A bill for an act prohibiting litigation financing contracts, and including effective date and applicability provisions.
Summary
Senate File 53 would make litigation financing contracts void, unlawful, and unenforceable in Iowa. The bill defines these contracts as nonrecourse arrangements in which a third party provides money to a consumer, attorney, or law firm in exchange for a contingent share of the proceeds from a legal claim, judgment, settlement, or verdict. In practical terms, it would prohibit third-party funding of civil lawsuits when repayment depends on the outcome of the case.
The bill expressly preserves two existing practices: contingency fee arrangements between clients and their attorneys, and the advancement of legal costs by an attorney for a client when done in accordance with Iowa rules of professional conduct. It also carves out references to commercial tort claims and workers’ compensation claims under chapter 87. The bill would take effect immediately upon enactment and would apply only to litigation financing contracts entered into on or after that date.
Impact
SF 53 would add a new section to Iowa Code chapter 537A declaring litigation financing contracts void and unenforceable, thereby eliminating the legal enforceability of third-party lawsuit funding agreements covered by the bill. It would affect consumers, attorneys, law firms, and litigation funding companies by preventing new nonrecourse financing deals tied to a share of lawsuit proceeds, while leaving contingency fees and attorney-funded litigation expenses intact. The bill’s applicability clause limits the change to contracts entered into on or after the effective date, so existing agreements would not be retroactively affected.
Sentiment
The available legislative context suggests generally favorable treatment of the bill at the committee level, as the subcommittee recommended passage. There are no recorded floor votes or committee transcripts in the provided materials, so the broader debate is not documented here. Based on the bill’s progress, the measure appears to have had at least some support among reviewing legislators, though the absence of recorded discussion limits conclusions about the full range of views.
Contention
The main point of contention is likely the policy choice to prohibit litigation financing altogether versus allowing it as a tool for plaintiffs to obtain funding for legal expenses. Supporters would likely view the bill as preventing speculative investment in lawsuits and protecting consumers and the legal system from outside influence, while opponents would likely argue that it restricts access to capital for plaintiffs who cannot afford litigation costs. The bill’s explicit exemptions for contingency fees and attorney advances indicate an effort to distinguish traditional legal financing from third-party litigation funding, which may be central to the debate.
A bill for an act relating to contracts entered into by state agencies and including applicability provisions. (Formerly HSB 583.) Effective date: 07/01/2026. Applicability date: 07/01/2026.