Bill Text: NY S04478 | 2019-2020 | General Assembly | Introduced


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: Bipartisan Bill

Status: (Introduced) 2019-03-12 - REFERRED TO CONSUMER PROTECTION [S04478 Detail]

Download: New_York-2019-S04478-Introduced.html


                STATE OF NEW YORK
        ________________________________________________________________________
                                          4478
                               2019-2020 Regular Sessions
                    IN SENATE
                                     March 12, 2019
                                       ___________
        Introduced  by Sens. KAPLAN, ORTT -- read twice and ordered printed, and
          when printed to be committed to the Committee on Consumer Protection
        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 consumer litigation funding contract to provide  non-
    17  recourse  funding  of  no  more  than five hundred thousand dollars to a
    18  consumer.
    19    3. "Consumer litigation funding contract" shall  mean  a  contract  to
    20  provide  non-recourse  funding  of  no  more  than five hundred thousand
    21  dollars to a consumer on the contingent  right  to  receive  the  funded
    22  amount  and  agreed  upon charges obtained in the event of a settlement,
    23  judgment or award.
    24    4. "Funded amount" shall mean the amount  of  money  provided  to  the
    25  consumer in consumer litigation financing.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD09439-01-9

        S. 4478                             2
     1    5.  "Resolution date" shall mean the date the funded amount and agreed
     2  upon charges are delivered to the consumer litigation financing company.
     3    §  899-ddd.  Contract  requirements.  1.  Consumer  litigation funding
     4  contracts shall contain a right of rescission, allowing the consumer  to
     5  cancel the consumer litigation funding contract without a penalty if the
     6  consumer returns the full amount of disbursed funds to the company with-
     7  in ten business days.
     8    2.  Consumer  litigation  funding  contracts  shall  contain a written
     9  acknowledgement by the attorney retained by the consumer that attests:
    10    (a) the attorney is being paid on a contingency basis  pursuant  to  a
    11  written fee agreement; and
    12    (b)  the  attorney is not receiving a referral fee from the litigation
    13  funding company in connection with the consumer's funding.
    14    3. Consumer litigation funding contracts shall clearly outline a sche-
    15  duled fee structure that outlines repayment terms including:
    16    (a) the funded amount plus charges written out as itemized amounts;
    17    (b) the charges outlined as a percentage amount exceeding  the  funded
    18  amount; and
    19    (c) itemized one-time fees including paperwork processing and adminis-
    20  trative fees.
    21    4.  Consumer  litigation  funding contracts shall contain a no penalty
    22  provision for the pre-payment of the funded amount prior to the  settle-
    23  ment  of his or her case. Such provision shall release the consumer from
    24  any obligation to share his or her settlement or verdict.
    25    § 899-eee. Prohibitions.  1.  Consumer  litigation  funding  companies
    26  shall  be prohibited from paying, accepting or offering referral fees or
    27  any type of consideration to and from any  medical  providers,  licensed
    28  therapists  or attorneys for referring a consumer to the company for the
    29  purpose of entering into a consumer litigation funding contract.
    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 who has entered into
    34  a consumer litigation funding contract with a consumer litigation  fund-
    35  ing company may have a financial interest in said company.
    36    4.  Consumer  litigation  funding  companies  shall be prohibited from
    37  attempting to obtain, or obtaining a waiver of any remedy, including but
    38  not limited to, compensatory, statutory or punitive  damages,  that  the
    39  consumer might otherwise have.
    40    5.  Consumer  litigation  funding  companies  shall be prohibited from
    41  attempting to effect arbitration or otherwise effect waiver of a consum-
    42  er's right to trial by jury for complaints  arising  from  the  consumer
    43  litigation funding contract.
    44    6.  Consumer  litigation  funding  companies  shall be prohibited from
    45  assigning a consumer litigation funding contract in whole or in part.
    46    7. Maximum amount of charges:
    47    (a) the maximum amount of charges which may be assessed pursuant to  a
    48  consumer  litigation funding contract shall not be in excess of the rate
    49  prescribed in section 190.42 of the penal law  (criminal  usury  in  the
    50  first degree), when expressed as a proportion of the funded amount; and
    51    (b)  any  consumer litigation funding contract which exceeds such rate
    52  shall be considered usurious as defined by section 5-501 of the  general
    53  obligations law.
    54    §  899-fff.  Registration. 1. Each consumer litigation funding company
    55  that wishes to engage in business in the state of New York  shall  first
    56  register with the New York department of financial services.

        S. 4478                             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.
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