Maryland Senators are reviewing SB 985, a bill aimed at regulating third-party litigation financing contracts. The legislation would require specific disclosures and impose fiduciary duties on financiers involved in class-action cases.
SB 985 seeks to strengthen consumer protections and increase transparency in these agreements. It would prevent financiers from influencing legal proceedings, offering legal advice, charging undisclosed fees, demanding payment when no recovery occurs, or retaliating against consumers or attorneys. Interest rates exceeding state limits would also be prohibited.
The bill would further ban payments, fees, or commissions to individuals referring consumers to third-party financiers. It outlines strict disclosure requirements, including details on font size and style.
Financiers would need to inform consumers of their right to cancel agreements, provide itemized invoices, specify the total funding amount, and confirm that no other charges beyond those listed in the contract would be required.
Interest in litigation financing reforms has grown in recent years. At the end of January, Georgia introduced broad tort reform legislation, driven by Gov. Brian Kemp.
This proposal includes changes to third-party litigation financing, limits on double recovery of attorney fees, and new rules requiring liability to be established before presenting evidence of damages.
In December, the National Council of Insurance Legislators approved a model law on third-party litigation funding, incorporating many provisions similar to Maryland’s proposal.
Maryland’s Senate Bill 985 (SB 985), introduced on February 3, 2025, seeks to regulate third-party litigation financing contracts. The bill aims to enhance consumer protection and transparency in these agreements.
It prohibits litigation financiers from engaging in specific actions, such as influencing legal proceedings, offering legal advice, charging undisclosed fees, demanding payment when no recovery occurs, and retaliating against consumers or attorneys. Additionally, SB 985 imposes fiduciary duties on financiers involved in class-action lawsuits.
The bill also mandates that litigation financing contracts include clear disclosures and be executed in a specified manner. If enacted, these regulations would take effect on October 1, 2025.
Under SB 985, third-party litigation financiers would be prohibited from influencing legal proceedings, providing legal advice, charging hidden fees, or requiring repayment if a lawsuit does not result in financial recovery. The bill also bars financiers from retaliating against consumers or attorneys who assert their contractual rights. Additionally, it sets a cap on interest rates, ensuring compliance with state-mandated limits.
