The New York State Senate

                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  11257

                          I N  A S S E M B L Y

                              July 25, 2018
                               ___________

Introduced  by COMMITTEE ON RULES -- (at request of M. of A. Magnarelli)
  -- read once and referred to the Committee  on  Consumer  Affairs  and
  Protection

AN  ACT to amend the general business law, in relation to consumer liti-
  gation funding

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Short  title. This act shall be known and may be cited as
the "consumer litigation funding act".
  § 2. Legislative intent. In an effort to promote consumer  protections
related  to  consumer  litigation  funding transactions, this act estab-
lishes that such transactions should be subject to state regulation  and
sets forth requirements regarding disclosure, licensing, funding company
and  attorney  responsibilities  and  limitations,  violations and other
items.
  § 3. The general business law is amended by adding a new article  39-H
to read as follows:
                              ARTICLE 39-H
                    THIRD PARTY LITIGATION FINANCING
SECTION 899-CCC. DEFINITIONS.
        899-DDD. CONTRACT REQUIREMENTS; RIGHT OF RESCISSION.
        899-EEE. PROHIBITIONS AND CHARGE LIMITATIONS.
        899-FFF. CONTRACTED AMOUNTS.
        899-GGG. DISCLOSURES.
        899-HHH. VIOLATIONS.
        899-III. ASSIGNABILITY; LIENS.
        899-JJJ. EFFECT OF COMMUNICATION ON PRIVILEGES.
        899-KKK. REGISTRATION.
        899-LLL. REPORTING.
        899-MMM. SEVERABILITY.
  §  899-CCC.  DEFINITIONS. AS USED IN THIS ARTICLE, THE FOLLOWING TERMS
SHALL HAVE THE FOLLOWING MEANINGS:
  1. "ADVERTISE" MEANS PUBLISHING OR DISSEMINATING ANY  WRITTEN,  AURAL,
ELECTRONIC  OR  PRINTED  COMMUNICATION  OR ANY COMMUNICATION BY MEANS OF

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets

                      [ ] is old law to be omitted.
                                                           LBD16338-02-8

A. 11257                            2

RECORDED TELEPHONE MESSAGES OR TRANSMITTED OR BROADCAST ON RADIO,  TELE-
VISION,  THE  INTERNET  OR SIMILAR COMMUNICATIONS MEDIA, INCLUDING AUDIO
RECORDINGS, FILM STRIPS, MOTION PICTURES AND VIDEOS, PUBLISHED,  DISSEM-
INATED,  CIRCULATED OR PLACED BEFORE THE PUBLIC, DIRECTLY OR INDIRECTLY,
FOR THE PURPOSE OF INDUCING A CONSUMER TO ENTER INTO  A  CONSUMER  LITI-
GATION FUNDING.
  2.  "CHARGES"  MEANS  THE  AMOUNT  OF MONEY TO BE PAID TO THE CONSUMER
LITIGATION FUNDING COMPANY BY OR ON BEHALF OF THE  CONSUMER,  ABOVE  THE
FUNDED  AMOUNT  PROVIDED  BY  OR  ON BEHALF OF THE COMPANY TO A NEW YORK
CONSUMER PURSUANT TO THIS ARTICLE. CHARGES INCLUDE  ALL  ADMINISTRATIVE,
ORIGINATION,  UNDERWRITING OR OTHER FEES NO MATTER HOW DENOMINATED. SUCH
CHARGES SHALL NOT EXCEED THE MAXIMUM ANNUAL PERCENTAGE  RATE  APPLICABLE
TO  CONSUMER CREDIT EXTENDED TO A MEMBER OF THE MILITARY AS PROVIDED FOR
IN TITLE 10, UNITED STATES CODE,  SECTION  987(B).  ANY  CONTRACT  WHICH
EXCEEDS  SUCH  RATE  SHALL  BE CONSIDERED USURIOUS AS DEFINED BY SECTION
5-501 OF THE GENERAL OBLIGATIONS LAW.
  3. "CONSUMER LITIGATION FUNDING" MEANS A NON-RECOURSE  TRANSACTION  IN
WHICH  A  CONSUMER  LITIGATION  FUNDING COMPANY PURCHASES AND A CONSUMER
ASSIGNS TO THE COMPANY A CONTINGENT RIGHT TO RECEIVE AN  AMOUNT  OF  THE
POTENTIAL PROCEEDS OF A SETTLEMENT, JUDGMENT, AWARD, OR VERDICT OBTAINED
IN THE CONSUMER'S LEGAL CLAIM.
  4.  "CONSUMER  LITIGATION FUNDING COMPANY" OR "COMPANY" MEANS A PERSON
OR ENTITY THAT ENTERS INTO A CONSUMER LITIGATION FUNDING CONTRACT OF  NO
MORE THAN FIVE HUNDRED THOUSAND DOLLARS WITH A CONSUMER. THIS TERM SHALL
NOT INCLUDE:
  (A) AN IMMEDIATE FAMILY MEMBER OF THE CONSUMER;
  (B) A BANK, LENDER, FINANCING ENTITY, OR OTHER SPECIAL PURPOSE ENTITY:
  (I)  THAT PROVIDES FINANCING TO A CONSUMER LITIGATION FUNDING COMPANY;
OR
  (II) TO WHICH A CONSUMER LITIGATION FUNDING COMPANY GRANTS A  SECURITY
INTEREST  OR  TRANSFERS  ANY RIGHTS OR INTEREST IN A CONSUMER LITIGATION
FUNDING; OR
  (C) AN ATTORNEY OR ACCOUNTANT WHO PROVIDES SERVICES TO A CONSUMER.
  5. "CONSUMER" MEANS A NATURAL PERSON WHO HAS A PENDING LEGAL CLAIM AND
WHO RESIDES OR IS DOMICILED IN NEW YORK.
  6. "FUNDED AMOUNT" MEANS THE AMOUNT  OF  MONIES  PROVIDED  TO,  OR  ON
BEHALF  OF,  THE  CONSUMER  IN  THE CONSUMER LITIGATION FUNDING. "FUNDED
AMOUNT" EXCLUDES CHARGES.
  7. "FUNDING DATE" MEANS THE DATE ON WHICH THE FUNDED AMOUNT IS  TRANS-
FERRED TO THE CONSUMER BY THE CONSUMER LITIGATION FUNDING COMPANY EITHER
BY  PERSONAL  DELIVERY  OR  VIA  WIRE,  ACH OR OTHER ELECTRONIC MEANS OR
MAILED BY INSURED, CERTIFIED OR REGISTERED UNITED STATES MAIL.
  8. "IMMEDIATE FAMILY MEMBER" MEANS A PARENT; SIBLING; CHILD BY  BLOOD,
ADOPTION, OR MARRIAGE; SPOUSE; GRANDPARENT OR GRANDCHILD.
  9. "LEGAL CLAIM" MEANS A BONA FIDE CIVIL CLAIM OR CAUSE OF ACTION.
  10.  "RESOLUTION  DATE"  MEANS  THE  DATE  THE FUNDED AMOUNT, PLUS THE
AGREED UPON CHARGES, ARE DELIVERED TO THE  CONSUMER  LITIGATION  FUNDING
COMPANY BY THE CONSUMER, THE CONSUMER'S ATTORNEY OR OTHERWISE.
  § 899-DDD. CONTRACT REQUIREMENTS; RIGHT OF RESCISSION. 1. ALL CONSUMER
LITIGATION FUNDING CONTRACTS SHALL MEET THE FOLLOWING REQUIREMENTS:
  (A)  A  CONTRACT SHALL BE WRITTEN IN A CLEAR AND COHERENT MANNER USING
WORDS WITH COMMON, EVERYDAY MEANINGS TO ENABLE THE AVERAGE CONSUMER  WHO
MAKES  A  REASONABLE  EFFORT  UNDER  ORDINARY  CIRCUMSTANCES TO READ AND
UNDERSTAND THE TERMS OF  THE  CONTRACT  WITHOUT  HAVING  TO  OBTAIN  THE
ASSISTANCE OF A PROFESSIONAL;

A. 11257                            3

  (B)  THE  CONTRACT SHALL BE COMPLETELY FILLED IN WHEN PRESENTED TO THE
CONSUMER FOR SIGNATURE;
  (C)  THE  CONTRACT  SHALL  CONTAIN,  IN TWELVE POINT BOLD TYPE FONT, A
RIGHT OF RESCISSION, ALLOWING THE CONSUMER TO CANCEL THE CONTRACT  WITH-
OUT PENALTY OR FURTHER OBLIGATION IF, WITHIN TEN BUSINESS DAYS AFTER THE
FUNDING  DATE,  THE  CONSUMER RETURNS TO THE CONSUMER LITIGATION FUNDING
COMPANY THE FULL AMOUNT OF THE DISBURSED FUNDS;
  (D) THE CONTRACT SHALL CONTAIN THE INITIALS OF THE  CONSUMER  ON  EACH
PAGE;
  (E)  A  STATEMENT  THAT THERE ARE NO FEES OR CHARGES TO BE PAID BY THE
CONSUMER OTHER THAN WHAT IS DISCLOSED ON THE DISCLOSURE FORM;
  (F) IN THE EVENT THE CONSUMER SEEKS MORE THAN ONE  LITIGATION  FUNDING
CONTRACT  FROM  THE  SAME COMPANY, A DISCLOSURE PROVIDING THE CUMULATIVE
AMOUNT DUE FROM THE CONSUMER FOR  ALL  TRANSACTIONS,  INCLUDING  CHARGES
UNDER  ALL  CONTRACTS, IF REPAYMENT IS MADE ANY TIME AFTER THE CONTRACTS
ARE EXECUTED;
  (G) A STATEMENT OF THE MAXIMUM AMOUNT THE CONSUMER MAY BE OBLIGATED TO
PAY UNDER THE CONTRACT OTHER THAN IN A CASE OF MATERIAL BREACH, FRAUD OR
MISREPRESENTATION BY OR ON BEHALF OF THE CONSUMER; AND
  (H) CLEAR AND CONSPICUOUS DETAIL OF HOW CHARGES, INCLUDING ANY  APPLI-
CABLE FEES, ARE INCURRED OR ACCRUED.
  2.  THE CONTRACT SHALL CONTAIN A WRITTEN ACKNOWLEDGEMENT BY THE ATTOR-
NEY RETAINED BY THE CONSUMER IN THE LEGAL  CLAIM  THAT  ATTESTS  TO  THE
FOLLOWING:
  (A)  THE  ATTORNEY  HAS  REVIEWED THE MANDATORY DISCLOSURES IN SECTION
EIGHT HUNDRED NINETY-NINE-GGG OF THIS ARTICLE WITH THE CONSUMER;
  (B) THE ATTORNEY IS BEING PAID ON A CONTINGENCY BASIS  PURSUANT  TO  A
WRITTEN FEE AGREEMENT;
  (C)  ALL  PROCEEDS OF THE LEGAL CLAIM WILL BE DISBURSED VIA EITHER THE
TRUST ACCOUNT OF THE  ATTORNEY  OR  A  SETTLEMENT  FUND  ESTABLISHED  TO
RECEIVE THE PROCEEDS OF THE LEGAL CLAIM ON BEHALF OF THE CONSUMER;
  (D)  THE  ATTORNEY IS OBLIGATED TO DISBURSE FUNDS FROM THE LEGAL CLAIM
AND TAKE ANY OTHER STEPS TO ENSURE THAT  THE  TERMS  OF  THE  LITIGATION
FUNDING CONTRACT ARE FULFILLED;
  (E)  THE  ATTORNEY  HAS NOT RECEIVED A REFERRAL FEE OR OTHER CONSIDER-
ATION FROM THE CONSUMER LITIGATION FUNDING COMPANY  IN  CONNECTION  WITH
THE  CONSUMER LITIGATION FUNDING, NOR WILL THE ATTORNEY RECEIVE SUCH FEE
OR OTHER CONSIDERATION IN THE FUTURE; AND
  (F) THE ATTORNEY IN THE LEGAL CLAIM HAS PROVIDED  NO  TAX,  PUBLIC  OR
PRIVATE  BENEFIT  PLANNING,  OR  FINANCIAL  ADVICE REGARDING THIS TRANS-
ACTION.
  3. SHOULD THE ACKNOWLEDGEMENT REQUIRED IN PARAGRAPH (C) OF SUBDIVISION
TWO OF THIS SECTION NOT BE COMPLETED BY THE ATTORNEY OR FIRM RETAINED BY
THE CONSUMER IN THE LEGAL CLAIM, THE CONTRACT SHALL BE  NULL  AND  VOID.
THE CONTRACT WILL REMAIN VALID AND ENFORCEABLE IN THE EVENT THE CONSUMER
TERMINATES  THE  INITIAL  ATTORNEY  AND/OR  RETAINS  A NEW ATTORNEY WITH
RESPECT TO THE LEGAL CLAIM.
  4. NOTWITHSTANDING PARAGRAPH B OF SUBDIVISION THREE OF  SECTION  5-501
OF THE GENERAL OBLIGATIONS LAW, NO PREPAYMENT PENALTIES OR FEES SHALL BE
CHARGED  OR  COLLECTED  ON  CONSUMER  LITIGATION FUNDING.   A PREPAYMENT
PENALTY ON CONSUMER LITIGATION FUNDING SHALL BE UNENFORCEABLE.
  § 899-EEE. PROHIBITIONS AND CHARGE LIMITATIONS.    1.  CONSUMER  LITI-
GATION FUNDING COMPANIES SHALL BE PROHIBITED FROM:
  (A)  PAYING  OR  OFFERING  TO PAY COMMISSIONS, REFERRAL FEES, OR OTHER
FORMS OF CONSIDERATION TO ANY  ATTORNEY,  LAW  FIRM,  MEDICAL  PROVIDER,

A. 11257                            4

CHIROPRACTOR  OR PHYSICAL THERAPIST OR ANY OF THEIR EMPLOYEES FOR REFER-
RING A CONSUMER TO THE COMPANY;
  (B)  ACCEPTING  ANY COMMISSIONS, REFERRAL FEES, REBATES OR OTHER FORMS
OF CONSIDERATION FROM AN ATTORNEY, LAW FIRM,  MEDICAL  PROVIDER,  CHIRO-
PRACTOR OR PHYSICAL THERAPIST OR ANY OF THEIR EMPLOYEES;
  (C)  INTENTIONALLY ADVERTISING MATERIALLY FALSE OR MISLEADING INFORMA-
TION REGARDING ITS PRODUCTS OR SERVICES;
  (D) REFERRING, IN FURTHERANCE OF AN INITIAL LEGAL FUNDING, A  CUSTOMER
OR  POTENTIAL CUSTOMER TO A SPECIFIC ATTORNEY, LAW FIRM, MEDICAL PROVID-
ER, CHIROPRACTOR OR  PHYSICAL  THERAPIST  OR  ANY  OF  THEIR  EMPLOYEES;
PROVIDED, HOWEVER, IF A CUSTOMER NEEDS LEGAL REPRESENTATION, THE COMPANY
MAY  REFER  THE  CUSTOMER  TO  A LOCAL OR STATE BAR ASSOCIATION REFERRAL
SERVICE;
  (E) KNOWINGLY PROVIDING FUNDING  TO  A  CONSUMER  WHO  HAS  PREVIOUSLY
ASSIGNED  AND/OR SOLD A PORTION OF THE CONSUMER'S RIGHT TO PROCEEDS FROM
HIS OR HER LEGAL CLAIM WITHOUT FIRST MAKING PAYMENT TO AND/OR PURCHASING
A PRIOR UNSATISFIED CONSUMER LITIGATION FUNDING COMPANY'S ENTIRE  FUNDED
AMOUNT  AND  CONTRACTED  CHARGES,  UNLESS  A  LESSER AMOUNT IS OTHERWISE
AGREED TO IN WRITING  BY  THE  CONSUMER  LITIGATION  FUNDING  COMPANIES,
EXCEPT  THAT  MULTIPLE  COMPANIES MAY AGREE TO CONTEMPORANEOUSLY PROVIDE
FUNDING TO A CONSUMER PROVIDED THAT  THE  CONSUMER  AND  THE  CONSUMER'S
ATTORNEY CONSENT TO THE ARRANGEMENT IN WRITING;
  (F)  RECEIVING  ANY RIGHT TO, OR MAKING, ANY DECISIONS WITH RESPECT TO
THE CONDUCT OF THE UNDERLYING LEGAL CLAIM OR ANY  SETTLEMENT  OR  RESOL-
UTION THEREOF. THE RIGHT TO MAKE SUCH DECISIONS SHALL REMAIN SOLELY WITH
THE CONSUMER AND THE ATTORNEY IN THE LEGAL CLAIM;
  (G)  ATTEMPTING  TO  OBTAIN  A  WAIVER  OF  ANY REMEDY OR RIGHT BY THE
CONSUMER, INCLUDING BUT NOT LIMITED TO THE RIGHT TO TRIAL BY JURY; AND
  (H) KNOWINGLY PAYING OR OFFERING TO PAY FOR COURT COSTS,  FILING  FEES
OR  ATTORNEY'S  FEES  EITHER DURING OR AFTER THE RESOLUTION OF THE LEGAL
CLAIM, USING FUNDS FROM THE CONSUMER LITIGATION FUNDING TRANSACTION.
  2. AN ATTORNEY OR LAW FIRM RETAINED BY THE CONSUMER IN THE LEGAL CLAIM
SHALL NOT HAVE A FINANCIAL INTEREST IN THE CONSUMER  LITIGATION  FUNDING
COMPANY OFFERING CONSUMER LITIGATION FUNDING TO THAT CONSUMER.
  3.  ANY  ATTORNEY WHO HAS REFERRED THE CONSUMER TO HIS OR HER RETAINED
ATTORNEY SHALL NOT HAVE A FINANCIAL INTEREST IN THE CONSUMER  LITIGATION
FUNDING COMPANY OFFERING CONSUMER LITIGATION FUNDING TO THAT CONSUMER.
  4.  THE  ATTORNEY  MAY  ONLY  DISCLOSE  PRIVILEGED  INFORMATION TO THE
CONSUMER LITIGATION FUNDING COMPANY WITH  THE  WRITTEN  CONSENT  OF  THE
CONSUMER.
  § 899-FFF. CONTRACTED AMOUNTS. THE CONTRACTED AMOUNT TO BE PAID TO THE
CONSUMER  LITIGATION  COMPANY SHALL BE A PREDETERMINED AMOUNT BASED UPON
INTERVALS OF TIME FROM THE FUNDING DATE THROUGH THE RESOLUTION DATE, AND
SHALL NOT BE DETERMINED AS A PERCENTAGE OF THE RECOVERY FROM  THE  LEGAL
CLAIM.
  §  899-GGG.  DISCLOSURES.  ALL  CONSUMER  LITIGATION FUNDING CONTRACTS
SHALL CONTAIN THE DISCLOSURES SPECIFIED IN  THIS  SECTION,  WHICH  SHALL
CONSTITUTE  MATERIAL  TERMS OF THE CONTRACT. UNLESS OTHERWISE SPECIFIED,
THE DISCLOSURES SHALL BE TYPED IN AT LEAST TWELVE POINT BOLD  TYPE  FONT
AND BE PLACED CLEARLY AND CONSPICUOUSLY WITHIN THE CONTRACT, AS FOLLOWS:
  1. ON THE FRONT PAGE UNDER APPROPRIATE HEADINGS, LANGUAGE SPECIFYING:
  (A) THE FUNDED AMOUNT TO BE PAID TO THE CONSUMER BY THE CONSUMER LITI-
GATION FUNDING COMPANY;
  (B) AN ITEMIZATION OF ONE-TIME CHARGES;
  (C)  THE  MAXIMUM  TOTAL  AMOUNT TO BE ASSIGNED BY THE CONSUMER TO THE
COMPANY, INCLUDING THE FUNDED AMOUNT AND ALL CHARGES; AND

A. 11257                            5

  (D) A PAYMENT SCHEDULE TO INCLUDE THE FUNDED AMOUNT AND CHARGES, LIST-
ING ALL DATES AND THE AMOUNT DUE AT THE END OF EACH ONE  HUNDRED  EIGHTY
DAY  PERIOD FROM THE FUNDING DATE, UNTIL THE DATE THE MAXIMUM AMOUNT DUE
TO THE COMPANY PURSUANT TO THE CONTRACT IS PAID.
  2.  PURSUANT  TO  THE PROVISIONS SET FORTH IN THIS SECTION, WITHIN THE
BODY OF THE CONTRACT:  "CONSUMER'S RIGHT TO CANCELLATION: YOU MAY CANCEL
THIS CONTRACT WITHOUT PENALTY OR FURTHER OBLIGATION WITHIN TEN  BUSINESS
DAYS  AFTER  THE  FUNDING  DATE IF YOU RETURN TO THE CONSUMER LITIGATION
FUNDING COMPANY THE FULL AMOUNT OF THE DISBURSED FUNDS."
  3. THE CONSUMER LITIGATION FUNDING  COMPANY  SHALL  HAVE  NO  ROLE  IN
DECIDING  WHETHER,  WHEN  AND  HOW  MUCH THE LEGAL CLAIM IS SETTLED FOR,
HOWEVER, THE CONSUMER AND CONSUMER'S ATTORNEY MUST NOTIFY THE COMPANY OF
THE OUTCOME OF THE LEGAL CLAIM BY SETTLEMENT OR  ADJUDICATION  PRIOR  TO
THE  RESOLUTION DATE. THE COMPANY MAY SEEK UPDATED INFORMATION ABOUT THE
STATUS OF THE LEGAL CLAIM BUT IN NO EVENT SHALL  THE  COMPANY  INTERFERE
WITH  THE  INDEPENDENT  PROFESSIONAL  JUDGEMENT  OF  THE ATTORNEY IN THE
HANDLING OF THE LEGAL CLAIM OR ANY SETTLEMENT THEREOF.
  4. WITHIN THE BODY OF THE CONTRACT, IN ALL CAPITAL LETTERS IN AT LEAST
TWELVE POINT BOLD TYPE FONT CONTAINED WITHIN A BOX: "THE  FUNDED  AMOUNT
AND  AGREED  UPON  CHARGES  SHALL BE PAID ONLY FROM THE PROCEEDS OF YOUR
LEGAL CLAIM, AND SHALL BE PAID ONLY TO THE EXTENT THAT THERE ARE  AVAIL-
ABLE  PROCEEDS  FROM  YOUR LEGAL CLAIM. YOU WILL NOT OWE (INSERT NAME OF
THE CONSUMER LITIGATION  FUNDING  COMPANY)  ANYTHING  IF  THERE  ARE  NO
PROCEEDS  FROM  YOUR  LEGAL CLAIM, UNLESS YOU HAVE VIOLATED ANY MATERIAL
TERM OF THIS CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST  (INSERT  NAME
OF CONSUMER LITIGATION FUNDING COMPANY)."
  5.  LOCATED  IMMEDIATELY  ABOVE  THE  PLACE  ON THE CONTRACT WHERE THE
CONSUMER'S SIGNATURE IS REQUIRED, IN TWELVE POINT BOLD  TYPE  FONT:  "DO
NOT  SIGN THIS CONTRACT BEFORE YOU READ IT COMPLETELY.  DO NOT SIGN THIS
CONTRACT IF IT  CONTAINS  ANY  BLANK  SPACES.  YOU  ARE  ENTITLED  TO  A
COMPLETELY FILLED-IN COPY OF THE CONTRACT BEFORE YOU SIGN THIS CONTRACT.
YOU  SHOULD OBTAIN THE ADVICE OF ANY ATTORNEY.  DEPENDING ON THE CIRCUM-
STANCES, YOU MAY WANT TO CONSULT A TAX, PUBLIC OR PRIVATE BENEFITS PLAN-
NING, OR FINANCIAL PROFESSIONAL. YOU ACKNOWLEDGE THAT YOUR  ATTORNEY  IN
THE LEGAL CLAIM HAS PROVIDED NO TAX, PUBLIC OR PRIVATE BENEFIT PLANNING,
OR FINANCIAL ADVICE REGARDING THIS TRANSACTION.  YOU FURTHER ACKNOWLEDGE
THAT YOUR ATTORNEY HAS EXPLAINED THE TERMS AND CONDITIONS OF THE CONSUM-
ER LITIGATION FUNDING CONTRACT."
  6.  A COPY OF THE EXECUTED CONTRACT SHALL PROMPTLY BE DELIVERED TO THE
ATTORNEY FOR THE CONSUMER.
  § 899-HHH. VIOLATIONS. 1. ANY COMPANY FOUND IN  WILLFUL  VIOLATION  OF
ANY PROVISION OF THIS ARTICLE IN A SPECIFIC FUNDING CASE: (A) WAIVES ITS
RIGHT  TO  RECOVER  BOTH  THE  FUNDED AMOUNT AND ANY AND ALL CHARGES, AS
DEFINED IN SUBDIVISION TWO OF SECTION EIGHT HUNDRED  NINETY-NINE-CCC  OF
THIS  ARTICLE,  IN  THAT  PARTICULAR CASE; AND (B) SHALL BE LIABLE FOR A
CIVIL PENALTY OF NOT MORE THAN FIVE THOUSAND DOLLARS FOR EACH VIOLATION,
WHICH SHALL ACCRUE TO THE STATE OF NEW YORK AND MAY BE  RECOVERED  IN  A
CIVIL ACTION BROUGHT BY THE ATTORNEY GENERAL.
  2. NOTHING IN THIS ARTICLE SHALL BE CONSTRUED TO RESTRICT THE EXERCISE
OF  POWERS OR THE PERFORMANCE OF THE DUTIES OF THE NEW YORK STATE ATTOR-
NEY GENERAL, WHICH HE OR SHE IS AUTHORIZED TO  EXERCISE  OR  PERFORM  BY
LAW.
  § 899-III. ASSIGNABILITY; LIENS. 1. THE CONTINGENT RIGHT TO RECEIVE AN
AMOUNT  OF  THE  POTENTIAL  PROCEEDS OF A LEGAL CLAIM IS ASSIGNABLE BY A
CONSUMER.

A. 11257                            6

  2. ONLY ATTORNEY'S LIENS RELATED TO  THE  LEGAL  CLAIM  WHICH  IS  THE
SUBJECT OF THE CONSUMER LITIGATION FUNDING OR MEDICARE OR OTHER STATUTO-
RY LIENS RELATED TO THE LEGAL CLAIM SHALL TAKE PRIORITY OVER ANY LIEN OF
THE  CONSUMER  LITIGATION  FUNDING  COMPANY.  ALL OTHER LIENS SHALL TAKE
PRIORITY BY NORMAL OPERATION OF LAW.
  §  899-JJJ.  EFFECT  OF COMMUNICATION ON PRIVILEGES. ALL COMMUNICATION
BETWEEN THE CONSUMER'S ATTORNEY IN THE  LEGAL  CLAIM  AND  THE  CONSUMER
LEGAL FUNDING COMPANY AS IT PERTAINS TO THE CONSUMER LEGAL FUNDING SHALL
FALL WITHIN THE SCOPE OF THE ATTORNEY CLIENT PRIVILEGE, INCLUDING, WITH-
OUT LIMITATION, THE WORK-PRODUCT DOCTRINE.
  §  899-KKK.  REGISTRATION.  1.  UNLESS  A  CONSUMER LITIGATION FUNDING
COMPANY HAS FIRST REGISTERED WITH THE STATE OF NEW YORK PURSUANT TO THIS
ARTICLE, THE COMPANY MAY NOT ENGAGE IN THE BUSINESS  OF  CONSUMER  LITI-
GATION FUNDING IN THIS STATE.
  2.  AN APPLICANT'S REGISTRATION MUST BE FILED IN THE MANNER PRESCRIBED
BY THE SECRETARY OF STATE AND MUST CONTAIN ALL THE INFORMATION  REQUIRED
BY  THE  DEPARTMENT  OF STATE TO MAKE AN EVALUATION OF THE CHARACTER AND
FITNESS OF THE APPLICANT COMPANY. THE INITIAL APPLICATION MUST BE ACCOM-
PANIED BY A FIVE HUNDRED DOLLAR FEE. A RENEWAL REGISTRATION MUST INCLUDE
A TWO HUNDRED DOLLAR FEE. A REGISTRATION MUST BE RENEWED EVERY TWO YEARS
AND EXPIRES ON THE THIRTIETH OF SEPTEMBER.
  3. A CERTIFICATE OF REGISTRATION MAY NOT BE ISSUED UNLESS THE  DEPART-
MENT  OF STATE, UPON INVESTIGATION, FINDS THAT THE CHARACTER AND FITNESS
OF THE APPLICANT COMPANY, AND OF THE OFFICERS AND DIRECTORS THEREOF, ARE
SUCH AS TO WARRANT BELIEF THAT THE BUSINESS WILL  BE  OPERATED  HONESTLY
AND FAIRLY WITHIN THE PURPOSES OF THIS ARTICLE.
  4.  EVERY  REGISTRANT  SHALL ALSO, AT THE TIME OF FILING SUCH APPLICA-
TION, FILE WITH THE DEPARTMENT OF STATE, IF THE DEPARTMENT OF  STATE  SO
REQUIRES,  A  BOND  SATISFACTORY TO THE DEPARTMENT OF STATE IN AN AMOUNT
NOT TO EXCEED FIFTY THOUSAND DOLLARS. IN LIEU OF THE BOND AT THE  OPTION
OF  THE  REGISTRANT,  THE  REGISTRANT  MAY POST AN IRREVOCABLE LETTER OF
CREDIT. THE TERMS OF THE BOND MUST RUN CONCURRENT  WITH  THE  PERIOD  OF
TIME  DURING  WHICH  THE  REGISTRATION  WILL BE IN EFFECT. THE BOND MUST
PROVIDE THAT THE REGISTRANT WILL FAITHFULLY CONFORM TO AND ABIDE BY  THE
PROVISIONS  OF THIS ARTICLE AND TO ALL RULES LAWFULLY MADE BY THE ADMIN-
ISTRATOR UNDER THIS ACT AND TO ANY SUCH PERSON OR PERSONS  ANY  AND  ALL
AMOUNTS  OF  MONEY  THAT MAY BECOME DUE OR OWING TO THE STATE OR TO SUCH
PERSON OR PERSONS FROM THE REGISTRANT UNDER AND BY VIRTUE OF THIS  ARTI-
CLE DURING THE PERIOD FOR WHICH THE BOND IS GIVEN.
  5.  UPON WRITTEN REQUEST, THE APPLICANT SHALL BE ENTITLED TO A HEARING
ON THE QUESTION OF THE APPLICANT'S QUALIFICATIONS FOR REGISTRATION IF:
  (A) THE DEPARTMENT OF STATE HAS NOTIFIED THE APPLICANT IN WRITING THAT
THE APPLICATION HAS BEEN DENIED, OR
  (B) THE DEPARTMENT OF STATE HAS NOT ISSUED A REGISTRATION WITHIN SIXTY
DAYS AFTER THE APPLICATION FOR THE REGISTRATION WAS FILED.
  6. A REQUEST FOR A HEARING MAY NOT BE  MADE  MORE  THAN  FIFTEEN  DAYS
AFTER  THE  DEPARTMENT HAS MAILED A WRITTEN NOTICE TO THE APPLICANT THAT
THE APPLICATION HAS BEEN DENIED AND STATING IN SUBSTANCE THE  DEPARTMENT
OF STATE'S FINDINGS SUPPORTING DENIAL OF THE APPLICATION.
  7.  NOTWITHSTANDING  THE PRIOR APPROVAL REQUIREMENT OF SUBDIVISION ONE
OF THIS SECTION, A CONSUMER LITIGATION FUNDING COMPANY  THAT  REGISTERED
WITH  THE DEPARTMENT OF STATE BETWEEN THE EFFECTIVE DATE OF THIS ARTICLE
OR WHEN THE DEPARTMENT OF STATE HAS MADE APPLICATIONS AVAILABLE  TO  THE
PUBLIC,  WHICHEVER  IS LATER, AND ONE HUNDRED EIGHTY DAYS THEREAFTER MAY
ENGAGE IN CONSUMER LITIGATION FUNDING WHILE THE  COMPANY'S  REGISTRATION
IS PENDING APPROVAL WITH THE DEPARTMENT OF STATE. ALL FUNDING AGREEMENTS

A. 11257                            7

ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF THIS ARTICLE ARE NOT SUBJECT
TO THE TERMS OF THIS ARTICLE.
  8. NO CONSUMER LITIGATION FUNDING COMPANY MAY USE ANY FORM OF CONSUMER
LITIGATION  FUNDING CONTRACT IN THIS STATE UNLESS IT HAS BEEN FILED WITH
THE DEPARTMENT OF STATE IN ACCORDANCE WITH  THE  FILING  PROCEDURES  SET
FORTH BY THE SECRETARY OF STATE.
  9.  THE  SECRETARY  OF  STATE  IS HEREBY AUTHORIZED TO ADOPT RULES AND
REGULATIONS TO IMPLEMENT THE PROVISIONS OF THIS SECTION AS NEEDED.
  § 899-LLL. REPORTING. 1. EACH CONSUMER LITIGATION FUNDING COMPANY THAT
ENGAGES IN BUSINESS IN THE STATE SHALL SUBMIT A REPORT TO THE DEPARTMENT
OF FINANCIAL SERVICES NO LATER THAN THE THIRTY-FIRST OF JANUARY OF  EACH
YEAR SPECIFYING:
  (A) NUMBER OF CONSUMER LITIGATION FUNDINGS BY THE COMPANY;
  (B) SUMMATION OF FUNDED AMOUNTS IN DOLLAR FIGURE; AND
  (C)  ANNUAL  PERCENTAGE  CHARGED  TO EACH CONSUMER WHERE REPAYMENT WAS
MADE.
  2. THE DEPARTMENT OF STATE SHALL MAKE THESE FIGURES AVAILABLE  TO  THE
PUBLIC,  IN  A MANNER WHICH MAINTAINS THE CONFIDENTIALITY OF THE NAME OF
EACH COMPANY AND CONSUMER, NO LATER THAN ONE YEAR AFTER THE REPORTS  ARE
DELIVERED.
  §  899-MMM. SEVERABILITY. IF ANY PROVISION OF THIS ARTICLE IS, FOR ANY
REASON, DECLARED UNCONSTITUTIONAL OR INVALID, IN WHOLE OR  IN  PART,  BY
ANY COURT OF COMPETENT JURISDICTION, SUCH PORTION SHALL BE DEEMED SEVER-
ABLE,  AND  SUCH  UNCONSTITUTIONALITY OR INVALIDITY SHALL NOT AFFECT THE
VALIDITY OF THE REMAINING PORTIONS  OF  THIS  ARTICLE,  WHICH  REMAINING
PORTIONS SHALL CONTINUE IN FULL FORCE AND EFFECT.
  § 4. This act shall take effect on the one hundred eightieth day after
it  shall have become a law; provided, however, it shall not apply or in
any way affect or invalidate any consumer litigation funding  previously
effectuated prior to the effective date of this act.