Atlanta, GA – Georgia Governor Brian Kemp recently signed Senate Bill 69 (SB69) into law on April 21, 2025, fundamentally altering the landscape for litigation financing within the state. The legislation aims to introduce greater accountability and consumer protection within this rapidly growing industry.
New Regulations Aim to Protect Consumers and Ensure Transparency
Table of Contents
- 1. New Regulations Aim to Protect Consumers and Ensure Transparency
- 2. Registration Requirements and Industry Guidance
- 3. Key provisions of SB69
- 4. Understanding Litigation Financing
- 5. Frequently Asked Questions about Georgia’s Litigation Financing Law
- 6. What are the key differences between state-level regulations and federal court approaches to overseeing litigation finance?
- 7. Banking and Finance Department Overview: Regulation and Oversight of Litigation Financiers
- 8. the Rise of Litigation Funding & Banking’s Role
- 9. Current Regulatory Landscape: A Patchwork Approach
- 10. Banking Department Responsibilities: Due Diligence & Risk Assessment
- 11. Specific Areas of Regulatory Focus
- 12. The Impact of the Litigation Funding Transparency Act of 2023
- 13. Benefits of Understanding Litigation Finance Regulation
- 14. Practical Tips for Banking & Finance Professionals
- 15. Case Study: The Impact of Disclosure on settlement Negotiations (Hypothetical)
The core elements of SB69 address several key concerns. First, the law establishes a comprehensive disclosure regime designed to shield consumers from perhaps exploitative practices. Second, it seeks to mitigate foreign interference in civil legal proceedings by imposing restrictions on foreign ownership of litigation financing companies. This measure reflects a broader national trend toward scrutinizing foreign investment in sensitive sectors. Third,the bill mandates that all litigation financiers register with the Georgia Department of Banking and Finance. SB69 compels the disclosure of any involvement by a litigation financier in civil cases, bringing previously obscured financial arrangements into the light.
Senator John Kennedy spearheaded the introduction of the bill, with Representative James Burchett championing its passage through the House. The majority of these provisions, notably the registration requirement, will take effect on January 1, 2026, affording businesses time to prepare for full compliance.
Registration Requirements and Industry Guidance
The Department of Banking and Finance is actively encouraging all entities engaged in litigation financing to thoroughly review the full text of Senate Bill 69. A comprehensive understanding of its provisions is crucial for ensuring adherence to the new legal framework. The official text of the bill is accessible at Georgia General Assembly – SB 69.
The Department plans to leverage the Nationwide Multistate Licensing System and Registry (NMLS) to streamline the registration process. Detailed instructions and guidance regarding the application procedure will be released by October 1, 2025.This timeline aims to provide ample prospect for companies to submit the necessary information and for the Department to efficiently process applications.According to data from the American Association of Justice, Third-party litigation financing has increased 600% over the last decade.
Companies with questions or requiring clarification regarding the registration process are directed to contact the Department at [email protected]. The Department assures timely responses to all inquiries.
Key provisions of SB69
| Provision | Description | Effective Date |
|---|---|---|
| consumer Disclosure | Requires financiers to disclose key terms and conditions to consumers. | January 1, 2026 |
| Foreign Ownership Restriction | Limits foreign ownership in litigation financing companies. | January 1,2026 |
| Registration Requirement | Mandates registration with the Georgia Department of Banking and Finance. | January 1, 2026 |
| Discoverability of Financing | Requires disclosure of financier involvement in civil cases. | January 1, 2026 |
Did You No? Litigation financing has become a meaningful source of capital for plaintiffs, particularly in complex or high-stakes cases.
Pro Tip: Ensure your company has established a compliance plan to address the new requirements of SB69 well before the January 1,2026,effective date.
Officials at the Department expressed enthusiasm about engaging with this evolving industry.They anticipate collaborative problem-solving during the registration process and beyond.
Understanding Litigation Financing
Litigation financing involves a third party providing funds to a plaintiff in exchange for a portion of any eventual settlement or judgment. This allows plaintiffs to pursue legal claims without bearing the full financial burden upfront. While this can be beneficial for individuals or businesses with meritorious cases, it also presents opportunities for potential abuse, so the need for regulation. The industry is seeing increased scrutiny from regulators across the United States. As of march 2024, states like New York and California are also evaluating stricter regulations on litigation financing.
Frequently Asked Questions about Georgia’s Litigation Financing Law
- What is litigation financing? Litigation financing is when a third party funds a lawsuit in exchange for a portion of the recovery.
- Who does SB69 apply to? SB69 applies to all entities providing funding for litigation in Georgia.
- When does the registration requirement go into effect? The registration requirement goes into effect on January 1, 2026.
- Where can I find the full text of SB69? The full text of SB69 can be found at Georgia General Assembly – SB 69.
- What happens if a litigation financier doesn’t register? Failure to register could result in penalties and legal repercussions.
What impact do you think these new regulations will have on access to justice for plaintiffs in Georgia? Share your thoughts in the comments below!
What are the key differences between state-level regulations and federal court approaches to overseeing litigation finance?
Banking and Finance Department Overview: Regulation and Oversight of Litigation Financiers
the Rise of Litigation Funding & Banking’s Role
litigation finance, also known as legal finance, has experienced ample growth in recent years.This industry involves funding lawsuits in exchange for a portion of any eventual recovery. Banks and financial institutions are increasingly encountering litigation financiers – both as potential collaborators and entities requiring careful oversight. understanding the regulatory landscape surrounding these financiers is crucial for banking and finance departments. Key terms driving searches include “litigation funding regulation,” “legal finance oversight,” and “third-party funding compliance.”
Current Regulatory Landscape: A Patchwork Approach
Currently, the regulation of litigation finance is fragmented. There isn’t a single, comprehensive federal law governing the industry in the United States. Instead, oversight falls into several categories:
* State-Level Regulations: A growing number of states are enacting disclosure laws. These laws typically require litigation funders to disclose their financial arrangements and potential conflicts of interest. States like Delaware, New York, and New Jersey have been at the forefront of this movement.
* Ethical Rules for Attorneys: Bar associations are grappling with the ethical implications of litigation funding. Concerns center around maintaining attorney independence and preventing funders from exerting undue influence over litigation strategy. Model Rule 5.4 of the American Bar Association’s model Rules of Professional conduct addresses business transactions with clients, which can apply to funding agreements.
* Consumer Protection Laws: Funders providing financing directly to plaintiffs are subject to consumer protection laws, including usury laws and truth-in-lending requirements.
* Federal Courts: Federal courts are increasingly addressing issues related to litigation finance, particularly concerning disclosure and potential conflicts of interest.
Banking Department Responsibilities: Due Diligence & Risk Assessment
Banking and finance departments need to implement robust due diligence procedures when dealing with litigation financiers. This includes:
- Know Your Customer (KYC) & Enhanced Due Diligence (EDD): Treat litigation financiers like any other financial institution.Thoroughly vet their ownership structure,funding sources,and compliance programs.
- conflict of Interest Checks: identify any potential conflicts of interest, especially if the bank has a relationship with any party involved in the underlying litigation.
- review of Funding Agreements: Scrutinize funding agreements to understand the terms, including the financier’s share of any recovery, control over litigation strategy, and dispute resolution mechanisms.
- Monitoring for Regulatory Changes: The regulatory landscape is evolving rapidly. Stay informed about new laws and regulations at both the state and federal levels.
- Anti-Money Laundering (AML) Compliance: Litigation funding can present AML risks, particularly if funds originate from opaque sources. Implement appropriate AML controls.
Specific Areas of Regulatory Focus
Several key areas are attracting increased regulatory scrutiny:
* Disclosure Requirements: Regulators are pushing for greater transparency in litigation funding agreements. This includes disclosing the identity of the funder, the amount of funding provided, and the terms of the funding arrangement.
* Control Over litigation: concerns exist about funders exerting excessive control over litigation strategy, perhaps compromising the independence of counsel.
* Champerty & Maintenance: Historically, the common law doctrines of champerty and maintenance prohibited third-party involvement in litigation. While these doctrines have been largely eroded,they still influence the debate surrounding litigation finance.
* Data Security & Privacy: Litigation ofen involves sensitive personal and financial information. Funders must implement robust data security measures to protect this information.
The Impact of the Litigation Funding Transparency Act of 2023
The Litigation Funding Transparency Act of 2023, while not fully resolving all regulatory concerns, marked a notable step towards federal oversight. This act requires disclosure of third-party funding in certain federal court cases, aiming to increase transparency and address potential conflicts of interest. Banks need to understand the implications of this act for their clients and their own potential involvement in funded litigation. Related searches include “Litigation funding Transparency Act compliance” and “federal court disclosure requirements.”
Benefits of Understanding Litigation Finance Regulation
Proactive engagement with the regulatory landscape surrounding litigation finance offers several benefits:
* Reduced Legal & Reputational Risk: Compliance with applicable laws and regulations minimizes the risk of legal challenges and reputational damage.
* Improved Risk Management: Thorough due diligence and risk assessment processes help identify and mitigate potential risks associated with litigation funding.
* Enhanced Client Relationships: Demonstrating a commitment to compliance builds trust with clients.
* Potential New Business Opportunities: Understanding the industry allows banks to explore potential opportunities to collaborate with litigation financiers.
Practical Tips for Banking & Finance Professionals
* Develop a comprehensive litigation finance policy: Outline the bank’s approach to dealing with litigation financiers.
* Provide training to relevant staff: Ensure that employees understand the regulatory requirements and the bank’s policies.
* Consult with legal counsel: Seek expert legal advice on complex issues related to litigation finance.
* Stay up-to-date on regulatory developments: Monitor changes in the law and regulations.
* Document all due diligence efforts: Maintain a clear record of all due diligence activities.
Case Study: The Impact of Disclosure on settlement Negotiations (Hypothetical)
A bank was involved in a complex commercial dispute. The opposing party had secured litigation funding
