BILL NUMBER: S3666
SPONSOR: COMRIE
 
TITLE OF BILL:
An act to amend the general business law, in relation to consumer liti-
gation funding
 
PURPOSE OR GENERAL IDEA OF BILL:
The bill establishes specific guidelines and provisions to regulate the
Consumer Litigation Funding Industry in New York State. This bill may be
cited as the "Consumer Litigation Funding Ace.
 
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 and sets interest rate cap
899-fff: clarifies payment schedule of contracted amount 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. By providing consumers with non-recourse litigation funding to
cover expenses while awaiting legal claims, the industry lent support to
many who felt unable to pursue legal action due to financial
constraints. However, as there is no recourse if the claimant loses the
suit, regular lending and collection caps do not apply to these financ-
ing companies. As a result, collected fees have the potential to reach
usurious rates, often unbeknownst to the consumer. The industry is
currently unregulated, exposing potential clients to risk. This legis-
lation instructs companies to submit applications to the Secretary of
State, who awards licensure and registration of companies pursuant to
character and fitness determinations. Additionally, it mandates financ-
ing companies to disclose their fee structure, repayment terms, rights
of rescission, and outlines various prohibitions which will better
educate consumers to the terms of their contract. Furthermore, this
legislation established federally recognized maximum collection rates on
funded amounts, and directs contracts to outline what consumers will owe
at any given time. This also bill includes reporting guidelines t hat
will allow the state to publicize data on the actions of this industry
for accountability purposes. Finally, this legislation also establishes
strict penalties for those found in willing violation of these
provisions.
 
PRIOR LEGISLATIVE HISTORY:
Introduced every year since 2019 and never reported out of Senate
Consumer Protection Committee.
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None
 
EFFECTIVE DATE:
This act shall take effect 180 days after the bill becomes law