SB 426

                     As Amended by House Committee
                     As Amended by Senate Committee
 Session of 2026
                        SENATE BILL No. 426
                           By Committee on Judiciary
                                     1-29
1 AN ACT enacting the Kansas transparency in consumer legal funding act;
2   providing requirements for consumer legal funding agreements;
3   prohibiting consumer legal funding companies from engaging in certain
4   conduct; requiring certain consumer disclosures related to consumer
5   legal funding agreements; providing for penalties for violation of the
6   act.
7
8 Be it enacted by the Legislature of the State of Kansas:
9     Section 1. (a) The provisions of sections 1 through 4, and
10 amendments thereto, shall be known and may be cited as the transparency
11 in consumer legal funding act. The purpose of the act is to promote
12 consumer protections related to consumer legal funding transactions.
13     (b) The provisions of this act are severable. If any portion of this act
14 is held by a court to be unconstitutional or invalid, or the application of
15 any portion of this act to any person or circumstance is held by a court to
16 be unconstitutional or invalid, the invalidity shall not affect other portions
17 of this act that can be given effect without the invalid portion or
18 application and the applicability of such other portions of this act to any
19 person or circumstance remains valid and enforceable.
20     Sec. 2. As used in the transparency in consumer legal funding act:
21     (a) "Advertise" means publishing or disseminating any written, oral,
22 electronic or printed communication or any communication by means of
23 recorded telephone message or transmitted or broadcast on radio,
24 television, the internet or similar communication media, including, but not
25 limited to, audio recordings, film strips, motion pictures and videos,
26 published, disseminated, circulated or placed before the public for the
27 purpose of inducing a consumer to enter into a consumer legal funding
28 contract.
29     (b) "Charges" means the amount of money to be paid to the consumer
30 legal funding company by or on behalf of the consumer, above the funded
31 amount provided by or on behalf of the consumer legal funding company
32 to the consumer. "Charges" includes all administrative, origination,
33 underwriting and other fees, including interest, regardless of how such
34 charges are denominated.
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1     (c) "Consumer" means an individual who is a Kansas resident or an
2 estate for a decedent related to a wrongful death with a legal claim a
3 natural person who resides or is domiciled in Kansas and is a plaintiff in
4 a civil action in Kansas. "Consumer" includes the state estate of a
5 decedent who was domiciled in Kansas at the time of death if the civil
6 action is a wrongful death claim.
7     (d) "Consumer legal funding" means a nonrecourse transaction in
8 which a consumer legal funding company purchases and a consumer
9 assigns to the company a contingent right to receive an amount of the
10 potential proceeds of any recovery, including a settlement or judgment, in
11 the consumer's legal claim, and the funds to the consumer are used for
12 household or personal expenses. "Consumer legal funding" does not
13 include expenses directly related to prosecuting the legal claim.
14     (e) "Consumer legal funding company" or "company" means a person
15 or entity that enters into or facilitates a consumer legal funding contract
16 with a consumer. "Consumer legal funding company" does not include:
17     (1) An immediate family member of the consumer;
18     (2) a bank, lender, financing entity or other special purpose entity:
19     (A) That provides financing to a consumer legal funding company; or
20     (B) to which a consumer legal funding company grants a security
21 interest in or transfers any rights or interest in a consumer legal funding
22 contract; or
23     (3) an attorney or accountant who provides services to the consumer.
24     (f) "Funded amount" means the amount of money provided to or on
25 behalf of the consumer in a consumer legal funding contract excluding
26 charges.
27     (g) "Funding date" means the date on which the funded amount is
28 transferred to the consumer by the consumer legal funding company by,
29 including, but not limited to, personal delivery, wire, ACH or other
30 electronic means or mailed by insured, certified or registered United States
31 mail.
32     (h) "Immediate family member" means a parent, sibling, child,
33 stepchild, spouse, domestic partner, cohabitant, immediate in-law, aunt,
34 uncle, first cousin, grandparent or grandchild.
35     (i) "Legal claim" means a civil claim or cause of action.
36     (j) "Resolution date" means the date the funded amount, plus the
37 agreed upon charges, are delivered to the consumer legal funding company
38 by the consumer, the consumer's attorney or otherwise.
39     Sec. 3. (a) A consumer legal funding contract shall:
40     (1) Be written in a clear manner using words with common, everyday
41 meanings to enable a reasonable consumer to read and understand the
42 terms of the contract without having to obtain the assistance of a
43 professional;
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1     (2) be completely filled in when presented to the consumer for
2 signature;
3     (3) contain a right of rescission, allowing the consumer to cancel the
4 contract without penalty or further obligation if, within 10 business days
5 after the funding date, the consumer returns to the consumer legal funding
6 company the full amount of the disbursed funds;
7     (4) contain the initials of the consumer on each page;
8     (5) contain a statement that there are no fees or charges to be paid by
9 the consumer other than what is disclosed on the disclosure form;
10     (6) if the consumer seeks more than one legal funding contract from
11 the same company, disclose the cumulative amount due from the consumer
12 for all transactions from the company, including, but not limited to,
13 charges under all contracts, if repayment is made any time after the
14 contracts are executed;
15     (7) contain a statement of the maximum amount the consumer may be
16 obligated to pay under the contract other than in a case of material breach,
17 fraud or misrepresentation by or on behalf of the consumer;
18     (8) clearly and conspicuously detail how charges, including, but not
19 limited to, any applicable fees, are incurred or accrued;
20     (9) for consumers whose primary language is not English, on written
21 request from the consumer or the consumer's attorney, be translated in
22 writing into the consumer's native language in which the oral negotiations
23 are conducted between the consumer legal funding company and the
24 consumer; and
25     (10) state that if there is no recovery from the consumer's civil action,
26 the consumer shall owe nothing to the consumer legal funding company
27 unless the consumer violated any material term of the contract or
28 committed fraud against the consumer legal funding company.
29     (b) A consumer legal funding contract shall contain the disclosures
30 described in this section and such disclosures are material terms of the
31 contract. Unless otherwise specified, such disclosures shall be typed in at
32 least 12-point font and be placed clearly and conspicuously within the
33 contract as follows:
34     (1) On the front page under appropriate headings, language
35 specifying:
36     (A) The funding amount to be paid to the consumer by the consumer
37 legal funding company;
38     (B) an itemization of one-time charges;
39     (C) the maximum total amount to be assigned by the consumer to the
40 company, including the funded amount and all charges; and
41     (D) a payment schedule including, but not limited to, the funded
42 amount and charges, all dates and the amount due at the end of each six-
43 month period from the funding date until the date the maximum amount
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1 due to the company pursuant to the contract is paid.
2     (2) Within the body of the contract:
3     (A) In at least 12-point bold type font: "Consumer's right to
4 cancellation: You may cancel this contract without penalty or further
5 obligation within 10 business days after the funding date if you return to
6 the consumer legal funding company the full amount of the disbursed
7 funds."
8     (B) A statement that the consumer legal funding company shall have
9 no role in deciding whether, when or how much the legal claim is settled
10 for, but the consumer and consumer's attorney shall notify the company of
11 the outcome of the legal claim by settlement or adjudication prior to the
12 resolution date. The company may seek updated information about the
13 status of the legal claim, but the company shall not interfere with the
14 independent professional judgment of the attorney handling the legal claim
15 or any settlement thereof.
16     (C) In all capital letters and in at least 12-point bold type font
17 contained within a box: "THE FUNDED AMOUNT AND AGREED
18 UPON CHARGES SHALL BE PAID ONLY FROM THE PROCEEDS
19 OF YOUR LEGAL CLAIM, AND SHALL BE PAID ONLY TO THE
20 EXTENT THAT THERE ARE AVAILABLE PROCEEDS FROM YOUR
21 LEGAL CLAIM. YOU WILL NOT OWE (INSERT NAME OF THE
22 CONSUMER LEGAL FUNDING COMPANY) ANYTHING IF THERE
23 ARE NO PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU
24 HAVE VIOLATED ANY MATERIAL TERM OF THIS CONTRACT OR
25 YOU HAVE COMMITTED FRAUD AGAINST (INSERT NAME OF
26 CONSUMER LEGAL FUNDING COMPANY)."
27     (3) Located immediately above the place on the contract where the
28 consumer's signature is required in 12-point bold type font: "Do not sign
29 this contract before you read it completely. Do not sign this contract if it
30 contains any blank spaces. You are entitled to a completely filled-in copy
31 of the contract before you sign this contract. You should obtain the advice
32 of an attorney. Depending on the circumstances, you may want to consult a
33 tax, public or private benefits planning or financial professional. You
34 acknowledge that your attorney in the legal claim has provided no tax,
35 public or private benefit planning, or financial advice regarding this
36 transaction. You further acknowledge that your attorney has explained the
37 terms and conditions of the consumer legal funding contract."
38     (c) If requested, a copy of the executed contract shall promptly be
39 delivered by the consumer to the attorney for the consumer.
40     (d) A consumer legal funding contract shall contain a written
41 acknowledgment by the attorney retained by the consumer in the legal
42 claim that attests to the following:
43     (1) The attorney has reviewed the mandatory disclosures required by
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1 this section with the consumer;
2     (2) the attorney is being paid on a contingency fee basis pursuant to a
3 written fee agreement;
4     (3) all proceeds of the legal claim will be disbursed by means of
5 either the trust account of the attorney or a settlement fund established to
6 receive the proceeds of the legal claim on behalf of the consumer;
7     (4) the attorney is obligated to disburse funds to the consumer legal
8 funding company from the legal claim and take any other steps to ensure
9 that the terms of the legal funding contract are fulfilled;
10     (5) the attorney has not received and will not receive a referral fee or
11 other consideration from the consumer legal funding company in
12 connection with the consumer legal funding; and
13     (6) the attorney in the legal claim has provided no tax, public or
14 private benefit planning or financial advice regarding the consumer legal
15 funding transaction.
16     (e) If the acknowledgment required by subsection (d) is not provided
17 by the attorney or firm retained by the consumer in the legal claim, the
18 consumer legal funding contract shall be null and void. A consumer legal
19 funding contract that complies with this section shall remain valid and
20 enforceable if the consumer terminates the relationship with the initial
21 attorney or retains a new attorney with respect to the legal claim.
22     (f) No prepayment penalties or fees shall be charged or collected on
23 consumer legal funding. A prepayment penalty or fee on consumer legal
24 funding shall be unenforceable.
25     (g) A consumer legal funding transaction that complies with this
26 section is not a loan and is not subject to any provision of law governing
27 loans or investment contracts. To the extent that this section conflicts with
28 any other law, this section shall control for the purposes of regulating
29 consumer legal funding transactions.
30     (h) The contracted amount to be paid to the consumer legal funding
31 company shall be a predetermined amount based upon intervals of time
32 from the funding date through the resolution date and shall not be
33 determined as a percentage of the recovery from the legal claim.
34     (i) Within 30 days after receipt of a written request, a consumer or the
35 consumer's attorney shall disclose to any requesting party to a legal claim
36 and each insurer that has a duty to defend if the consumer has entered into
37 a consumer legal funding contract. The consumer and the consumer's
38 attorney have a continuing obligation to disclose that the consumer has
39 entered into a consumer legal funding contract within 30 days after the
40 consumer enters such contract.
41     (j) The contingent right to receive an amount of the potential
42 proceeds of a legal claim is assignable by a consumer to a consumer legal
43 funding company.
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1     (k) Communications between a consumer's attorney and a consumer
2 legal funding company to allow the consumer legal funding company to
3 ascertain the status of a legal claim or a legal claim's expected value are
4 not discoverable by a person against whom the legal claim is asserted or
5 filed.
6     Sec. 4. (a) A consumer legal funding company shall not:
7     (1) Pay or offer to pay commissions, referral fees or other forms of
8 consideration to any attorney, law firm, medical provider, chiropractor or
9 physical therapist or any employees of such providers for referring a
10 consumer to the company;
11     (2) accept commissions, referral fees, rebates or other forms of
12 consideration from any attorney, law firm, medical provider, chiropractor
13 or physical therapist or any employees of such providers;
14     (3) advertise false or misleading information regarding its products or
15 services;
16     (4) knowingly provide funding to a consumer who has previously
17 assigned or sold a portion of the consumer's right to proceeds from the
18 legal claim without first making payment to or purchasing a prior
19 unsatisfied consumer legal funding company's entire funded amount and
20 contracted charges unless a lesser amount is otherwise agreed to in writing
21 by the consumer legal funding companies, except that multiple companies
22 may agree to contemporaneously provide funding to a consumer if the
23 consumer and the consumer's attorney consent to the arrangement in
24 writing;
25     (5) have any influence, receive any right to or make any decisions
26 with respect to the conduct of the underlying legal claim or any settlement
27 or resolution thereof, and the right to make such decisions shall remain
28 solely with the consumer and the consumer's attorney in the legal claim;
29     (6) attempt to obtain a waiver of any remedy or right by the
30 consumer, including, but not limited to, the right to trial by jury;
31     (7) knowingly pay or offer to pay for court costs, filing fees or
32 attorney fees during or after the resolution of the legal claim using funds
33 from the consumer legal funding transaction;
34     (8) knowingly offer or collude to provide funding as an inducement
35 to a consumer who is presently represented by counsel to terminate that
36 relationship and engage an attorney or law firm to represent the consumer
37 in the legal claim, and any contract that purports to do so is void and
38 unenforceable; and
39     (9) collude with or knowingly assist an attorney or law firm that is
40 enticing or intends to entice a consumer to bring a claim that the company
41 knows or has reason to know is fabricated or otherwise brought not in
42 good faith, and any contract that purports to do so is void and
43 unenforceable.
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1     (b) (1) Any attorney retained by a consumer or any immediate family
2 member of such attorney shall not have a financial interest in a consumer
3 legal funding company offering consumer legal funding to that consumer
4 or provide consumer legal funding, loans or advances for personal needs,
5 cash or nonmonetary equivalent to current or prospective consumers or the
6 consumer's immediate family members.
7     (2) Any attorney who has referred the consumer to the consumer's
8 retained attorney shall not have a financial interest in the consumer legal
9 funding company offering consumer legal funding to such consumer.
10     (c) The attorney for a consumer may only disclose confidential or
11 privileged information to the consumer legal funding company with the
12 written consent of the consumer.
13     (d) Only the consumer shall be authorized to execute a consumer
14 legal funding agreement unless the consumer lacks the legal capacity to
15 execute a contract. The consumer's legal representative in the legal claim
16 shall not execute a consumer legal funding contract on behalf of the
17 consumer. A consumer legal funding contract executed by the consumer
18 legal representative on behalf of such consumer shall be void and
19 unenforceable.
20     (e) A consumer legal funding company shall not accept any funds
21 from a foreign government or foreign adversary as defined in 15 C.F.R.
22 §791.4, as in effect on July 1, 2026.
23     (f) All consumer legal funding companies shall register with the
24 secretary of state pursuant to K.S.A. 17-7901, et seq., and amendments
25 thereto.
26     (g) (1) A consumer legal funding company that violates the
27 provisions of this section shall be liable to the consumer for:
28     (A) Automatic termination of the consumer legal funding contract;
29     (B) statutory damages in an amount not to exceed $10,000 per
30 violation or three times the actual damages incurred by the consumer,
31 whichever is greater;
32     (C) attorney fees; and
33     (D) injunctive or declaratory relief.
34     (2) In assessing the amount of statutory damages under this
35 subsection, the court shall consider any relevant information presented by
36 any party to the case, including, but not limited to the:
37     (A) Persistence of the violation;
38     (B) length of time over which the violation occurred;
39     (C) culpability of the defendant with respect to such violation; and
40     (D) defendant's assets, liabilities and net worth.  The attorney
41 general, upon a finding that a consumer legal funding company has
42 willfully violated the provisions of this act after notice and opportunity
43 for hearing in accordance with the Kansas administrative procedure act,
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1 may assess upon such consumer legal funding company a civil penalty
2 of not to exceed $10,000 per violation.
3     (2) In addition to any civil penalty assessed pursuant to paragraph
4 (1), such consumer legal funding company shall not recover the funded
5 amount or any charges under such consumer legal funding contract.
6     (3) Any civil penalty recovered pursuant to this subsection shall be
7 remitted to the state treasurer in accordance with the provisions of
8 K.S.A. 75-4215, and amendments thereto. Upon receipt of each such
9 remittance, the state treasurer shall deposit the entire amount in the
10 state treasury to the credit of the state general fund.
11     (4) All civil penalties assessed pursuant to this subsection shall be
12 due and payable within 10 days after written notice of assessment is
13 served on the person. If a civil penalty is not paid within the applicable
14 time period, the attorney general may file a certified copy of the notice of
15 assessment with the clerk of the district court in the county where the
16 violation occurred. The notice of assessment shall be enforced in the
17 same manner as a judgment of the district court.
18     (5) Any action by the attorney general pursuant to this subsection
19 shall be subject to review in accordance with the Kansas judicial review
20 act.
21     Sec. 5. This act shall take effect and be in force from and after its
22 publication in the statute book.