Legislation

* § 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;

(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
without 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
applicable fees, are incurred or accrued.

2. The contract shall contain a written acknowledgement by the
attorney 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
consideration 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
transaction.

3. In the event that the acknowledgement required pursuant to
paragraph (c) of subdivision two 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.

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.

* NB Effective June 17, 2026