HB1274 creates a new subtitle in the Commercial Law Article called the Maryland Transparency in Third-Party Litigation Financing Act. It regulates transactions in which a litigation financier provides money to a consumer or the consumer’s lawyer in exchange for repayment tied to the outcome of a civil action. The bill defines key terms, excludes certain nonprofit, business, and bank lending arrangements from coverage, and expressly excludes ordinary contingency-fee legal representation and related attorney cost advances.
The bill requires litigation financing contracts to be in writing, fully disclosed, and signed with specified consumer-facing warnings and cancellation rights. It mandates detailed contract disclosures, including the financier’s identity, fees, total repayment amounts over time, tax warnings, and statements that the consumer owes nothing if there is no recovery or insufficient recovery. It also requires disclosure of these contracts to other parties and insurers in civil actions, permits discovery into the existence and participants of such contracts, and sets special disclosure rules for class actions, including a fiduciary duty owed by the financier to class members.
HB1274 also prohibits a range of practices by litigation financiers, such as referral fees, misleading advertising, legal advice, interference with litigation decisions, assignment or securitization of the contract, and reporting consumers to credit agencies when recovery is insufficient. It caps interest at the rate allowed under Maryland’s general usury law and makes violations subject to enforcement by the Attorney General. A violation can render the contract void and unenforceable, and usury violations trigger existing penalty provisions.
The bill’s legal impact would be to add a comprehensive consumer-protection and transparency framework for third-party litigation funding in Maryland, affecting financiers, consumers, attorneys, insurers, and parties to civil actions. It would also create new disclosure and litigation-management obligations in ordinary civil cases and class actions, while preserving existing contingency-fee arrangements for lawyers. The act applies prospectively only to contracts entered into on or after its October 1, 2025 effective date.
No committee discussion or vote history was provided, so the overall sentiment cannot be measured from recorded debate. Based on the bill text alone, the measure appears aimed at consumer protection and transparency, but it also imposes significant restrictions on litigation finance businesses and may raise concerns among financiers and some practitioners about cost, access to capital, and litigation strategy disclosure.
HB1274 would add Subtitle 50 to the Commercial Law Article and create a new regulatory regime for third-party litigation financing in Maryland. It would impose contract-form, disclosure, anti-referral, anti-interference, and interest-rate rules; require disclosure of financing agreements in civil litigation; authorize Attorney General enforcement; and make noncompliant contracts void and unenforceable. It also creates special fiduciary-duty and disclosure obligations in class actions and expressly preserves contingency-fee legal representation from being treated as litigation financing.
No votes or committee transcripts were provided, so there is no recorded legislative sentiment to summarize. On its face, the bill is framed as a consumer-protection and transparency measure, suggesting support from proponents of disclosure and regulation, while likely drawing concern from litigation finance firms and possibly some attorneys over the breadth of restrictions and mandatory disclosures.
The main points of contention are likely to be the bill’s limits on litigation financiers’ conduct, especially the prohibition on influencing case decisions, the ban on referral fees and related compensation, the interest-rate cap, and the requirement to disclose financing contracts to opposing parties and insurers. Another likely issue is the class-action fiduciary-duty provision and the broad discovery/disclosure rules, which may be viewed as increasing litigation burdens and exposing financing arrangements to strategic use by opponents. Supporters would likely emphasize consumer protection, transparency, and preventing abusive financing terms.