What's happening
This bill regulates third party litigation funding companies, establishing contract requirements, prohibitions, registration, fee limits, and penalties for violations.
Why it matters
Protects consumers from predatory practices. by requiring clear disclosures, limiting allowable fees to rates below criminal usury, and ensuring consumers can rescind contracts without penalty within 10 business days.
Reduces conflicts of interest and maintains legal ethics. by prohibiting attorneys, medical providers, and therapists from receiving referral fees, barring attorneys from holding financial interests in litigation funding companies, and requiring attorney acknowledgment of ethical compliance.
Increases industry oversight and accountability. by mandating registration and regular renewal with the Department of Financial Services, including character and fitness review for companies wishing to operate in New York.
Empowers consumers in legal funding arrangements. by banning penalty fees for early repayment, prohibiting forced arbitration or jury trial waivers, and ensuring companies cannot assign contracts or demand consumer waivers of legal remedies. Violation of these rules results in the funding company forfeiting both principal and fees in that case.
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Who cares
Consumer litigation funding companies
The bill would require state registration, cap charges, restrict contract terms and make companies forfeit repayment in any funding case where they violate its requirements.
Consumers seeking litigation funding
The bill would require itemized fee disclosures, allow cancellation within ten business days if funds are returned and prohibit penalties for prepayment before settlement.
Attorneys representing funded consumers
The bill would require written acknowledgments about contingency fees and referral payments, bar financial interests in their clients’ funding companies and prohibit funder inquiries that violate attorney-client privilege.
New York Department of Financial Services
The bill would require the department to register funding companies and assess their character and fitness before issuing registration certificates.
Headline styles
Regulate Lawsuit Funding Firms
Plain English, a few words. Used as the page title.
Sponsors
18 Co-sponsors
2 Multi-sponsors
History
- Print number 8653a
- Amend and recommit to consumer affairs and protection
- Referred to consumer affairs and protection
- Referred to consumer affairs and protection
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Regulate Litigation Funding Companies
In Senate Committee · Consumer Protection · Sponsor Robert Ortt
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
8653--A
2017-2018 Regular Sessions
IN ASSEMBLY
September 1, 2017
Introduced by M. of A. MAGNARELLI, TAYLOR, VANEL, COOK, SIMON, SEAWRIGHT, NIOU, RIVERA, WRIGHT, WOERNER, MAGEE, D'URSO, ARROYO, LAVINE, JENNE, McDONALD, WILLIAMS, FAHY -- Multi-Sponsored by -- M. of A. DE LA ROSA, SCHIMMINGER -- read once and referred to the Committee on Consumer Affairs and Protection -- recommitted to the Committee on in accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the general business law, in relation to third party litigation financing
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The general business law is amended by adding a new article 39-H to read as follows:
ARTICLE 39-H
THIRD PARTY LITIGATION FINANCING Section 899-ccc. Definitions.
899-ddd. Contract requirements.
899-eee. Prohibitions.
899-fff. Registration.
899-ggg. Penalty for violation.
§ 899-ccc. Definitions. As used in this article, the following terms shall have the following meanings:
1. "Charges" shall mean the amount of money to be paid to the consumer litigation funding company that exceeds the funded amount of principal loan.
2. "Consumer litigation funding company" shall mean a person or entity that enters into a consumer litigation funding contract to provide nonrecourse funding of no more than five hundred thousand dollars to a consumer.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD04763-06-8
A. 8653--A 2
3. "Consumer litigation funding contract" shall mean a contract to provide non-recourse funding of no more than five hundred thousand dollars to a consumer on the contingent right to receive the funded amount and agreed upon charges obtained in the event of a settlement, judgment or award.
4. "Funded amount" shall mean the amount of money provided to the consumer in consumer litigation financing.
5. "Resolution date" shall mean the date the funded amount and agreed upon charges are delivered to the consumer litigation financing company.
§ 899-ddd. Contract requirements. 1. Consumer litigation funding contracts shall contain a right of rescission, allowing the consumer to cancel the consumer litigation funding contract without a penalty if the consumer returns the full amount of disbursed funds to the company within ten business days.
2. Consumer litigation funding contracts shall contain a written acknowledgement by the attorney retained by the consumer that attests:
(a) the attorney is being paid on a contingency basis pursuant to a written fee agreement; and
(b) the attorney is not receiving a referral fee from the litigation funding company in connection with the consumer's funding.
3. Consumer litigation funding contracts shall clearly outline a scheduled fee structure that outlines repayment terms including:
(a) the funded amount plus charges written out as itemized amounts;
(b) the charges outlined as a percentage amount exceeding the funded amount; and
(c) itemized one-time fees including paperwork processing and administrative fees.
4. Consumer litigation funding contracts shall contain a no penalty provision for the pre-payment of the funded amount prior to the settlement of his or her case. Such provision shall release the consumer from any obligation to share his or her settlement or verdict.
§ 899-eee. Prohibitions. 1. Consumer litigation funding companies shall be prohibited from paying, accepting or offering referral fees or any type of consideration to and from any medical providers, licensed therapists or attorneys for referring a consumer to the company for the purpose of entering into a consumer litigation funding contract.
2. The company shall be prohibited from making any inquiries with the consumer's representative attorney that would violate the terms of the attorney-client privilege at any point in time.
3. No attorney or law firm retained by a consumer who has entered into a consumer litigation funding contract with a consumer litigation funding company may have a financial interest in said company.
4. Consumer litigation funding companies shall be prohibited from attempting to obtain, or obtaining a waiver of any remedy, including but not limited to, compensatory, statutory or punitive damages, that the consumer might otherwise have.
5. Consumer litigation funding companies shall be prohibited from attempting to effect arbitration or otherwise effect waiver of a consumer's right to trial by jury for complaints arising from the consumer litigation funding contract.
6. Consumer litigation funding companies shall be prohibited from assigning a consumer litigation funding contract in whole or in part.
7. Maximum amount of charges:
(a) the maximum amount of charges which may be assessed pursuant to a consumer litigation funding contract shall not be in excess of the rate
A. 8653--A 3
prescribed in section 190.42 of the penal law (criminal usury in the first degree), when expressed as a proportion of the funded amount; and
(b) any consumer litigation funding contract which exceeds such rate shall be considered usurious as defined by section 5-501 of the general obligations law.
§ 899-fff. Registration. 1. Each consumer litigation funding company that wishes to engage in business in the state of New York shall first register with the New York department of financial services.
2. Each applicant's registration must be filed in a manner prescribed by the New York department of financial services with an initial accompanied fee of five hundred dollars. Registrations must be renewed every two years on or before the thirtieth day of September.
3. The New York department of financial services shall issue certificates of registration after both understanding and attesting to the character and fitness of the applicant company with sufficient reason to believe the company will operate honestly and fairly.
§ 899-ggg. Penalty for violation. Any company found in violation of any provisions of this article in a specific funding case, waives its right to recover both the funded amount and any additional fees in that particular case.
§ 2. This act shall take effect on the one hundred eightieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.