Amendment ASA1-AB773

LRBs0268/1

MJ/TD/AG/KP/MP:all

2017 - 2018 LEGISLATURE

ASSEMBLY SUBSTITUTE AMENDMENT 1, TO ASSEMBLY BILL 773

January 29, 2018 - Offered by Representatives Tusler and Horlacher.

AB773-ASA1,2,2 An Act to renumber 804.01 (2) (e) 1., 893.93 (1) (a) and 893.93 (1) (b); to renumber and amend 804.09 (2) (a); to amend 138.04, 218.0125 (7), 218.0126, 628.46 (1), 801.01 (2), 804.01 (1), 804.01 (2) (a), 804.01 (2) (e) 2., 804.01 (2) (e) 3., 804.01 (3) (a) 2., 804.01 (4), 804.05 (1), 804.06 (1) (a), 804.08 (1) (a), 804.09 (2) (b) 1., 804.12 (1) (a) and 893.53; and to create 100.56, 177.30 (6), 804.01 (2) (bg), 804.01 (2) (e) 1g., 804.01 (2m), 804.05 (1m), 804.06 (1m), 804.08 (1) (am) and 893.93 (1m) (intro.) of the statutes; relating to: discovery of information in court proceedings; consumer lawsuit lending; the statute of limitations for certain civil actions; agreements by the secretary of revenue to allow third-party audits related to unclaimed property; interest rates for overdue insurance claims; and providing a penalty.

Analysis by the Legislative Reference Bureau

Discovery procedures

This substitute amendment makes certain changes to discovery procedure in court proceedings. Under the substitute amendment, the court must limit the frequency or extent of discovery if it determines that the burden or expense of the proposed discovery outweighs its likely benefit or is not proportional to the claims and defenses at issue. The substitute amendment also limits discovery of electronically stored information that the party identifies as not reasonably accessible because of undue burden or cost. In addition, under the substitute amendment, parties' discovery is limited to ten depositions and 25 interrogatories, unless otherwise stipulated by the parties or ordered by a court.

The substitute amendment also creates a mandatory disclosure requirement that requires a party, without awaiting a discovery request, to disclose any agreement under which any person, other than an attorney who is permitted to charge a contingent fee for representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action.

consumer lawsuit lending

This substitute amendment creates provisions governing consumer lawsuit lending transactions. Under the substitute amendment, a “consumer" is an individual who is or may become a plaintiff or claimant in a civil action or other proceeding (dispute). “Consumer lawsuit lending" means 1) providing money to a consumer, for the consumer to use for any purpose other than prosecuting the consumer's dispute, with repayment of the money conditioned on and derived from the consumer's proceeds of the dispute or 2) purchasing from a consumer a contingent right to receive a share of the potential proceeds of the consumer's dispute. In a consumer lawsuit lending transaction, all of the following apply: 1) the lender may charge interest at a rate of no more than 18 percent per year; 2) the consumer may prepay the transaction at any time and, upon prepayment in full, is entitled to a refund of unearned interest charged; 3) the transaction term may not exceed 36 months; 4) the lender may not charge fees of more than $360 per year; 5) the lender may not pay commissions or referral fees to attorneys or health care providers; and 6) there must be a written agreement between the lender and the consumer that contains specified information, including the interest rate and the consumer's right to receive a refund of interest charged if prepayment is made in full, as well as provisions that disclose all one-time fees charged to the consumer, disclose the amount to be received by the consumer and the amount the consumer assigns to the lender, state that the consumer has a right to cancel the agreement within five days, state that the lender has no right to make decisions or otherwise participate in the dispute, and state that the lender may be paid only from the consumer's proceeds of the dispute and is not entitled to be repaid if there are no such proceeds. A lender that violates any of these requirements or restrictions is subject to a civil forfeiture of not less than $25 nor more than $5,000, unless the lender establishes that the violation was the result of an unintentional good faith error and the lender had in place policies or procedures designed to achieve compliance. The Department of Agriculture, Trade and Consumer Protection has enforcement authority over violations.

The substitute amendment requires a consumer, upon commencing a lawsuit or within ten days after entering into a consumer lawsuit lending transaction, to provide the court and all parties to the lawsuit with a copy of the consumer lawsuit lending transaction agreement and any documents the consumer provided to the lender in connection with the agreement.

Statutes of limitation

Under current law, the statute of limitations for an action for injury to character is six years. Under the substitute amendment, the statute of limitations is shortened to three years.

Under current law, the statute of limitations for an action upon a liability created by statute when a different limitation is not prescribed by law and for an action for relief on the ground of fraud is six years. Under the substitute amendment, the statute of limitations is shortened to three years.

Third-party tax audits

This substitute amendment prohibits the secretary of revenue from entering into an agreement to allow a person to engage in an audit on a contingent fee basis of another person's documents or records in order to administer the unclaimed property law or to purchase information arising from the audit, except for information received by the federal government.

Timely payment of claims

This substitute amendment changes the interest rate that an insurer must pay for overdue insurance claims from 12 percent to 10 percent. Current law requires an insurer to promptly pay every insurance claim and, generally, a claim is considered overdue if the claim is not paid within 30 days after the insurer has written notice of the fact and amount of a covered loss.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB773-ASA1,1 Section 1 . 100.56 of the statutes is created to read:

AB773-ASA1,3,2 100.56 Consumer lawsuit lending. (1) In this section:

AB773-ASA1,3,4 (a) “Consumer" means an individual who is or may become a plaintiff or claimant or demandant in any dispute.

AB773-ASA1,4,2 (b) “Consumer lawsuit lender" means any person that engages in consumer lawsuit lending.

AB773-ASA1,4,3 (c) “Consumer lawsuit lending" means any of the following:

AB773-ASA1,4,7 1. Providing money to any consumer, for the consumer to use for any purpose other than prosecuting the consumer's dispute, with repayment of the money conditioned on and derived from the consumer's proceeds of the dispute, regardless of whether these proceeds result from a judgment, settlement, or other source.

AB773-ASA1,4,10 2. Purchasing from any consumer a contingent right to receive a share of the potential proceeds of the consumer's dispute, regardless of whether these proceeds result from a judgment, settlement, or other source.

AB773-ASA1,4,11 (d) “Dispute" means any of the following:

AB773-ASA1,4,12 1. Any civil action.

AB773-ASA1,4,13 2. Any alternative dispute resolution proceeding.

AB773-ASA1,4,15 3. Any administrative proceeding before any agency or instrumentality of the state.

AB773-ASA1,4,17 (2) (a) A consumer lawsuit lender may charge or contract for interest in a consumer lawsuit lending transaction at a rate not exceeding 18 percent per year.

AB773-ASA1,4,21 (b) A consumer lawsuit lending transaction may be prepaid by the consumer at any time in whole or in part. Upon prepayment of the consumer lawsuit lending transaction in full by cash, renewal, or refinancing, the consumer is entitled to a refund of unearned interest charged, which shall be determined as follows:

AB773-ASA1,5,4 1. On a consumer lawsuit lending transaction that is repayable in substantially equal, successive installments at approximately equal intervals of time and the face amount of which includes predetermined interest charges, the amount of the refund shall be as great a proportion of the total interest charged as the sum of the balances scheduled to be outstanding during the full installment periods commencing with the installment date nearest the date of prepayment bears to the sum of the balances scheduled to be outstanding for all installment periods of the consumer lawsuit lending transaction.

AB773-ASA1,5,9 2. On any consumer lawsuit lending transaction other than one under subd. 1., the amount of the refund shall not be less than the difference between the interest charged and interest, at the rate contracted for, computed upon the unpaid principal balances of the consumer lawsuit lending transaction from time to time outstanding prior to prepayment in full.

AB773-ASA1,5,11 (3) (a) The term of a consumer lawsuit lending transaction may not exceed 36 months.

AB773-ASA1,5,14 (b) The maximum total annual fee charged by a consumer lawsuit lender in a consumer lawsuit lending transaction, including any underwriting fee, organization fee, or other fee or charge, may not exceed $360 per year.

AB773-ASA1,5,17 (4) (a) A consumer lawsuit lender may not enter into a consumer lawsuit lending transaction unless there is a written agreement between the consumer lawsuit lender and the consumer that includes all of the following:

AB773-ASA1,5,19 1. The rate of interest agreed upon in terms either of simple interest computed on the declining principal balance or of the actual interest cost in money.

AB773-ASA1,5,22 2. A statement that the consumer lawsuit lending transaction may be prepaid in full or in part and that, if the consumer lawsuit lending transaction is prepaid in full, the consumer may receive a refund of interest charged.

AB773-ASA1,6,2 3. On the front page of the agreement, a disclosure of the amount of money to be provided to the consumer and the total amount of money to be assigned by the consumer to the consumer lawsuit lender, described in 6-month intervals for a total period of 36 months, along with an itemization of all one-time fees to be charged to the consumer.

AB773-ASA1,6,7 4. A provision that the consumer may cancel the agreement, without penalty or further obligation, within 5 business days after entering into the consumer lawsuit lending transaction if, during this period, the consumer returns to the consumer lawsuit lender either the lender's unnegotiated check or all money provided to the consumer as well as notice of cancellation.

AB773-ASA1,6,11 5. A provision that the consumer lawsuit lender has no right to, and will not, make any decisions with respect to the conduct of the dispute or any settlement or resolution of the dispute and that those decisions remain solely with the consumer and the consumer's attorney.

AB773-ASA1,6,14 6. A provision that the consumer lawsuit lender has no right to participate in the prosecution of the dispute or to obtain documents or evidence connected with the dispute.

AB773-ASA1,6,19 7. A provision that the consumer lawsuit lender accepts only an assignment of an amount of the potential proceeds from the dispute and does not accept an assignment of the consumer's legal claim. This provision shall also specify that the consumer lawsuit lender has no right to pursue the consumer's legal claim on behalf of or in lieu of the consumer.

AB773-ASA1,7,2 8. A provision that the consumer lawsuit lender may be paid only from the consumer's proceeds of the dispute. This provision shall also specify that the consumer does not owe the consumer lawsuit lender anything if there is no recovery by the consumer in the dispute unless the consumer violates the terms of the agreement. This provision shall also specify that, if there are insufficient proceeds to pay the consumer lawsuit lender in full, the consumer lawsuit lender may be paid only to the extent that there are available proceeds from the dispute, unless the consumer violates the terms of the agreement.

AB773-ASA1,7,5 9. A provision that, if the consumer is represented by an attorney, any proceeds from the dispute paid to the consumer lawsuit lender may be paid only from the trust account of the consumer's attorney.

AB773-ASA1,7,8 (b) Each provision or disclosure required under this subsection shall be in boldface type and of a type size no smaller than 12-point, except that the provision under par. (a) 8. shall be of a type size no smaller than 15-point.

AB773-ASA1,7,11 (5) (a) In this subsection, “health care provider" has the meaning given in s. 146.81 (1), but also includes any individual licensed or certified in another state for the same or equivalent profession.

AB773-ASA1,7,15 (b) A consumer lawsuit lender may not pay or offer to pay commissions or referral fees to any attorney or employee of a law firm, or to any health care provider or employee of a health care provider, for referring a consumer to the consumer lawsuit lender.

AB773-ASA1,7,18 (6) (a) Except as provided in par. (b), any consumer lawsuit lender that violates this section is subject to a forfeiture of not less than $25 nor more than $5,000 for each violation.

AB773-ASA1,7,22 (b) It is a defense to a violation of this section if the consumer lawsuit lender establishes that the violation was the result of an unintentional good faith error and, at the time of the violation, the consumer lawsuit lender had in place policies or procedures designed to achieve compliance with this section.

AB773-ASA1,2 Section 2 . 138.04 of the statutes is amended to read:

AB773-ASA1,8,4 138.04 Legal rate. The rate of interest upon the loan or forbearance of any money, goods, or things in action shall be $5 upon the $100 for one year and according to that rate for a greater or less sum or for a longer or a shorter time; but parties may contract for the payment and receipt of a rate of interest not exceeding the rate allowed in ss. 100.56 (2) (a), 138.041 to 138.056, 138.09 to 138.14, 218.0101 to 218.0163, or 422.201, in which case such rate shall be clearly expressed in writing.

AB773-ASA1,3 Section 3 . 177.30 (6) of the statutes is created to read:

AB773-ASA1,8,10 177.30 (6) The administrator may not enter into a contract or other agreement to allow any person to engage in an audit on a contingent fee basis of another person's documents or records as part of an effort to administer this chapter or to purchase information or documents arising from the audit, except that this subsection does not apply to information received from the federal government.

AB773-ASA1,4 Section 4 . 218.0125 (7) of the statutes is amended to read:

AB773-ASA1,8,25 218.0125 (7) A claim made by a franchised motor vehicle dealer for compensation under this section shall be either approved or disapproved within 30 days after the claim is submitted to the manufacturer, importer or distributor in the manner and on the forms the manufacturer, importer or distributor reasonably prescribes. An approved claim shall be paid within 30 days after its approval. If a claim is not specifically disapproved in writing or by electronic transmission within 30 days after the date on which the manufacturer, importer or distributor receives it, the claim shall be considered to be approved and payment shall follow within 30 days. A manufacturer, importer or distributor retains the right to audit claims for a period of one year after the date on which the claim is paid and to charge back any amounts paid on claims that are false or unsubstantiated. If there is evidence of fraud, this subsection does not limit the right of the manufacturer to audit for longer periods and charge back for any fraudulent claim, subject to the limitations period under s. 893.93 (1) (1m) (b).

AB773-ASA1,5 Section 5. 218.0126 of the statutes is amended to read:

AB773-ASA1,9,16 218.0126 Promotional allowances. A claim made by a franchised motor vehicle dealer for promotional allowances or other incentive payments shall be either approved or disapproved within 30 days after the claim is submitted to the manufacturer, importer or distributor in the manner and on the forms the manufacturer, importer or distributor reasonably prescribes. An approved claim shall be paid within 30 days after its approval. If a claim is not specifically disapproved in writing or by electronic transmission within 30 days after the date on which the manufacturer, importer or distributor receives it, the claim shall be considered to be approved and payment shall follow within 30 days after approval. A manufacturer, importer or distributor retains the right to audit a claim for a period of 2 years after the date on which the claim is paid and to charge back any amounts paid on claims that are false or unsubstantiated. If there is evidence of fraud, this section does not limit the right of the manufacturer to audit for longer periods and charge back for any fraudulent claim, subject to the limitations period under s. 893.93 (1) (1m) (b).

AB773-ASA1,6 Section 6 . 628.46 (1) of the statutes is amended to read:

AB773-ASA1,9,25 628.46 (1) Unless otherwise provided by law, an insurer shall promptly pay every insurance claim. A claim shall be overdue if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of the loss. If such written notice is not furnished to the insurer as to the entire claim, any partial amount supported by written notice is overdue if not paid within 30 days after such written notice is furnished to the insurer. Any part or all of the remainder of the claim that is subsequently supported by written notice is overdue if not paid within 30 days after written notice is furnished to the insurer. Any payment shall not be deemed overdue when the insurer has reasonable proof to establish that the insurer is not responsible for the payment, notwithstanding that written notice has been furnished to the insurer. For the purpose of calculating the extent to which any claim is overdue, payment shall be treated as being made on the date a draft or other valid instrument which is equivalent to payment was placed in the U.S. mail in a properly addressed, postpaid envelope, or, if not so posted, on the date of delivery. All overdue payments shall bear simple interest at the rate of 12 10 percent per year.