S T A T E O F N E W Y O R K
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5410
2011-2012 Regular Sessions
I N A S S E M B L Y
February 18, 2011
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Introduced by M. of A. TOWNS -- read once and referred to the Committee
on Judiciary
AN ACT to amend the general obligations law, in relation to the regu-
lation of non-recourse civil litigation advance contracts
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Article 5 of the general obligations law is amended by
adding a new title 8 to read as follows:
TITLE 8
NON-RECOURSE CIVIL LITIGATION ADVANCE CONTRACTS
SECTION 5-801. NON-RECOURSE CIVIL LITIGATION ADVANCE CONTRACTS.
S 5-801. NON-RECOURSE CIVIL LITIGATION ADVANCE CONTRACTS. 1. AS USED
IN THIS SECTION, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
(A) "NON-RECOURSE CIVIL LITIGATION ADVANCE" MEANS A TRANSACTION OR
AGREEMENT WHEREIN A COMPANY MAKES A PAYMENT OF MONEY TO A CONSUMER WHO
EITHER HAS COMMENCED IN THE MANNER PROVIDED BY LAW, OR MAY COMMENCE A
CIVIL ACTION OR PROCEEDING FOR MONEY DAMAGES BEFORE A COURT OF COMPETENT
JURISDICTION IN THIS STATE, IN EXCHANGE FOR THE RIGHT TO COLLECT MONIES
DUE PURSUANT TO THE TERMS OF THE CONTRACT BETWEEN THE CONSUMER AND THE
COMPANY.
(B) "COMPANY" MEANS ANY PERSON, PARTNERSHIP, CORPORATION OR OTHER
BUSINESS ENTITY WHICH ENTERS INTO A NON-RECOURSE CIVIL LITIGATION
ADVANCE TRANSACTION CONTRACT WITH A CONSUMER.
(C) "CONSUMER" MEANS A PERSON OR ENTITY WHO IS BOTH (I) REPRESENTED BY
AN ATTORNEY ADMITTED TO PRACTICE IN THIS STATE AT THE TIME OF ANY
CONTRACT ENTERED INTO WITH A COMPANY; AND (II) HAS COMMENCED, IN THE
MANNER PROVIDED BY LAW, OR MAY COMMENCE A CIVIL ACTION OR PROCEEDING FOR
MONEY DAMAGES BEFORE A COURT OF COMPETENT JURISDICTION IN THIS STATE, IN
EXCHANGE FOR THE RIGHT TO COLLECT MONIES DUE PURSUANT TO THE TERMS OF
THE CONTRACT BETWEEN A CONSUMER AND THE COMPANY.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09617-01-1
A. 5410 2
2. ON AND AFTER THE EFFECTIVE DATE OF THIS SECTION, ALL CONTRACTS
ENTERED INTO FOR A NON-RECOURSE CIVIL LITIGATION ADVANCE SHALL COMPLY
WITH SECTION 5-702 OF THIS CHAPTER, AS WELL AS THE FOLLOWING REQUIRE-
MENTS:
(A) ALL CONTRACTS SHALL BE COMPLETELY FILLED IN AND CONTAIN THE
FOLLOWING DISCLOSURES ON THE FRONT PAGE IN AT LEAST TWELVE-POINT BOLD
TYPE, APPROPRIATELY HEADED:
(I) THE TOTAL DOLLAR AMOUNT TO BE ADVANCED TO THE CONSUMER;
(II) AN ITEMIZATION OF ANY ONE-TIME FEES BROKEN OUT ITEM BY ITEM (E.G.
APPLICATION, PROCESSING, ATTORNEY REVIEW, BROKER OR SIMILAR CHARGES);
(III) THE TOTAL DOLLAR AMOUNT TO BE REPAID TO THE COMPANY BY THE
CONSUMER, IN SIX-MONTH INTERVALS FOR THIRTY-SIX MONTHS, AND INCLUDING
ALL FEES AS WELL AS ANY MINIMUM MONTHLY REQUIRED PAYMENT AMOUNT; AND
(IV) THE PERCENTAGE FEE OR RATE OF RETURN, STATED ON AN ANNUALIZED
BASIS, INCLUDING FREQUENCY OF COMPOUNDING.
(B) THE CONTRACT SHALL PROVIDE THAT THE CONSUMER MAY CANCEL THE
CONTRACT WITHIN FIVE BUSINESS DAYS FOLLOWING THE CONSUMER'S RECEIPT OF
FUNDS, WITHOUT PENALTY OR FURTHER OBLIGATION. THE CONTRACT SHALL CONTAIN
THE FOLLOWING NOTICE WRITTEN IN A CLEAR AND CONSPICUOUS MANNER, ALSO IN
AT LEAST TWELVE-POINT BOLDFACE TYPE: "CONSUMER'S RIGHT TO CANCELLATION:
YOU MAY CANCEL THIS CONTRACT WITHOUT PENALTY OR FURTHER OBLIGATION WITH-
IN FIVE BUSINESS DAYS FROM THE DATE YOU RECEIVE FUNDING FROM (INSERT
NAME OF COMPANY).". THE CONTRACT ALSO SHALL SPECIFY THAT IN ORDER FOR
THE CANCELLATION TO BE EFFECTIVE, THE CONSUMER MUST EITHER RETURN TO THE
COMPANY THE FULL AMOUNT OF DISBURSED FUNDS BY DELIVERING THE COMPANY'S
UNCASHED CHECK TO THE OFFICE ADDRESS OF THE COMPANY, WITHIN FIVE BUSI-
NESS DAYS OF THE DISBURSEMENT OF FUNDS, OR MAIL A NOTICE OF CANCELLATION
AND INCLUDE IN THAT MAILING A RETURN OF THE FULL AMOUNT OF DISBURSED
FUNDS IN THE FORM OF THE COMPANY'S CHECK, OR A REGISTERED OR CERTIFIED
CHECK OR MONEY ORDER, BY INSURED, REGISTERED OR CERTIFIED UNITED STATES
MAIL, POSTMARKED WITHIN FIVE BUSINESS DAYS OF RECEIVING FUNDS FROM THE
COMPANY, AT THE ADDRESS SPECIFIED IN THE CONTRACT FOR SUCH CANCELLATION.
(C) THE CONTRACT SHALL ADDITIONALLY CONTAIN THE FOLLOWING STATEMENT IN
AT LEAST TWELVE-POINT BOLDFACE TYPE: "THE COMPANY AGREES THAT IT SHALL
HAVE NO RIGHT TO AND WILL NOT MAKE ANY DECISIONS WITH RESPECT TO THE
CONDUCT OF THE UNDERLYING CIVIL ACTION OR CLAIM OR ANY SETTLEMENT OR
RESOLUTION THEREOF AND THAT THE RIGHT TO MAKE SUCH DECISIONS REMAIN
SOLELY WITH THE CONSUMER AND THE CONSUMER'S ATTORNEY."
(D) THE CONTRACT SHALL CONTAIN THE INITIALS OF THE CONSUMER ON EACH
PAGE.
(E) THE CONTRACT SHALL ALSO CONTAIN THE FOLLOWING STATEMENT IN AT
LEAST TWELVE-POINT BOLDFACE TYPE LOCATED IMMEDIATELY ABOVE THE PLACE ON
THE CONTRACT WHERE THE CONSUMER'S SIGNATURE IS REQUIRED: "DO NOT SIGN
THIS CONTRACT BEFORE YOU READ IT COMPLETELY OR IF IT CONTAINS ANY BLANK
SPACES. BEFORE YOU SIGN THIS CONTRACT YOU SHOULD OBTAIN THE ADVICE OF
YOUR ATTORNEY. YOU ARE ENTITLED TO A COMPLETELY FILLED IN COPY OF THIS
CONTRACT. DEPENDING ON YOUR CIRCUMSTANCES, YOU MAY WANT TO CONSULT A TAX
BENEFIT PLANNING AND/OR A FINANCIAL PROFESSIONAL."
(F) THE CONTRACT SHALL CONTAIN A WRITTEN CERTIFICATION BY THE CONSUM-
ER'S ATTORNEY OF RECORD THAT HE OR SHE HAS RECEIVED THE CONTRACT AND
EXPLAINED TO THE CONSUMER ITS TERMS, INCLUDING THE ANNUALIZED RATE OF
RETURN APPLIED TO CALCULATE THE AMOUNT TO BE PAID BY THE CONSUMER.
(G) FOR FRENCH AND SPANISH SPEAKING CONSUMERS, THE CONTRACT SHALL ALSO
BE WRITTEN IN THE SAME LANGUAGE IN WHICH THE TERMS HAVE BEEN DISCUSSED,
AS BETWEEN THE COMPANY AND THE CONSUMER. FOR CONSUMERS WHOSE PRIMARY
LANGUAGE IS NEITHER ENGLISH, FRENCH, NOR SPANISH, THE PRINCIPAL TERMS OF
A. 5410 3
THE CONTRACT SHALL BE TRANSLATED IN WRITING INTO THE CONSUMER'S NATIVE
LANGUAGE; THE CONSUMER AND THE COMPANY SHALL SIGN THE TRANSLATED DOCU-
MENT, AND THE TRANSLATOR SHALL SIGN A NOTARIZED AFFIDAVIT OR AFFIRMATION
CONFIRMING THAT THE TERMS OF THE CONTRACT HAVE BEEN PRESENTED TO THE
CONSUMER IN THE CONSUMER'S NATIVE LANGUAGE AND ACKNOWLEDGED BY THE
CONSUMER, IN WRITING.
S 2. This act shall take effect on the ninetieth day after it shall
have become a law.