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Plaintiff Finance


Your Comprehensive Guide to Litigation Financing Under Vermont's Regulations

January 1, 2015
5min read

Vermont Legal Funding Legislation Key Takeaways

  1. All companies engaged in litigation financing must be licensed by the Vermont Department of Financial Regulation and pay a $600 registration fee.
  2. You must register for a license both if you fund lawsuits filed in Vermont or if you fund a Vermont resident with a suit filed in a different state.
  3. In addition to the registration fee, companies must file a proof of financial stability in the form of a surety bond or guaranteed letter of credit in the amount of either $50,000 or double the company's largest funded amount in the state during the previous three calendar years, whichever is greater.
  4. All litigation funding contracts must include certain provisions and a list of disclosures to the consumer.
  5. As of now, there is no limit on the fees a company can charge.
  6. An annual report must be filed before April 1 of each year.

If anyone ever offers to sell you some oceanfront property in Vermont, don't do it; Vermont is the only New England state that does not border the Atlantic.  Vermont also holds the distinction of being the only New England state (and only one of a handful of all states) to regulate the litigation financing industry.  Tortured comparisons notwithstanding, litigation financiers who wish to do business in the Green Mountain State must comply with certain requirements as of 7/1/2016.

By reading and following the rules below, you should be able to engage in compliant funding in Vermont. Still, funders should always read the full text for any new regulations before funding in order to contextualize as well as ensure they are aware of the fine details.

Although this bill was signed into law over a year ago (May 24, 2016)  we have received an increasing number of questions from funders in recent months about Vermont funding requirements, and we are going to provide breakdowns like this of other regulated states.


In a phrase that only a lawyer could love, Vermont House Bill 84 defines Consumer Litigation Funding as "a nonrecourse transaction in which a company purchases and a consumer assigns to the company a contingent right to receive an amount of the potential net proceeds of a settlement or judgment obtained from the consumer's legal claim." Confused?  Don't be.  It's basically a standard definition of litigation financing.  Importantly, though, the statute defines it as a "nonrecourse transaction," meaning it is not a loan.

Unlike Indiana's Regulation, where litigation financing companies need only register for a license if they fund 25 or more transactions per year, Vermont requires registration with its Department of Financial regulation irrespective of how much business the company conducts in the state.

Licenses are issued by the Commissioner of the Department of Financial Regulation (Commissioner) and obtained through the Nationwide Multistate Licensing System & Registry.  Vermont requires a $600 annual registration fee as well as a surety bond or guaranteed letter of credit for the larger of $50,000 or double the highest amount the company has funded in the state during the previous three years.

Also, it's important to note that the statute defines "consumer" as: a "natural person who is seeking or has obtained consumer litigation funding for a pending legal claim, provided the:

  1. Claim is in Vermont; or
  2. Person resides or is domiciled in Vermont, or
  3. both statements are true

Thus, legal funders must be licensed in Vermont if the fund just a single case in which the plaintiff is a Vermont resident, irrespective of the jurisdiction, or if the lawsuit is filed in Vermont.


The Vermont statute Section 2253 requires the following disclosures on the front page of the funding agreement:

1. Each contract shall include consumer disclosures on the front page. The consumer disclosures shall be in a form prescribed by the Commissioner and shall include:

2. A description of possible alternatives to a litigation funding contract, including secured or unsecured personal loans, and life insurance policies;

3. Notification that some or all of the funded amount may be taxable; a description of the consumer's right of rescission;

4. The total funded amount provided to the consumer under the contract;

5. An itemization of charges;

6. The annual percentage rate of return;

7. The total amount due from the consumer, including charges,

  • if repayment is made any time after the funding contract is executed;

8. A statement that there are no fees or charges to be paid by

  • the consumer other than what is disclosed on the disclosure form;

9. In the event the consumer seeks more than one round of funding

  • Contract, a disclosure providing the cumulative amount due from the consumer
  • For all transactions, including charges under all contracts, if repayment is made
  • Any time after the contracts are executed;

10. A statement that the company has no right to make any decisions regarding the conduct of the legal claim or any settlement or resolution thereof and that the right to make such decisions remains solely with the consumer and his or her attorney;

11. A statement that, if there is no recovery of any money from the consumer's legal claim, the consumer shall owe nothing to the company and that, if the net proceeds of the claim are insufficient to repay the consumer's indebtedness to the company, then the consumer shall owe the company no money in excess of the net proceeds; and

12.Any other statements or disclosures deemed necessary or

  • Appropriate by the Commissioner.

For the most part, this is boilerplate language that most funders should already have in their standard agreements. The only thing to watch for in these disclosures is the final one.  The statute provides the Commissioner with discretion to require more disclosure as he or she sees fit. With this in mind, it's a good idea to periodically check the Commissioner's website for any new orders or regulations.

The statute also requires certain provisions within the contract itself.  As a threshold matter, the contract "shall be written in a clear and coherent manner using words with common, everyday meanings to enable the average consumer who makes a reasonable effort under ordinary circumstances to read and understand the terms of the contract without having to obtain the assistance of a professional."  In other words, no complicated legalese.

The following provisions must also be in every contract:

  1. Definitions of the terms "consumer," "consumer litigation funding," and "consumer litigation funding company."
  2. A right of rescission, allowing the consumer to cancel the contract without penalty or further obligation if, within five business days following the execution of the contract or the consumer's receipt of any portion of the funded amount, the consumer gives notice of the rescission to the company and returns any funds provided to the consumer by the company.
  3. A provision specifying that, in the event of litigation involving the contract and at the election of the consumer, venue shall lie in the  Vermont Superior Court for the county where the consumer resides.
  4. An acknowledgment that the consumer is represented by an attorney in the legal claim and has had an opportunity to discuss the contract with his or her attorney.

Again, these are all fairly standard contract provisions for a consumer agreement.  Just be aware of the requirement that it be written in plain English.  There can be some subjectivity in interpreting what can and cannot be easily comprehended by a layperson.


As of now, the statute places no limits on the fees a litigation financing company can charge.  However, the statute does state that "beginning on or before October 1, 2017, the Commissioner and Attorney General shall report jointly to the General Assembly on the status of consumer litigation funding in Vermont and make any recommendations they deem necessary to improve the regulatory framework of consumer litigation funding, including a recommendation on whether Vermont should limit charges imposed under a consumer litigation funding contract." 

That language makes it seem likely that there will be a limit to charges at some point.  Also, within contract law, excessive fees can be struck as unconscionable.  Basically, keep your fees reasonable and consistent across state lines, and you should be fine.  However, the Commissioner's website should be monitored to determine if a fee limit has been imposed.


The final item litigation financiers should be aware of is the requirement to file an annual report.  It's worth repeating that funders who invest in lawsuits with jurisdiction in Vermont and funders who fund plaintiffs with Vermont residency must file this report.

This report needs to be filed with the Commissioner's office by April first and should contain the following information:

  1. Number of contracts entered into;
  2. Dollar value of funded amounts to consumers;
  3. Dollar value of charges under each contract, itemized and including the annual rate of return;
  4. Dollar amount and number of litigation funding transactions in which the realization to the company was as contracted; and
  5. Dollar amount and number of litigation funding transactions in which the realization to the company was less than contracted.

The statute requires this report to be filed "under oath," meaning it needs to be notarized.


This guide should provide you with everything you need in order to prepare for compliant legal funding in Vermont.  As always, be sure to read the relevant statutes for more information before funding.

Have any questions, thoughts, or think we missed anything? Let me know in the comments below.

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