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EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb1298*
HOUSE BILL 1298
I1, I2, D3 6lr2288
CF SB 894
By: Delegate A. Johnson
Introduced and read first time: February 12, 2026
Assigned to: Economic Matters
A BILL ENTITLED
AN ACT concerning 1
Third–Party Litigation Financing – Licensing and Regulation 2
FOR the purpose of prohibiting a certain litigation financier from providing certain 3
litigation financing unless licensed under the Maryland Consumer Loan Law or 4
provisions of law relating to installment loans; providing that litigation financing 5
shall be considered a loan for certain purposes ; requiring a certain disclosure of a 6
litigation financing contract in certain civil actions; providing that certain 7
information is a permissible subject of discovery in certain civil actions; and 8
generally relating to third–party litigation financing transactions. 9
BY adding to 10
Article – Financial Institutions 11
Section 1 2–1301 through 1 2–1306 to be under the new subtitle “Subtitle 13. 12
Third–Party Litigation Financing” 13
Annotated Code of Maryland 14
(2020 Replacement Volume and 2025 Supplement) 15
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 16
That the Laws of Maryland read as follows: 17
Article – Financial Institutions 18
SUBTITLE 13. THIRD–PARTY LITIGATION FINANCING. 19
12–1301. 20
(A) IN THIS SUBTITLE THE FOLLOWING WORDS HAVE THE MEANINGS 21
INDICATED. 22
2 HOUSE BILL 1298
(B) “CIVIL ACTION” INCLUDES ANY LEGAL C LAIM, CASE, ADMINISTRATIVE 1
PROCEEDING, OR PORTFOLIO OF ACTIONS TO RECOVER DAMAGES IN THE STATE. 2
(C) “CONSUMER” MEANS AN INDIVIDUAL WHO IS DOMICILED, RESIDES, OR 3
IS PRESENT IN THE STATE, OR WHO IS OR MAY BEC OME A PLAINTIFF, A CLAIMANT, 4
OR A COMPLAINANT IN A CIVIL ACTION IN THE STATE. 5
(D) “LEGAL REPRESENTATIVE” MEANS AN ATTORNEY , A GROUP OF 6
ATTORNEYS, OR A LAW FIRM LICENS ED AND AUTHORIZED TO PRACTICE LAW AND 7
REPRESENT A CONSUMER IN A CIVIL ACTION IN THE STATE. 8
(E) “LITIGATION FINANCIER” MEANS A PERSON OR A GROUP OF PERSONS 9
ENGAGED IN OR FORMED , CREATED, OR ESTABLISHED FOR T HE PURPOSE OF 10
ENGAGING IN THE BUSI NESS OF LITIGATION F INANCING OR ANY OTHE R BUSINESS 11
OR ECONOMIC ACTIVITY IN WHICH A PERSON OR A GROUP OF PERSONS REC EIVES 12
CONSIDERATION OF ANY KIND IN EXCHANGE FOR PROVIDING LITIGATION 13
FINANCING. 14
(F) “LITIGATION FINANCING ” MEANS THE FINANCING , FUNDING, 15
ADVANCING, OR LOANING OF MONEY TO A CONSUMER IF: 16
(1) THE REPAYMENT OF ALL OR ANY PORTION OF TH E AMOUNT 17
FINANCED, FUNDED, ADVANCED, OR LOANED IS: 18
(I) CONTINGENT ON THE OUTCOME OF A CIVIL ACTION; OR 19
(II) REQUIRED ONLY IF THE CONSUMER PREVAILS IN A CIVIL 20
ACTION; OR 21
(2) THE MONEY OR FUNDS FOR THE REPAYMENT OF ANY AMOUNT OF 22
FINANCING, FUNDING, ADVANCE, OR LOAN IS DERIVED OR SOURCED, DIRECTLY OR 23
INDIRECTLY, FROM THE PROCEEDS OR OTHER CONSIDERATION REALIZED FROM 24
ANY JUDGMENT, AWARD, SETTLEMENT, VERDICT, OR OTHER FORM OF MON ETARY 25
RELIEF THE CONSUMER MAY RECEIVE OR RECOV ER IN RELATION TO A CIVIL 26
ACTION. 27
(G) (1) “LITIGATION FINANCING CONTRACT” MEANS A W RITTEN 28
CONTRACT IN WHICH A LITIGATION FINANCIER AGREES TO PROVIDE LI TIGATION 29
FINANCING TO A CONSU MER IN CONJUNCTION W ITH A CIVIL ACTION A S 30
CONSIDERATION FOR: 31
(I) REPAYMENT OF THE LITIGATION FINANCING; 32
HOUSE BILL 1298 3
(II) THE PAYMENT OF INTERE ST, FEES, OR OTHER 1
CONSIDERATION TO THE LITIGATION FINANCIER; OR 2
(III) ASSIGNING TO THE LITI GATION FINANCIER A R IGHT TO 3
RECEIVE PAYMENT FROM THE VALUE OF: 4
1. ANY PROCEEDS OR OTHER CONSIDERATION 5
REALIZED FROM ANY JUDGMENT, AWARD, SETTLEMENT, OR VERDICT; OR 6
2. ANY OTHER FORM OF MONETA RY RELIEF A 7
CONSUMER, A LEGAL REPRESENTATIVE, OR ANY OTHER PERSON MAY RECEIVE OR 8
RECOVER IN RELATION TO THE CIVIL ACTION. 9
(2) “LITIGATION FINANCING CONTRACT” DOES NOT INCLUDE AN 10
AGREEMENT, A CONTRACT, OR AN ENGAGEMENT OF A LEGAL REPRESENTATIVE TO 11
RENDER LEGAL SERVICE S TO A CONSUMER ON A CONTINGENCY FEE BASI S, 12
INCLUDING THE ADVANCEMENT OF LEGAL COSTS BY THE LEGAL REPRESENTATIVE 13
IN WHICH THE SERVICE S OR COSTS ARE PROVI DED TO OR ON BEHALF OF A 14
CONSUMER BY THE LEGA L REPRESENTATIVE WHO IS REPRESENTING THE 15
CONSUMER IN A CIVIL ACTION. 16
(H) “PORTFOLIO OF ACTIONS ” MEANS AN ARRANGEMENT IN WHICH A 17
LITIGATION FINANCIER FINANCES MULTIPLE CIVIL ACTIO NS BELONGING TO AN 18
ATTORNEY OR A LAW FIRM WITH ANY RETURN ON INVESTED CAPITAL COMING FROM 19
THE SETTLEMENT OR JUDGMENT OF ANY INDIVIDUAL CIVIL ACTION OR GROUP OF 20
CIVIL ACTIONS. 21
12–1302. 22
IT IS THE INTENT OF T HE GENERAL ASSEMBLY TO PROMOTE C ONSUMER 23
PROTECTION AND TRANS PARENCY IN THIRD –PARTY LITIGATION FIN ANCING 24
TRANSACTIONS THROUGH THE LICENSING, REGULATION, AND DISCLOSURE 25
REQUIREMENTS PROVIDED UNDER THIS SUBTITLE. 26
12–1303. 27
(A) A LITIGATION FINANCIER MAY NOT PROVIDE LITI GATION FINANCING 28
UNLESS THE LITIGATION FINANCIER IS LICENSED UNDER TITLE 11, SUBTITLE 2 OR 29
3 OF THIS ARTICLE. 30
(B) LITIGATION FINANCING SHALL BE CONSIDERED A LOAN SUBJECT TO 31
TITLE 12, SUBTITLE 1, 3, 9, OR 10 OF THE COMMERCIAL LAW ARTICLE AS MAY BE 32
APPLICABLE. 33
4 HOUSE BILL 1298
12–1304. 1
(A) A PARTY IN A CIVIL ACTION SHALL PROVIDE, WITHOUT WAITING FOR A 2
DISCOVERY REQUEST, TO EACH OF THE OTHER PARTIES IN THE CIVIL ACTION AND 3
EACH INSURER THAT HAS A DUTY TO DEFEND ANOTHER PARTY IN THE CIVIL ACTION 4
ANY LITIGATION FINAN CING CONTRACT UNDER WHICH A LITIGATION F INANCIER 5
HAS A RIGHT TO RECEIVE COMPENSATION THAT IS CONTINGENT IN ANY RESPECT ON 6
THE OUTCOME OF THE CIVIL ACTION. 7
(B) DISCLOSURE IS REQUIRE D UNDER SUBSECTION (A) OF THIS SECTION 8
REGARDLESS OF WHETHER A CIVIL ACTION HAS FORMALLY COMMENCED. 9
(C) (1) THE DISCLOSURE REQUIR ED UNDER SUBSECTION (A) OF THIS 10
SECTION IS A CONTINUING OBLIGATION. 11
(2) WITHIN 30 DAYS AFTER ENTERING INTO A LITIGATION FINANCING 12
CONTRACT OR AMENDING AN EXISTING LITIGATION FINANCING CONTRACT, A PARTY 13
IN A CIVIL ACTION SHALL DISCLOSE AND DELIVER A NEW OR AMENDED LITIGATION 14
FINANCING CONTRACT T O ALL OTHER PARTIES AND E ACH INSURER THAT HAS A 15
DUTY TO DEFEND ANOTHER PARTY IN THE CIVIL ACTION. 16
12–1305. 17
THE FOLLOWING INFORMATION ARE PERMISSIBLE SUBJECTS OF DISCOVERY 18
IN ANY CIVIL ACTION FOR WHICH LITIGATION FINANCING IS PROVIDE D UNDER A 19
LITIGATION FINANCING CONTRACT, REGARDLESS OF WHETHER A CIVIL ACTION HAS 20
FORMALLY COMMENCED: 21
(1) THE EXISTENCE OF A LITIGATION FINANCING CONTRACT; 22
(2) EACH PARTICIPANT OR P ARTY TO THE LITIGATION FINANCING 23
CONTRACT; AND 24
(3) THE CONTENTS OF THE LITIGATION FINANCING CONTRACT. 25
12–1306. 26
THE COMMISSIONER MAY ADOPT REGULATIONS TO CARRY OUT THE 27
PROVISIONS OF THIS SUBTITLE. 28
SECTION 2. AND BE IT FURTHER ENACTED, That, if any provision of this Act or 29
the application of any provision of this Act to any person or circumstance is held invalid for 30
any reason in a court of competent jurisdiction, the invalidity does not affect other 31
HOUSE BILL 1298 5
provisions or any other application of this Act that can be given effect without the invalid 1
provision or application, and for this purpose the provisions of this Act are declared 2
severable. 3
SECTION 3. AND BE IT FURTHER ENACTED, That , except for § 12 –1303 of the 4
Financial Institutions Article, as enacted by Section 1 of this Act, this Act shall be construed 5
to apply only prospectively and may not be applied or interpreted to have any effect on or 6
application to any litigation financing contract , as defined in § 1 2–1301 of the Financial 7
Institutions Article, as enacted by Section 1 of this Act, entered into before the effective 8
date of this Act. 9
SECTION 4. AND BE IT FURTHER ENACTED, That this Act shall take effect 10
October 1, 2026. 11