HB156 Alabama 2011 Session

Summary

Primary Sponsor

Oliver Robinson

Democrat

Session

Regular Session 2011

Title

Contracts between a consumer and a consumer legal funding company, regulated, Consumer Legal Funding Act

Summary

The bill creates the Alabama Consumer Legal Funding Act to regulate contracts where a consumer sells a portion of potential settlement proceeds to a funding company.

What This Bill Does

It defines key terms and sets rules for how consumer legal funding contracts must work, including required disclosures, cancellation rights, and how repayments are calculated. It clarifies these contracts are not loans and restricts how funds can be used, with repayment tied to the real proceeds of the legal claim. It also imposes prohibitions and protections (such as translation for non-English speakers, limits on referrals, and no funding when a class action is involved) to protect consumers and guide funding companies.

Who It Affects

• Consumers in Alabama with pending legal claims who might enter into a consumer legal funding contract, who would receive clearer disclosures, cancellation rights, and limits on how funds are used.
• Consumer legal funding companies operating in Alabama, which would have to follow detailed contract requirements, disclosures, prohibitions, and reporting rules.

Key Provisions

• Definitions of terms: consumer, consumer legal funding, funding company, funding date, purchase price, legal claim, and resolution date.
• Written contracts with front-page disclosures: total purchase price, itemized one-time fees, total proceeds to be assigned in six-month intervals for 36 months, and semi-annual fee percentages.
• Cancellation right: consumer may cancel within five business days after the funding date and must follow a specified method to return the funds.
• Contract terms: funder will not make decisions about the legal claim, will only accept an assignment of a contingent right to proceeds, and the return amount is not based on a percentage of the recovery but on time-based intervals.
• Plain-language warning box: states funds are paid only from the proceeds, no payment if there is no recovery unless fraud is involved, and potential full recovery by the funder if fraud occurred.
• Acknowledgement and notice: consumer must acknowledge reviewing the contract; funder must notify the consumer's attorney within three business days of funding.
• Financial terms: repayment of purchase price plus fees is determined by time intervals and repaid only from the realized proceeds of the claim.
• Restrictions and prohibitions: no referral payments to attorneys or providers, no false advertising, no funding for pending class actions, no funding if the consumer previously sold to another funder without settling balances, no funding for attorney fees or litigation costs from the funds, translations required for non-English speakers, and no financial interest for attorneys in the funding company.
• Legal status and privilege: contracts are not loans or investments; assignment is valid; communications do not waive attorney-client privilege.
• Superiority and effective date: the act supersedes conflicting state law on consumer legal funding and becomes effective after a set date.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Contracts