Indiana is the latest state to enact regulatory measures for legal financing companies. Civil proceeding advance payment (CPAP) providers in Indiana will need to purchase a surety bond and become licensed. CPAP providers offer funding to litigants as part of the legal financing industry. These providers cover legal costs and fees in advance for lower-income plaintiffs. Lawsuit funding is often used for proceedings in civil suits. House Bill 1127 was signed by Gov. Mike Pence on March 23 and becomes law on July 1, 2016; however licensing and bonding is required beginning on January 1, 2017. The bill will also require CPAP providers to register with the state Department of Financial Institutions.
CPAP providers usually provide funds for living or medical expenses to consumer claimants as the lawsuit progresses. HB 1127 requires providers to hold a surety bond in an amount set by the Department, not to exceed $50,000. The bond ensures that CPAP providers adhere to their industry laws and protects consumer claimants from financial damages caused by the provider. Providers have the option of filing an irrevocable letter of credit in place of a surety bond.
HB 1127 will limit the fees and interest rates CPAP providers can charge consumer claimants. Consumer claimants are only required to repay the CPAP provider if they win their civil lawsuit. CPAP providers cannot pay for attorney costs, filing fees or court costs. CPAP providers cannot offer commission or referral fees to any medical or law professional or accept commission or referral fees from those entities.
Contact the Department of Financial Institutions to confirm your surety bond coverage amount. Find more information about getting bonded in Indiana here.