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Bill Summary · HB 925

HB 925 — Consumers in Crisis Protection Act

Status: Committee Substitute Favorable (Reported Favorably, Committee Substitute) — Re-referred to Finance (6/25/2025)

Note: This summary is based on the Committee Substitute (House Bill 925, First/Second Edition) text as filed for the 2025 North Carolina General Assembly (Article 94 added to Chapter 58). Portions of the bill text provided were truncated; the summary highlights the bill’s clear, available provisions.

Purpose / Intent

The bill establishes a regulatory framework for “consumer legal funding” transactions — nonrecourse advances paid to individuals who have pending civil legal claims in exchange for a contingent interest in possible future settlement or judgment proceeds. The stated aim is to protect consumers in financial crisis who accept such advances by requiring company registration, setting transparency and contract standards, and creating consumer protections against abusive or hidden terms.

Key definitions

  • Consumer legal funding transaction: a nonrecourse sale of an unvested contingent future interest in potential net proceeds of a settlement or judgment, where the consumer must use funds for personal/household needs (and may be prohibited from using funds for legal costs).
  • Funded amount: cash provided to (or on behalf of) the consumer (excludes any charges).
  • Net proceeds / gross proceeds: defined to describe recovery calculations, subtracting attorneys’ fees, valid liens, statutory liens, etc.

Major provisions

  • Regulatory classification: A compliant consumer legal funding transaction is explicitly not a loan and is governed by this Article rather than lending law; this Article supersedes conflicting statutes regulating these transactions.
  • Registration requirement: Any person must register as a “consumer legal funding company” with the Commissioner of Insurance before entering into transactions with North Carolina consumers. A contract with an unregistered company is void and unenforceable.
    • Registration fee: $1,000 at registration and at each renewal.
    • Renewal cycle: every three years.
    • Financial stability requirement: certified financial statements and proof of a $50,000 surety bond or irrevocable letter of credit.
    • Application contents include identifying information, business history, criminal background records for principals, and other items the Commissioner requires.
  • Contract filing and form standards:
    • Companies must file a contract template with the Commissioner before use.
    • Contracts must be written in plain language, fully completed when presented, and include specific required disclosures (definitions, attorney-representation acknowledgment, etc.).
    • Consumer must be acknowledged as represented by counsel and have opportunity to consult counsel regarding the contract.
    • Right of rescission: the contract must include a consumer right to cancel (the available text indicates a 10-business-day rescission period).
  • Exemptions: immediate family members, banks/lenders or entities financing funding companies, and attorneys/accountants providing services are exempt from these requirements.
  • Relationship to other law: the Article treats compliant transactions as not subject to loan laws; it is intended to be the controlling regulation for these transactions in the State.

Who is affected

  • Consumers in North Carolina with pending civil claims who may seek cash advances against future recoveries.
  • Consumer legal funding companies (existing and new) doing business with North Carolina residents — they must register and meet bonding/financial requirements.
  • Attorneys representing claimants (contract form must acknowledge representation and allow counsel review).
  • The North Carolina Department of Insurance / Commissioner (responsible for registration, oversight, and enforcement).

Procedural / timeline aspects

  • Registration is required before transacting; registrations renew every three years.
  • Contracts must be filed with the Commissioner prior to use and must include the rescission right at execution.
  • Status (as of materials provided): Committee Substitute Favorable reported 6/25/2025; re-referred to the Finance Committee. Further legislative action required before enactment.

Potential impacts / considerations

  • Consumer protections: increased transparency, plain-language contracts, rescission right, and oversight intended to reduce predatory terms and protect financially vulnerable plaintiffs.
  • Industry compliance costs: registration fee, $50,000 bond/LOC requirement, application and disclosure filing, and possible operational changes.
  • Legal/economic effects: the bill treats transactions as not loans, potentially changing how such products are characterized in litigation or consumer protection enforcement.
  • Administrative burden: the Commissioner’s office will have new registration and oversight responsibilities; fiscal effects were not provided in the truncated text.

For the full text, specific charge calculations or caps, enforcement remedies, and any additional consumer or industry requirements, consult the official bill language as filed with the North Carolina General Assembly and subsequent committee substitutes.

Compiled from official sources — confirm details with the bill’s official record.

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