New YorkA 94422025-2026 Regular SessionHouseWALLET

Relates to litigation funding

Sponsored By: William Magnarelli (Democratic)

Became Law

CONSUMER AFFAIRS AND PROTECTIONCODESRULES

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Bill Overview

Analyzed Economic Effects

7 provisions identified: 5 benefits, 0 costs, 2 mixed.

Penalties when funders break rules

If a funder willfully breaks this law in your case, the funder cannot collect its charges in that case. The funder can also face up to $5,000 per violation. The New York Attorney General can bring a civil action to recover these penalties.

Clear contracts and 10-day cancellation

Funding contracts must be clear, complete, and list every charge with a payment schedule and examples. They must state the maximum you can owe and include a bold box saying you owe nothing if there are no proceeds, except for fraud or breach. You can cancel within 10 business days after funding if you return the money. Each page must be initialed, and your lawyer must get a copy. Your lawyer must sign an acknowledgment about handling funds through a trust account or settlement fund; if that part is missing, the contract is void.

Caps and limits on lawsuit funding

A single funding deal is capped at $500,000. The most you can owe is the advance plus 25% of your gross recovery, and never more than the money actually available. You only pay after your case is finally over and your lawyer receives the funds. Funders cannot charge prepayment penalties. Multiple fundings need your and your lawyer’s written OK, and total funder interests cannot exceed the advance plus 25%; a new funder must buy or cancel any old funding first.

Keep your lawyer in control

Funders cannot influence your legal strategy or your settlement choices. Your lawyer cannot be forced to share privileged information with a funder without your written OK; the lawyer only must share the amount of the proceeds. Talks between your lawyer and the funder do not waive attorney‑client privilege or work‑product protections. Contracts cannot make you give up legal rights, like a jury trial.

Repayment source and lien order

Funders cannot use the advance to pay court costs or attorney fees. The right to future claim proceeds can be assigned by you or the funder. Attorney liens and Medicare or other statutory liens get paid before a funder’s lien. Other lien priority follows normal law.

Stop conflicted referrals and kickbacks

Funders cannot pay or accept referral fees or commissions with lawyers or medical providers. Funders cannot steer you to a specific lawyer or provider; they may refer you to a bar association referral service. A funder cannot contract with you if your lawyer has a financial interest in that funder. False or misleading ads by funders are banned.

State registration of funding companies

Funding companies must register with the state and pay a $500 application fee. Banks and certain licensed lenders are exempt. The superintendent can approve, deny, suspend, or revoke registrations. These registration sections take effect one year after becoming law. The law also repeals the older General Business Law article that separately regulated consumer litigation funding.

Sponsors & Cosponsors

Sponsor

William Magnarelli
Democratic • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 58 • No: 1

House vote • 1/28/2026

FLOOR Vote