TCJL SUPPORTS – Under legislation filed by Rep. Doug Miller (R-New Braunfels), consumer lawsuit lending transactions would be subjected to Texas usury and regulatory laws in the same manner as a loan for personal, family, or household use. The bill also requires disclosure of consumer lawsuit lending transactions to the court and to an opposing party.
HB 1595 defines a “consumer” as an individual who is or may become a complaining party in a dispute and to whom money is provided in a consumer lawsuit lending transaction. A “consumer lawsuit lender” is a person that provides money to a consumer, but does not include an attorney who has an attorney-client relationship with the consumer concerning the consumer’s dispute. The bill applies to any dispute, whether a civil action, ADR proceeding, or an administrative proceeding before a state agency.
The bill characterizes non-recourse advances from a consumer lawsuit lender, the repayment of which is conditioned on the consumer’s recovery in the dispute, as a “loan” for purposes of Texas consumer finance laws (Chapter 342, Finance Code). This law regulates the terms, conditions, and interest that may be charged on a consumer loans and requires consumer lenders to be licensed.
In addition to the regulation of consumer lawsuit lending transactions, HB 1595 requires the plaintiff in a civil action to produce to the opposing party, without a discovery request, all documents that the plaintiff or plaintiff’s representative provided to the consumer lawsuit lender. It also requires the plaintiff to file with the court and serve on the opposing party a copy of any agreement between the plaintiff and lender. If the lending agreement is executed prior to filing the lawsuit, the information must accompany the plaintiff’s original petition. If it is executed after the action is filed, the agreement must be filed and served not later than 10 days after execution. A parallel provision applies in an alternative dispute resolution proceeding under Chapter 154, CPRC.