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New YorkA 94422025-2026 Regular SessionHouseWALLET

Relates to litigation funding

Sponsored By: William Magnarelli (Democratic)

Signed by Governor

CONSUMER AFFAIRS AND PROTECTIONCODESRULES

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Bill Overview

Analyzed Economic Effects

6 provisions identified: 2 benefits, 0 costs, 4 mixed.

Consumers get capped, delayed funding repayment

Total repayment cannot exceed the advance plus 25% of the claim's gross recovery, including all fees and interest. Liability generally stays within available claim proceeds, with exceptions for a material contract violation or fraud against the funder. No prepayment fees are allowed. Payment is due only after final claim resolution, completed appeals, and receipt of proceeds by the consumer's lawyer. Consumers and funders can transfer their rights to future claim proceeds. Attorney liens and Medicare or other statutory liens come before the funder's lien; other liens keep their existing priority.

Consumers get clear contracts and cancellation rights

Funding contracts must use plain language, be complete when signed, and include page initials. Front-page disclosures show the advance, itemized charges, sample payment outcomes, and repayment cap; other disclosures explain rights and warnings. Required disclosures generally use bold type of at least 12 points, and the lawyer promptly receives a signed copy. Consumers can cancel without penalty within 10 business days after receiving funds by returning the full advance. A missing attorney acknowledgment makes the contract void, but changing lawyers does not. The acknowledgment covers reviewed disclosures, a written contingency-fee agreement, trust-account or settlement-fund payments, reasonable steps to meet contract terms, no referral fees, and no legal, tax, or financial advice about funding.

Consumers face funding limits and safeguards

Litigation funding is capped at $500,000 per consumer. Funders cannot support claims they reasonably believe are frivolous or lack merit, or use transaction funds for court or attorney fees. A new funder must acquire or end existing funding obligations before funding an already-funded consumer. Multiple companies can fund the same claim together with written consent from both the consumer and lawyer. Their combined interest must stay within the repayment cap, and contracts must disclose cumulative amounts due.

Consumers keep control of funded claims

Funders cannot control claim or settlement decisions, demand rights waivers, or require privileged information without the consumer's written consent. Lawyer-funder communications about the funded claim do not waive attorney-client privilege or protection for case-preparation materials. The lawyer must tell the funder the amount recovered. Funders and listed legal or medical providers cannot exchange commissions, referral fees, or other payments for referrals. Funders cannot use materially false or misleading ads or direct consumers to particular lawyers or providers. They can refer consumers needing a lawyer to a local or state bar association referral service.

New York funding protections exclude older contracts

The law creates new rules for funding individuals who live in New York or have their permanent home there. Their claims must be filed, or planned for filing, in a New York state or federal court. Most protections begin 180 days after enactment, but contracts signed before the article's effective date are exempt. The law also repeals the earlier consumer litigation funding article in New York's business law.

Funders face registration, fees, and penalties

Beginning one year after enactment, funders must register with New York's financial services department and pay $500 per application. Specified banks and licensed lenders are exempt from registration. Funders applying within 180 days after applications first become available can enter contracts while their applications remain pending. The department can deny registration for specified misconduct, including fraud, false statements, misused money, unfair practices, or legal violations. Suspension or revocation requires notice and a hearing; qualifying discipline elsewhere also provides grounds. A willful violation makes the funder lose its right to collect charges in that case. The Attorney General can seek civil penalties of up to $5,000 per violation, payable to New York.

Sponsors & Cosponsors

Sponsor

  • William Magnarelli

    Democratic • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 194 • No: 2

Senate vote • 1/28/2026

FLOOR Vote

Yes: 58 • No: 1

House vote • 1/20/2026

Assembly floor vote

Yes: 136 • No: 1

Actions Timeline

  1. SIGNED CHAP.11

    2/13/2026House

  2. DELIVERED TO GOVERNOR

    2/13/2026House

  3. RETURNED TO ASSEMBLY

    1/28/2026Senate

  4. PASSED SENATE

    1/28/2026Senate

  5. 3RD READING CAL.86

    1/28/2026Senate

  6. SUBSTITUTED FOR S8808

    1/28/2026Senate

  7. REFERRED TO RULES

    1/20/2026Senate

  8. DELIVERED TO SENATE

    1/20/2026House

  9. PASSED ASSEMBLY

    1/20/2026House

  10. ORDERED TO THIRD READING RULES CAL.22

    1/13/2026House

  11. RULES REPORT CAL.22

    1/13/2026House

  12. REPORTED

    1/13/2026House

  13. REPORTED REFERRED TO RULES

    1/13/2026House

  14. REPORTED REFERRED TO CODES

    1/12/2026House

  15. REFERRED TO CONSUMER AFFAIRS AND PROTECTION

    1/7/2026House

  16. REFERRED TO CONSUMER AFFAIRS AND PROTECTION

    1/6/2026House

Bill Text

  • Original

    1/6/2026

    PDF

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