SB985 creates a new subtitle in Maryland’s Commercial Law Article called the “Maryland Transparency in Third-Party Litigation Financing Act.” The bill regulates transactions in which a litigation financier provides money to a consumer or the consumer’s legal representative in connection with a civil action, where repayment is contingent on the outcome of the case or tied to proceeds from a judgment, settlement, award, or similar recovery. It also defines key terms such as “litigation financing,” “litigation financing contract,” “consumer,” and “portfolio of actions,” while excluding certain nonprofit, ordinary business, and bank lending arrangements that do not take an interest in litigation proceeds.
The bill requires litigation financing contracts to be fully written out before signing and to include specific disclosures, such as the financier’s contact information, whether the financing may be taxable, the consumer’s cancellation rights, itemized charges, the total amount funded, and the total amount due over time. It also requires prominent warnings that the consumer owes nothing if there is no recovery, limits repayment to the amount recovered, and instructs consumers to seek legal and financial advice before signing. In addition, if the consumer is represented by counsel, the lawyer must disclose the contract to the consumer and acknowledge the absence of referral fees or other consideration from the financier.
SB985 also imposes litigation-disclosure requirements in civil actions. Parties must provide litigation financing contracts to other parties and insurers with a duty to defend, and any changes to those contracts must be disclosed within 30 days. The existence of a litigation financing contract becomes a permissible subject of discovery, though the contract is not automatically admissible solely because it was disclosed. For class actions, the bill goes further by imposing a fiduciary duty on the litigation financier to class members and requiring additional disclosures about any relationship between class counsel and the financier.
The bill places substantive limits on litigation financiers. It prohibits referral fees, misleading advertising, steering consumers to particular vendors, legal advice, assignment or securitization of the contract, credit reporting for unpaid balances when recovery is insufficient, and any attempt to influence litigation strategy or settlement decisions. It also bars arrangements giving nonparties contingent payment rights tied to the outcome of the case. If a financier violates the subtitle, the contract becomes void and unenforceable, and the Attorney General may enforce the law. If the financier charges interest above Maryland’s usury limits, the bill subjects the financier to existing usury penalties.
Overall, the bill appears aimed at consumer protection, transparency, and limiting conflicts of interest in the growing third-party litigation financing market. No committee transcripts or recorded votes were provided, so there is no documented legislative debate or vote history to indicate support or opposition. Based on the bill text alone, the measure is strongly protective of consumers and plaintiffs, while likely to draw scrutiny from litigation finance firms and possibly some attorneys over disclosure burdens, class-action fiduciary duties, and the potential for contracts to be voided for violations.
SB985 would add a new regulatory framework to Maryland’s Commercial Law Article governing third-party litigation financing. It would create disclosure, contract-form, discovery, and conduct rules for litigation financiers, authorize Attorney General enforcement, and make noncompliant contracts void and unenforceable. It also ties certain excessive-interest arrangements to Maryland’s existing usury enforcement provisions and applies prospectively only to contracts entered into on or after the effective date, October 1, 2025.
No committee discussion or voting record was provided, so there is no direct evidence of legislative sentiment from hearings or floor votes. The bill’s text reflects a clear consumer-protection orientation, emphasizing transparency, informed consent, and limits on financier influence over litigation. That framing suggests likely support from consumer advocates and plaintiff-side interests concerned about abusive financing terms, while also implying likely resistance from litigation finance companies and others affected by the new compliance and disclosure requirements.
The main points of contention are likely to be the scope of disclosure, the prohibition on financier influence over litigation decisions, and the treatment of class actions. Litigation financiers may object to the detailed contract disclosures, the continuing duty to disclose contracts in litigation, the fiduciary duty imposed in class actions, and the risk that violations render contracts void. Attorneys and law firms may also scrutinize the required disclosures about relationships with financiers and the ban on referral fees or other consideration. Another likely issue is the bill’s usury provision, which could subject some financing arrangements to existing interest-rate limits and penalties.