The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 074: Consumer Litigation Funding Companies

• § 2251. Definitions

  As used in this chapter:

  (1) “Charges” means the amount a consumer owes to a company in addition to the funded amount and includes 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.

  (2) “Consumer” means a natural person who is seeking or has obtained consumer litigation funding for a pending legal claim, provided:

  (A) the claim is in Vermont; or

  (B) the person resides or is domiciled in Vermont, or both.

  (3) “Consumer litigation funding” or “funding” means a nonrecourse transaction in which a company purchases and a consumer assigns to the company a contingent right to receive an amount of the potential net proceeds of a settlement or judgment obtained from the consumer’s legal claim. If no proceeds or net proceeds are obtained, the consumer is not required to repay the company the funded amount or charges.

  (4) “Consumer litigation funding company,” “litigation funding company,” or “company” means a person that provides consumer litigation funding to a consumer. The term does not include an immediate family member of the consumer.

  (5) “Funded amount” means the amount of monies provided to, or on behalf of, the consumer pursuant to a litigation funding contract. The term excludes charges.

  (6) “Health care facility” has the same meaning as in 18 V.S.A. § 9402(6).

  (7) “Health care provider” has the same meaning as in 18 V.S.A. § 9402(7).

  (8) “Litigation funding contract” or “contract” means a contract between a company and a consumer for the provision of consumer litigation funding.

  (9)(A) “Net proceeds” means the amount recovered by a consumer as a result of a legal claim less costs associated with the legal claim or the underlying events giving rise to the legal claim, including:

  (i) attorney’s fees, attorney liens, litigation costs;

  (ii) claims or liens for related medical services owned and asserted by the provider of such services;

  (iii) claims or liens for reimbursement arising from third parties who have paid related medical expenses, including claims from insurers, employers with self-funded health care plans, and publicly financed health care plans; and

  (iv) liens for workers’ compensation benefits paid to the consumer.

  (B) This definition of “net proceeds” shall in no way affect the priority of claims or liens other than those for payments to the consumer litigation funding company under a consumer litigation funding contract subject to this chapter. (Added 2015, No. 128 (Adj. Sess.), § A.1; amended 2019, No. 20, § 33.)

• § 2252. Registration; financial stability

  (a) A company shall not engage in the business of consumer litigation funding without first filing a registration with the Commissioner on a form prescribed by the Commissioner and submitting a registration fee and proof of financial stability.

  (b) A company shall file with the Commissioner evidence of its financial stability which shall include proof of a surety bond or irrevocable letter of credit issued and confirmed by a financial institution authorized by law to transact business in Vermont that is equal to double the amount of the company’s largest funded amount in Vermont in the prior three calendar years or $50,000.00, whichever is greater. (Added 2015, No. 128 (Adj. Sess.), § A.1; amended 2017, No. 22, § 1, eff. May 4, 2017; 2019, No. 20, § 34.)

• § 2253. Contracts; disclosures and requirements

  (a) A contract shall 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 contract without having to obtain the assistance of a professional.

  (b) Each contract shall include consumer disclosures on the front page. The consumer disclosures shall be in a form prescribed by the Commissioner and shall include:

  (1) a description of possible alternatives to a litigation funding contract, including secured or unsecured personal loans, and life insurance policies;

  (2) notification that some or all of the funded amount may be taxable;

  (3) a description of the consumer’s right of rescission;

  (4) the total funded amount provided to the consumer under the contract;

  (5) an itemization of charges;

  (6) the annual percentage rate of return;

  (7) the total amount due from the consumer, including charges, if repayment is made any time after the funding contract is executed;

  (8) a statement that there are no fees or charges to be paid by the consumer other than what is disclosed on the disclosure form;

  (9) in the event the consumer seeks more than one litigation funding contract, a disclosure providing the cumulative amount due from the consumer for all transactions, including charges under all contracts, if repayment is made any time after the contracts are executed;

  (10) a statement that the company has no right to make any decisions regarding the conduct of the legal claim or any settlement or resolution thereof and that the right to make such decisions remains solely with the consumer and his or her attorney;

  (11) a statement that, if there is no recovery of any money from the consumer’s legal claim, the consumer shall owe nothing to the company and that, if the net proceeds of the claim are insufficient to repay the consumer’s indebtedness to the company, then the consumer shall owe the company no money in excess of the net proceeds; and

  (12) any other statements or disclosures deemed necessary or appropriate by the Commissioner.

  (c) Each contract shall include the following provisions:

  (1) Definitions of the terms “consumer,” “consumer litigation funding,” and “consumer litigation funding company.”

  (2) A right of rescission, allowing the consumer to cancel the contract without penalty or further obligation if, within five business days following the execution of the contract or the consumer’s receipt of any portion of the funded amount, the consumer gives notice of the rescission to the company and returns any funds provided to the consumer by the company.

  (3) A provision specifying that, in the event of litigation involving the contract and at the election of the consumer, venue shall lie in the Vermont Superior Court for the county where the consumer resides.

  (4) An acknowledgment that the consumer is represented by an attorney in the legal claim and has had an opportunity to discuss the contract with his or her attorney. (Added 2015, No. 128 (Adj. Sess.), § A.1.)

• § 2254. Prohibited acts

  (a) A consumer litigation funding company shall not engage in any of the following conduct or practices:

  (1) Pay or offer to pay commissions, referral fees, or any other form of consideration to any attorney, law firm, health care provider, health care facility, or an employee of a law firm, health care provider, or health care facility for referring a consumer to the company.

  (2) Accept any commissions, referral fees, or any other form of consideration from any attorney, law firm, health care provider, health care facility, or an employee of a law firm, health care provider, or health care facility.

  (3) Advertise false or misleading information regarding its products or services.

  (4) Receive any right to nor make any decisions with respect to the conduct of the consumer’s legal claim or any settlement or resolution. The right to make such decisions shall remain solely with the consumer and his or her attorney.

  (5) Knowingly pay or offer to pay for court costs, filing fees, or attorney’s fees either during or after the resolution of the legal claim.

  (6) Refer a consumer to a specific attorney, law firm, health care provider, or health care facility.

  (7) Fail to provide promptly copies of contract documents to the consumer or to the consumer’s attorney.

  (8) Obtain a waiver of any remedy the consumer might otherwise have against the company.

  (9) Provide legal advice to the consumer regarding the funding or the underlying legal claim.

  (10) Assign a contract in whole or in part to a third party. Provided, however, if the company retains responsibility for collecting payment, administering, and otherwise enforcing the consumer litigation funding contract, the prohibition in this subdivision (10) shall not apply to an assignment:

  (A) to a wholly owned subsidiary of the company;

  (B) to an affiliate of the company that is under common control with the company; or

  (C) granting a security interest under Article 9 of the Uniform Commercial Code or as otherwise permitted by law.

  (11) Report a consumer to a credit reporting agency if insufficient funds remain from the net proceeds to repay the company.

  (12) Require binding arbitration in the event of a dispute between the consumer and the company. A consumer has the right to a trial in the event of a contractual dispute.

  (b) An attorney or law firm retained by a consumer shall not have a financial interest in a company offering litigation funding to the consumer and shall not receive a referral fee or other consideration from such company, its employees, or its affiliates. (Added 2015, No. 128 (Adj. Sess.), § A.1.)

• § 2255. Effect of communication on privileges

  A communication between a consumer’s attorney and the company shall not be discoverable or limit, waive, or abrogate the scope or nature of any statutory or common-law privilege, including the work-product doctrine and the attorney-client privilege. (Added 2015, No. 128 (Adj. Sess.), § A.1.)

• § 2256. Examinations

  For the purpose of protecting consumer interests and determining a company’s financial stability and compliance with the requirements of this chapter, the Commissioner may conduct an examination of a company engaged in the business of consumer litigation funding as often as the Commissioner deems necessary. (Added 2015, No. 128 (Adj. Sess.), § A.1; amended 2019, No. 20, § 35.)

• § 2257. Repealed. 2019, No. 20, § 36.

• § 2258. Repealed. 2019, No. 20, § 37.

• § 2259. Violations an unfair or deceptive act

  (a) A company’s failure to comply with the requirements of this part, including this chapter, shall constitute an unfair or deceptive act in commerce enforceable under 9 V.S.A. chapter 63, the Consumer Protection Act.

  (b) The powers vested in the Commissioner by this chapter shall be in addition to any other powers or rights of consumers or the Attorney General or others under any other applicable law or rule, including the Vermont Consumer Protection Act and any applicable rules adopted thereunder, provided the Commissioner’s determinations concerning the interpretation and administration of the provisions of this part, including this chapter, and rules adopted thereunder shall carry a presumption of validity. (Added 2015, No. 128 (Adj. Sess.), § A.1; amended 2019, No. 20, § 38.)

• § 2260. Annual reports

  (a) Annually, on or before April 1, each company registered under this chapter shall file a report with the Commissioner under oath and in the form and manner prescribed by the Commissioner. In addition to information required by section 2120 of this title, the report shall include any information the Commissioner requires concerning the company’s business and operations during the preceding calendar year within Vermont and, in addition, shall include:

  (1) the number of contracts entered into;

  (2) the dollar value of funded amounts to consumers;

  (3) the dollar value of charges under each contract, itemized and including the annual rate of return;

  (4) the dollar amount and number of litigation funding transactions in which the realization to the company was as contracted; and

  (5) the dollar amount and number of litigation funding transactions in which the realization to the company was less than contracted.

  (b) [Repealed.]

  (c) [Repealed.] (Added 2015, No. 128 (Adj. Sess.), § A.1; amended 2019, No. 20, § 39; 2019, No. 20, § 109(b), eff. Dec. 31, 2021.)