Legislation

* § 1002. Contract requirements; right of rescission. (a) All
litigation funding contracts shall meet the following requirements:

(i) 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;

(ii) the contract shall be completely filled in when presented to the
consumer for signature;

(iii) the contract shall contain, in twelve point bold type font, a
right of rescission, allowing the consumer to cancel the contract
without penalty or further obligation if, within ten business days after
the funding date, the consumer returns to the litigation funding company
the full amount of the funded amount;

(iv) the contract shall contain a space for the consumer to initial
each page;

(v) a statement that there is nothing to be paid by the consumer other
than the charges that are disclosed in the contract;

(vi) 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 under all contracts,
provided that a litigation funding company may not obtain an interest
that, in aggregate, would result in charges that exceed the funded
amount plus twenty-five percent of the gross proceeds of the consumer's
legal claim;

(vii) a statement of the maximum charges the consumer may be obligated
to pay under the contract;

(viii) a statement that a consumer may be liable for a breach of
contract claim if they materially breach a contract or engage in fraud
or material misrepresentation relating to a contract; and

(ix) a clear explanation of how and when the consumer is obligated to
pay the charges to the litigation funding company, including an
explanation of the consumer's payment obligations if the proceeds of the
legal claim will be paid to the consumer over time.

(b) The contract shall contain a written acknowledgement by the
attorney retained by the consumer in the legal claim that attests to the
following:

(i) the attorney has reviewed the mandatory disclosures in section one
thousand five of this article with the consumer;

(ii) the attorney is being paid on a contingency basis pursuant to a
written fee agreement;

(iii) 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;

(iv) the attorney is obligated to take all reasonable steps to
disburse funds from the legal claim and to ensure that the terms of the
litigation funding contract are fulfilled;

(v) the attorney has not received a referral fee or other
consideration from the litigation funding company in connection with the
litigation funding, nor will the attorney receive such fee or other
consideration in the future; and

(vi) the attorney in the legal claim has provided no tax, public or
private benefit planning, or financial advice regarding this
transaction.

(c) In the event that the acknowledgement required pursuant to
paragraph (iii) of subsection (b) of this section is not completed by
the attorney or firm retained by the consumer in the legal claim, the
contract shall be null and void. The contract shall 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.

(d) 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 a litigation funding contract shall be unenforceable.

* NB Effective June 17, 2026