafter, the administrator shall prepare 
and submit a report on the status of legal funding activities in the State. The report must 
include aggregate information reported by litigation funding providers pursuant to 
subsection 3. The report must be submitted to the joint standing committee of the 
Legislature having jurisdiction over insurance and financial services matters. 
Sec. 2. Report to Legislature. 
As part of the first annual report required 
pursuant to the Maine Revised Statutes, Title 9-A, section 12-107, subsection 4, the 
Director of the Office of Consumer Credit Regulation within the Department of 
Professional and Financial Regulation shall review and evaluate the annual percentage 
fee imposed by litigation funding providers on consumers who entered into contracts for 
legal funding and assess whether a cap on the maximum annual percentage fee is 
necessary. 
The report must be submitted to the joint standing committee of the 
Legislature having jurisdiction over insurance and financial services matters by March 1, 
2009. The joint standing committee may submit legislation to implement a cap on the 
annual percentage fee on legal funding contracts to the First Regular Session of the 124th 
Legislature. 
Sec. 3. Effective date. This Act takes effect January 1, 2008.' 
COMMITTEE AMENDMENT 
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COMMI1TEE AMENDMENT A 
"t. H.P. t 186, L.D. 1703 
SUMMARY 
This amendment replaces the bill. The amendment creates a separate article in the 
Maine Consumer Credit Code to differentiate the activities of legal funding companies 
from lenders or creditors. The amendment does the following. 
1. It establishes a registration requirement for legal funding companies. 
2. It incorporates disclosure and operational provisions that legal funding companies 
are currently complying with in other states. 
3. It limits to 42 months the period for which fees may be charged to a consumer and 
requires that fees be assessed only on amounts actually retained by the consumer. 
4. It permits semiannual compounding of interest and prohibits the compounding of 
interest for any lesser period of time. 
5. It prohibits the use of mandatory arbitration clauses in contracts. 
6. It establishes enforcement provisions based on those now applied to consumer 
creditors and lenders. 
7. It requires an annual report to the joint standing committee of the Legislature 
having jurisdiction over insurance and financial services matters on the status of legal 
funding in this State. As part of the first annual report submitted by March 1,2009, the 
Director of the Office of Consumer Credit Regulation within the Department of 
Professional and Financial Regulation is required to review and evaluate the annual 
percentage fees charged to consumers and assess whether a cap on the maximum annual 
percentage fee is necessary. The amendment authorizes the joint standing committee to 
submit legislation to implement a cap to the 124th Legislature. 
FISCAL NOTE REQUIRED 
(See attached) 
COMMITTEE AMENDMENT 
Fiscal Detail and Notes 
Approved: 06/06/07 ::!Pac:.. 
LD 1703 
LR 2459(02) 
An Act To Regulate Presettlement Lawsuit Funding 
Fiscal Note for Bill as Amended by Committee Amendment ·if .. 
Committee: Insurance and Financial Services 
Fiscal Note Required: Yes 
Fiscal Note 
Minor cost increase - Other Special Revenue Funds 
Minor revenue increase - Other Special Revenue Funds 
The additional costs and additional revenue resulting from this bill are expected to be minor and the costs can be 
absorbed within existing resources of the Office of Consumer Credit Regulation in the Department ofProfessionc 
Financial Regulation. 
LR24S9(02) - Fiscal Note - Page 1 of 1