H.B. 280 Third Party Litigation Funding Amendments: transcript

Thank you, Mr. Chairman. Committee member. So, about five years ago, I sponsored legislation, uh, created the Maintenance Funding Practices Act. And this year's an update, uh, really to try to provide transparency for this, this industry, and this financing mechanism. And we're gonna keep this high level and then try to answer any questions. I'm gonna turn some time over to Ryan Andres.

Yes. Thank you. Thank you. Vice Chair and Committee. My name is Ryan Andres. I'm general counsel with WCF Insurance. We appreciate Representative Dungan working on this bill. Uh, this bill, what it does is it, uh, addresses, so his original bill back in 2020 addressed just consumer, uh, litigation financing. This bill, uh, also addresses commercial litigation financing. And what it does basically is it just tightens up Utah's bill and requires that commercial litigation funders also must register with the state, like consumer, uh, litigation funders. Um, this is an industry that is a growing industry. Many states are addressing and tightening up their litigation funding laws. So Utah is not alone in this. We appreciate the efforts. We've worked with Representative Dunnigan, UAJ industry folks from both the commercial and consumer side, um, and the Division of Consumer Protection and the court system, uh, to get this built to where it is today. And we appreciate Representative Dunnigan and his efforts. Thank you, Mr. Chairman. I'm speaking to the second sub.

Thank you, Mr. Chairman, members of the committee. I'm Frank Ginelli with Foxley Ginelli, Kathleen Styler. We are honored to represent the American Finance Legal Association, the largest group that represents legal financing entities in all 50 states. Uh, we really want to commend, uh, the, the people, good people from the, the trial lawyers to the workers' comp and to others. They've crafted what we consider very pro-consumer piece of legislation, and we support this wholeheartedly and ask for your support.

Hi, Rachel Sykes. I'm the Vice President of the Utah Association for Justice. I am, my location is about a mile up the street. I'm snowed in, so sorry. I couldn't make it down there. Um, so we worked together with Representative Dunnigan and with Ryan, um, on this bill. And we appreciate their responsiveness to our concerns. Uh, so we don't oppose this bill.

Thank you. Hi, everybody. My name is Dwe Chinen. I'm the US Chapter Chair of I lfa, the International Legal Finance Association, which is the trade Association for the Commercial Litigation Funding Industry. And I am zooming in today from New York City. Um, I appreciate, uh, having the time to, to participate and also the leadership of, um, Representative Dunnigan and Mr. Andres. I'm here only to speak to one issue, uh, which Mr. Andres and I have discussed a little bit, which is registration. Uh, the commercial litigation funding industry is very different from the commercial industry. And, uh, you know, there are only a handful of commercial litigation funders in the us only a handful of which a subset are likely to have done or done any business in the state of Utah, which would fall under this statute registration. Um, therefore could be an impediment. Oftentimes litigation funding transactions need to close very quickly because, uh, a law firm needs to be paid to continue a case, and these can be millions of dollars. And if there were registration hurdle prior to providing the financing, uh, that may limit the availability of litigation funding options for Utah, small businesses that need it for commercial litigation. And therefore, registration, we think would be more, more appropriate if it were limited to consumer litigation funders as it is in other states, because that implicates consumer protection statutes to the extent it's necessary for commercial litigation funders to register. Uh, there's two things that I think should bear in mind. The first is whether or not that registration could occur after the fact to account for the quick timeframe upon which small businesses often need funding. Uh, and the second would be in the annual report to remove the requirements that amounts and rates of return be redacted, as those are confidential information and could lead to, um, uh, kind of backdoor disclosure of confidential information that would, that that could hurt a plaintiff's case. Thank you very much.

Thank you, Mr. Chair. Make a motion. Is there a substitute? Uh, we, oh, do we already said? Okay. I make a motion that we pass out favorably. Second substitute HB two 80 I. We think we need to adopt the second substitute. Oh, you do? Sub My apologies. Uh, I draw that motion and instead I make a motion that we adopt the second substitute of HB two 80.

You. I make a motion that we pass out favorably. Second substitute HP two 80.

Thank you, Mr. Chair. So six years ago we created a registry for Con Consumer, um, litigation financing. This in this involves, uh, a tort. So let's say you're injured or, or you have a claim and you think was time you can work out a better settlement with the insurance company, but you don't have enough money to pay your daily living expenses. So there are companies that will finance that. They'll give you your, uh, money to finance it so you can afford to continue on and, and, uh, wage your your case. And, and then they charge the course. The finance company charges an interest. So that's consumer lending. Larger cases in the commercial space are gonna involve businesses, much large, larger claims, more sophisticated. Six years ago, we set up a registry with a consumer protection division. And the industry, uh, has grown considerably from 300 or so to 1300 since that time that are now operating in Utah. What this bill does is it provides some additional consumer protections to those who are consumer. It gives a consumers 10 days to rescind a contract instead of five. And it prevents foreign entities from certain concerning nations from investing in this. Some of these foreign entities are using this way to get around investing in the United States. So they're putting money in this. So this, this bill creates a, that we already have a registry division of consumer Protection for consumer lending. This adds commercial lending to that. And what they do is they, they register and then they give a copy of their contracts at the end of the year for the consumer lending. This past year, the, uh, division of Consumer Protection did an audit, and they, they found that there were 600 violations issued over a hundred thousand dollars in, in fines. But really what we're doing is we're trying to protect consumers and trying to provide a little more transparency. And I'd be glad to go into more detail if you wish, Mr. Chair? Um, I'm good. Thank you.

That is my presentation. Okay. I, I appreciate the offer.

Dennis? Yes. Did that pass? Yes. Okay. We, we've got a bill together. Um, thank you.

Thank you, Mr. Chair and committee members. My name's Mackay Johnson. I'm representing the American Legal Finance Association, which provides educational resources and funding for consumers. On behalf of the association, I want to compliment Representative Dunnigan for his great work on this legislation. We appreciate the careful thought that he put into this and would also like to thank the other stakeholders who are, who are involved with this and we support this bill. Thank you.

Hi, Kurt London from Utah County. I'm here as a representative for Utah Association for Justice. We support this bill. We also wanted to thank the sponsor for working with us in the language of it. We really appreciate it.

I recommend that we pass out with a favorable recommendation, third substitute house bill two 80 to the full body of the Senate.

Motion to circle. Motion is to circle. All in favor say aye.

Representative Dunnigan. Thank You Mr. Speaker. I move to adopt third substitute house Bill two 80.

Yes. The third sub includes a coordination clause. There's a Senate bill that's also working in this space, and it provides a coordination clause with the Senate. Bill.

Thank you Mr. Speaker. So third party litigation gets involved as, let's say you're in an injury, let, you're waiting for a settlement, uh, and you, you have daily living expenses and maybe you feel like you need to settle because you can't hold out until the settlement comes in or until it goes through the legal process. So there are lenders out there that will kind of front you the money and say, we'll give you some daily living expenses so that you can, uh, continue on and let us fight the battle for you. It's done on both a consumer level and then a larger, if multiple people are involved or businesses involved, it's done on a commercial level. Basically they front the money on the consumer level, they charge you interest. It's an non-recourse loan. But if you get a settlement, then they charge you kind of a high interest rate and they recoup their money on a commercial litigation funding. They get a piece of the, of the settlement. It's become quite an industry. Uh, five or six years ago we started registering this for consumers. So what this bill does add some additional consumer protections, add transparency, and it provides registration for the commercial lending business just like we do currently in the consumer lending. The vision of consumer protection as a registry, I think it costs 300 bucks. The business to lender goes and registers files an annual report, and it extends a consumer's right to rescind an agreement for five to 10 days. So if they change their minds, it gives 'em a few more days to do that. And one important thing it does, it prevents foreign money from certain countries. Some of the countries, you can figure out who they are. There's about half a dozen of 'em that they have prohibitions on investing and putting certain funds in. In the United States, they're using this as a tool to kind of invest and to put dollars in the United States. So it has a prohibition on that. And with that, Mr. Speaker, I'm open to questions.

Thank you, Mr. Speaker. We've been working with, uh, a variety of different parties for some time on this. Uh, supported one of the main national lenders. American Legal Finance Association, uh, supports it as well as the Alliance responsible consumer legal funding. It protects consumers, provides more transparency. Thank you, Mr. Speaker.

Representative Dunnigan. Thank You Mr. Speaker. I move to adopt third substitute house Bill two 80.

Yes. The third sub includes a coordination clause. There's a Senate bill that's also working in this space, and it provides a coordination clause with the Senate. Bill.

Thank you Mr. Speaker. So third party litigation gets involved as, let's say you're in an injury, let, you're waiting for a settlement, uh, and you, you have daily living expenses and maybe you feel like you need to settle because you can't hold out until the settlement comes in or until it goes through the legal process. So there are lenders out there that will kind of front you the money and say, we'll give you some daily living expenses so that you can, uh, continue on and let us fight the battle for you. It's done on both a consumer level and then a larger, if multiple people are involved or businesses involved, it's done on a commercial level. Basically they front the money on the consumer level, they charge you interest. It's an non-recourse loan. But if you get a settlement, then they charge you kind of a high interest rate and they recoup their money on a commercial litigation funding. They get a piece of the, of the settlement. It's become quite an industry. Uh, five or six years ago we started registering this for consumers. So what this bill does add some additional consumer protections, add transparency, and it provides registration for the commercial lending business just like we do currently in the consumer lending. The vision of consumer protection as a registry, I think it costs 300 bucks. The business to lender goes and registers files an annual report, and it extends a consumer's right to rescind an agreement for five to 10 days. So if they change their minds, it gives 'em a few more days to do that. And one important thing it does, it prevents foreign money from certain countries. Some of the countries, you can figure out who they are. There's about half a dozen of 'em that they have prohibitions on investing and putting certain funds in. In the United States, they're using this as a tool to kind of invest and to put dollars in the United States. So it has a prohibition on that. And with that, Mr. Speaker, I'm open to questions.

Thank you, Mr. Speaker. We've been working with, uh, a variety of different parties for some time on this. Uh, supported one of the main national lenders. American Legal Finance Association, uh, supports it as well as the Alliance responsible consumer legal funding. It protects consumers, provides more transparency. Thank you, Mr. Speaker.

Yeah. Thank you. So in 2020, Representative Dunnigan created a maintenance funding practices act that began the regulation of litigation funding. This bill strengthens the protections and improves transparency and accountability and litigation funding it distinguishes between consumer and commercial maintenance funding. Uh, commercial funding is usually provided to businesses or institutional claimants and involves large amounts of money and it direct collateralized interest in the litigation. This requires commercial funders to register with the state. Commercial consumer funders already are required to register. Uh, this prevents foreign countries and entities of concern from providing maintenance funding and it applies to commercial funders. That same restrictions on influencing the underlying legal claim that the statute already applies to consumer funders. Uh, and this has the, uh, support of the various legal industries. And with that, I'm open to any questions.

I'll call the question. Thank you.

Senator Vickers. Sp aye. Lewin Aye. Brammer Bus Comore Escamia Fillmore Grover Harper.

Aye. Ipson a Johnson Juab McKay. Mikel Milner Musman Owens pitcher Plum Rebi Sandal Stevenson. Stratton Thickers. Thickers.

Senator Weiler. Senator Wilson. Aye. Winterton Aye. Adams President Adams Aye.

Thank you. President. Motion to suspend the rules. Motion to suspend the rules for the purpose of hearing a Senate, senate bill.