Bill Text: NY A09241 | 2015-2016 | General Assembly | Amended

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Bill Title: Establishes contract requirements for third party litigation financing which includes requiring contracts to contain a right of rescission, a written acknowledgement by the attorney retained, a clear outline of the scheduled fee structure and a no penalty provision.

Spectrum: Strong Partisan Bill (Democrat 12-1)

Status: (Introduced - Dead) 2016-06-17 - ordered to third reading rules cal.540 [A09241 Detail]

Download: New_York-2015-A09241-Amended.html

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                STATE OF NEW YORK
        ________________________________________________________________________
                                         9241--C
                   IN ASSEMBLY
                                    February 4, 2016
                                       ___________
        Introduced  by  M.  of  A.  SIMANOWITZ,  GOTTFRIED, ZEBROWSKI, BRINDISI,
          TITONE, SEPULVEDA, HYNDMAN, DILAN -- Multi-Sponsored by --  M.  of  A.
          BRENNAN,  COOK,  FRIEND,  ROBINSON, SIMON -- read once and referred to
          the  Committee  on  Consumer  Affairs  and  Protection  --   committee
          discharged, bill amended, ordered reprinted as amended and recommitted
          to  said  committee -- reported and referred to the Committee on Codes
          -- committee discharged, bill amended, ordered  reprinted  as  amended
          and  recommitted to said committee -- again reported from said commit-
          tee with amendments, 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  Assem-
        bly, do enact as follows:
     1    Section 1. The general business law is amended by adding a new article
     2  39-H to read as follows:
     3                                 ARTICLE 39-H
     4                      THIRD PARTY LITIGATION FINANCING
     5  Section 899-ccc. Definitions.
     6          899-ddd. Contract requirements.
     7          899-eee. Prohibitions.
     8          899-fff. Registration.
     9          899-ggg. Penalty for violation.
    10    §  899-ccc.  Definitions. As used in this article, the following terms
    11  shall have the following meanings:
    12    1. "Charges" shall mean the amount of money to be paid to the consumer
    13  litigation funding company that exceeds the funded amount  of  principal
    14  loan.
    15    2. "Consumer litigation funding company" shall mean a person or entity
    16  that enters into a non-recourse transaction wherein the company provides
    17  funds to a consumer on the contingent right to receive the funded amount
    18  and  agreed upon charges obtained in the event of a settlement, judgment
    19  or award.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD13354-07-6
        A. 9241--C                          2
     1    3. "Funded amount" shall mean the amount  of  money  provided  to  the
     2  consumer in consumer litigation financing.
     3    4.  "Resolution date" shall mean the date the funded amount and agreed
     4  upon charges are delivered to the consumer litigation financing company.
     5    § 899-ddd. Contract requirements. 1. Contracts shall contain  a  right
     6  of  rescission,  allowing  the consumer to cancel the contract without a
     7  penalty if the consumer returns the full amount of  disbursed  funds  to
     8  the company within ten business days.
     9    2.  Contracts  shall contain a written acknowledgement by the attorney
    10  retained by the consumer that attests:
    11    (a) the attorney is being paid on a contingency basis  pursuant  to  a
    12  written fee agreement; and
    13    (b)  the  attorney is not receiving a referral fee from the litigation
    14  funding company in connection with the consumer's funding.
    15    3. Contracts shall clearly outline  a  scheduled  fee  structure  that
    16  outlines repayment terms including:
    17    (a) the funded amount plus charges written out as itemized amounts;
    18    (b)  the  charges outlined as a percentage amount exceeding the funded
    19  amount; and
    20    (c) itemized one-time fees including paperwork processing and adminis-
    21  trative fees.
    22    4. Contracts shall contain a no penalty provision for the  pre-payment
    23  of  the  funded  amount prior to the settlement of his or her case. Such
    24  provision shall release the consumer from any obligation to share his or
    25  her settlement or verdict.
    26    § 899-eee. Prohibitions.  1.  Consumer  litigation  funding  companies
    27  shall  be prohibited from paying, accepting or offering referral fees or
    28  any type of consideration to and from any  medical  providers,  licensed
    29  therapists or attorneys for referring a consumer to the company.
    30    2.  The company shall be prohibited from making any inquiries with the
    31  consumer's representative attorney that would violate the terms  of  the
    32  attorney-client privilege at any point in time.
    33    3.  No attorney or law firm retained by a consumer that utilizes liti-
    34  gation financing may have a financial interest in said company.
    35    4. Consumer litigation funding  companies  shall  be  prohibited  from
    36  attempting to obtain, or obtaining a waiver of any remedy, including but
    37  not  limited  to,  compensatory, statutory or punitive damages, that the
    38  consumer might otherwise have.
    39    5. Consumer litigation funding  companies  shall  be  prohibited  from
    40  attempting to effect arbitration or otherwise effect waiver of a consum-
    41  er's  right  to  trial  by jury for complaints arising from the consumer
    42  litigation funding transaction.
    43    6. Consumer litigation funding  companies  shall  be  prohibited  from
    44  assigning a consumer litigation funding contract in whole or in part.
    45    7. Maximum amount of charges:
    46    (a)  the maximum amount of charges which may be assessed pursuant to a
    47  consumer litigation funding contract shall not be in excess of the  rate
    48  prescribed in section fourteen-a of the banking law, when expressed as a
    49  proportion of the funded amount; and
    50    (b)  any  consumer litigation funding contract which exceeds such rate
    51  shall be considered usurious as defined by section 5-501 of the  general
    52  obligations law.
    53    §  899-fff.  Registration. 1. Each consumer litigation funding company
    54  that wishes to engage in business in the state of New York  shall  first
    55  register with the New York department of financial services.
        A. 9241--C                          3
     1    2.  Each applicant's registration must be filed in a manner prescribed
     2  by the New York department of financial services with an initial  accom-
     3  panied  fee of five hundred dollars. Registrations must be renewed every
     4  two years on or before the thirtieth day of September.
     5    3.  The  New York department of financial services shall issue certif-
     6  icates of registration after both understanding  and  attesting  to  the
     7  character and fitness of the applicant company with sufficient reason to
     8  believe the company will operate honestly and fairly.
     9    §  899-ggg.  Penalty  for violation. Any company found in violation of
    10  any provisions of this article in a specific funding  case,  waives  its
    11  right  to recover both the funded amount and any additional fees in that
    12  particular case.
    13    § 2. This act shall take effect on the one hundred eightieth day after
    14  it shall have become a law.