Bill Text: NY S08006 | 2015-2016 | 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: Partisan Bill (Republican 2-0)
Status: (Engrossed - Dead) 2016-06-17 - referred to ways and means [S08006 Detail]
Download: New_York-2015-S08006-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 8006 IN SENATE June 3, 2016 ___________ Introduced by Sen. 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 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. 20 3. "Funded amount" shall mean the amount of money provided to the 21 consumer in consumer litigation financing. 22 4. "Resolution date" shall mean the date the funded amount and agreed 23 upon charges are delivered to the consumer litigation financing company. 24 § 899-ddd. Contract requirements. 1. Contracts shall contain a right 25 of rescission, allowing the consumer to cancel the contract without a 26 penalty if the consumer returns the full amount of disbursed funds to 27 the company within ten business days. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD13354-08-6S. 8006 2 1 2. Contracts shall contain a written acknowledgement by the attorney 2 retained by the consumer that attests: 3 (a) the attorney is being paid on a contingency basis pursuant to a 4 written fee agreement; and 5 (b) the attorney is not receiving a referral fee from the litigation 6 funding company in connection with the consumer's funding. 7 3. Contracts shall clearly outline a scheduled fee structure that 8 outlines repayment terms including: 9 (a) the funded amount plus charges written out as itemized amounts; 10 (b) the charges outlined as a percentage amount exceeding the funded 11 amount; and 12 (c) itemized one-time fees including paperwork processing and adminis- 13 trative fees. 14 4. Contracts shall contain a no penalty provision for the pre-payment 15 of the funded amount prior to the settlement of his or her case. Such 16 provision shall release the consumer from any obligation to share his or 17 her settlement or verdict. 18 § 899-eee. Prohibitions. 1. Consumer litigation funding companies 19 shall be prohibited from paying, accepting or offering referral fees or 20 any type of consideration to and from any medical providers, licensed 21 therapists or attorneys for referring a consumer to the company. 22 2. The company shall be prohibited from making any inquiries with the 23 consumer's representative attorney that would violate the terms of the 24 attorney-client privilege at any point in time. 25 3. No attorney or law firm retained by a consumer that utilizes liti- 26 gation financing may have a financial interest in said company. 27 4. Consumer litigation funding companies shall be prohibited from 28 attempting to obtain, or obtaining a waiver of any remedy, including but 29 not limited to, compensatory, statutory or punitive damages, that the 30 consumer might otherwise have. 31 5. Consumer litigation funding companies shall be prohibited from 32 attempting to effect arbitration or otherwise effect waiver of a consum- 33 er's right to trial by jury for complaints arising from the consumer 34 litigation funding transaction. 35 6. Consumer litigation funding companies shall be prohibited from 36 assigning a consumer litigation funding contract in whole or in part. 37 7. Maximum amount of charges: 38 (a) the maximum amount of charges which may be assessed pursuant to a 39 consumer litigation funding contract shall not be in excess of the rate 40 prescribed in section fourteen-a of the banking law, when expressed as a 41 proportion of the funded amount; and 42 (b) any consumer litigation funding contract which exceeds such rate 43 shall be considered usurious as defined by section 5-501 of the general 44 obligations law. 45 § 899-fff. Registration. 1. Each consumer litigation funding company 46 that wishes to engage in business in the state of New York shall first 47 register with the New York department of financial services. 48 2. Each applicant's registration must be filed in a manner prescribed 49 by the New York department of financial services with an initial accom- 50 panied fee of five hundred dollars. Registrations must be renewed every 51 two years on or before the thirtieth day of September. 52 3. The New York department of financial services shall issue certif- 53 icates of registration after both understanding and attesting to the 54 character and fitness of the applicant company with sufficient reason to 55 believe the company will operate honestly and fairly.S. 8006 3 1 § 899-ggg. Penalty for violation. Any company found in violation of 2 any provisions of this article in a specific funding case, waives its 3 right to recover both the funded amount and any additional fees in that 4 particular case. 5 § 2. This act shall take effect on the one hundred eightieth day after 6 it shall have become a law.
