Overview
Idaho House Bill 646 (2026) would create the Litigation Financing Transparency, National Security, and Consumer Protection Act. The new chapter establishes a regulatory framework for litigation financing within Idaho, including registration of litigation financiers, disclosure obligations, consumer protections, and safeguards against foreign involvement in Idaho litigation financing. The act takes effect for claims filed or commenced on or after July 1, 2026.
Main purpose and intent
- Increase transparency of third-party litigation financing.
- Protect consumers and plaintiffs from undue influence or loss of control over their legal claims.
- Prevent foreign adversaries or foreign persons of concern from participating in Idaho litigation financing and from influencing Idaho legal proceedings.
- Provide guidelines for disclosure, discovery, and regulatory oversight to ensure accountability.
Key provisions and changes
-Definition and scope
- Defines terms such as consumer, entity, foreign adversary, foreign person, litigation financier, and litigation financing.
- Expands regulation to cover litigation financing arrangements, including contracts and disclosures, and their disclosure in court and discovery.
-Registration of litigation financiers (new Chapter 21)
- Requires registration with the Secretary of State to engage in litigation financing in Idaho.
- Registration requires:
- Entity in good standing and governing documents authorizing litigation financing.
- Public registration details (name, addresses, contact info, registered agent, etc.).
- Disclosure of ownership/control information for individuals or entities owning 5%+ of voting securities.
- Ongoing obligation to amend registration within 30 days of changes.
- Registered information becomes public record.
-Litigation financing protections and restrictions
- Prohibits paying kickbacks or referral fees to obtain referrals.
- Caps interest/fees: maximum rate is the greater of 15% or +6 percentage points above the federal prime rate, with interest permitted per contract terms.
- Prohibits charging more than 25% of any monetary relief recovered through the claim.
- Prohibits false/misleading advertising, steering consumers to specific providers, failure to deliver complete contracts, attempts to waive consumer rights, or giving legal advice.
- Prohibits assignment or securitization of contracts and prohibits financiers from influencing litigation decisions (counsel selection, strategy, settlements).
- Prohibits financial interests for entities providing goods/services to the consumer in exchange for influence over the claim.
-Litigation financing contracts: disclosures and requirements
- Requires fully completed contracts with no omitted terms.
- Contracts must clearly disclose terms, including:
- Name and contact information of the financier.
- Five-day cancellation right with procedure to cancel and return funds.
- Cap on the financier’s recovery (25% of any judgment or monetary relief).
- Assurance that the financier cannot influence litigation strategy or outcomes.
- What happens if no recovery is obtained or funds cannot be fully recovered.
- Acknowledgment that the consumer should read the contract and may consult an attorney.
- Legal representatives must confirm no referral fees were received or paid if involved in the financing.
- If a consumer’s legal representative handles the financing contract, the consumer must receive the contract and sign an acknowledgment.
-Disclosure and discovery
- Requires before or without a discovery request that the litigation financing contract be disclosed to all parties, the court, and any insurer with a preexisting defense/indemnity obligation.
- Disclosure is ongoing; new or amended contracts must be disclosed within 30 days of execution or amendment.
- Existence and details of financing contracts are discoverable in related litigation.
-Exemptions
- Provisions for certain nonprofits and certain entities that operate without charging interest or taking a financial stake in outcomes.
- Exempts regulated lenders under certain conditions.
-Class actions
- Applies the act’s requirements to class actions and imposes fiduciary duties on a litigation financier to all class members.
- Class counsel must disclose any legal/financial relationships with the financier.
- Class members can request a true copy of the litigation financing contract from class counsel.
-Joint and several liability for costs
- A litigation financier can be jointly and severally liable for costs or sanctions assessed against a consumer or their legal representative related to the pursued claim.
-Foreign involvement restrictions
- Prohibits foreign adversaries or foreign persons of concern from engaging in Idaho litigation financing, and prohibits such entities from investing in or controlling a Idaho financier.
- Financiers must not affiliate with or accept funds from foreign adversaries or foreign persons of concern.
-Prohibition on disclosure of proprietary information
- Prohibits sharing proprietary information with foreign adversaries or foreign persons of concern.
-Foreign funding limitations and transparency
- Limits and regulates associations between foreign persons and Idaho financiers; requires transparency of foreign involvement if it occurs.
-Regulatory oversight
- Secretary of State may adopt rules to oversee litigation financing, subject to legislative approval.
-Enforcement and unenforceability
- Any violation of the act can render a litigation financing contract unenforceable.
- Usury penalties if a financier charges interest exceeding allowed rates.
-Applicability
- The chapter applies to legal claims pending or commenced on or after July 1, 2026.
Who would be affected
- Litigation financiers operating in Idaho (must register and comply with disclosures and prohibitions).
- Consumers and plaintiffs pursuing civil claims in Idaho using third-party financing.
- Legal representatives (attorneys and firms) involved in claims with financing arrangements (must disclose relationships and ensure compliance).
- Class members in class actions involving litigation financing.
- Foreign entities or individuals seeking to engage in Idaho litigation financing.
Procedural and timeline details
- Effective date: July 1, 2026 (claims filed on or after this date fall under the act; exemptions may apply).
- Registration amendments: changes must be reported within 30 days.
- Disclosures: new or amended contracts must be disclosed within 30 days.
- Emergency status declared in bill; act is intended to be in force on July 1, 2026.
Potential impacts and considerations
- Increased transparency could deter problematic financing arrangements and protect consumer rights.
- Strong restrictions on foreign involvement aim to shield Idaho’s judicial processes from external influence.
- Compliance costs for financiers and potential penalties for violations (including unenforceability and usury penalties).
- Operational changes for class actions due to fiduciary duties and additional disclosure requirements.
Note: This summary reflects the bill text and stated purposes; it does not represent a final interpretation or legal conclusion.
