BILL NUMBER: S1104A
SPONSOR: COONEY
 
TITLE OF BILL:
An act to amend the general business law, in relation to consumer liti-
gation funding
 
PURPOSE:
The purpose of this bill is to establish provisions to regulate' the
Consumer Litigation Funding Industry in New York State. This bill may be
cited as the "Consumer Litigation Funding Act".
 
SUMMARY OF PROVISIONS:
Section 1 Relates the short title of the bill. Section 2 Clarifies the
legislative intent.
Section 3 Amends the general business law by adding a new article, 39-H,
which specifies guidelines of regulation as follows:
899-ccc: Provides definitions.
899-ddd: Provides contract requirements including rights of rescission.
899-eee: Sets forth prohibitions. Limits the maximum recovery of the
financing company to 25% of the gross recovery of the claim.
899-fff: Clarifies payment schedule of the funded amount and charges
from the consumer to the consumer litigation company.
899-ggg: Sets forth necessary disclosure language in contracts.
899-hhh: Provides penalties for violations of this bill.
899-iii: Clarifies assignability of claims.
899-jjj: Provides confidentiality of communications.
899-kkk: Sets forth registration and licensing requirements.
899-111: Sets forth reporting requirements.
899-mmm: Severability clause.
Section 4 sets the effective date.
 
JUSTIFICATION:
Consumer Litigation Financing emerged as an industry in the US in the
1990s. Currently, the industry is not regulated in New York State. As a
result, several "bad actors" entered the business, who often acted in
bad faith and charged exorbitant fees for the services provided and
engaged in other bad practices. The instant legislation provides a set
of robust provisions that, if enacted, would tightly regulate the
consumer litigation financing industry, and protect consumers of such
services.
The bill sets forth the required contract and disclosure requirements to
ensure consumers are fully aware of the proposed transaction and imposes
a cap on charges that limit the financing companies' recovery to 25% of
the gross recovery of the case. A ten-day right of rescission is also
included to further protect the consumer. The bill also provides that
litigation finance companies must submit a registration application
containing all the information that the Department of State needs to
evaluate the character, fitness, and financial stability of the appli-
cant. Such application must include a suitable bond and be approved by
the Department prior to a certificate of registration being issued.
 
LEGISLATIVE HISTORY:
S.41468/A.7655B: of 2023-24: Passed Senate
S.705 of 2021-22
S. 4555/A. 674 of 2019-20: Advanced to Third Reading Calendar
2017-2018: S.9105 passed Senate
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall take effect 180 days after it shall have become a law;
provided, however, it shall 11!6t apply or in any way affect or invali-
date any consumer litigation funding previously effectuated prior to the
effective date of this act.