New York

Consumer Legal Funding: A Critical Resource For Victims Seeking Justice in New York

No New Yorker should have to give up on pursuing justice because they can’t afford it. For victims of on-the-job accidents or workplace discrimination, consumer legal funding serves as a vital lifeline to cover the costs of everyday needs such as groceries, medical bills, rent, car payments, and student loans while they see their case through.

While consumer legal funding serves as a crucial financial resource for victims, New York currently lacks sufficient consumer protections for those who need to access this life-sustaining funding in order to pursue a fair settlement for their injuries. Robust regulation requiring licensure, registration, and disclosure, along with transparent and easy-to-read contracts in the consumers’ first language, are needed to protect consumers from bad actors and ensure access to advances.

Pass the Consumer Legal Funding Act (S.4146-AA.7655-A)

The Consumer Legal Funding Act (S.4146-AA.7655-A) would establish the necessary oversight and regulation to effectively regulate this industry and ensure victims in need of this financial lifeline do not fall prey to bad actors who seek to exploit, rather than support, the pursuit of justice.

This much-needed legislation puts forth common-sense regulation that will protect consumers while preserving access to this vital lifeline by establishing:

  • Uniform and Easy-to-Read Contracts: Contracts should be standardized using plain, easy-to-read language translated into the consumer’s primary language. This will guarantee that consumers fully comprehend the terms and their right to rescind before accepting a pre-settlement advance.
  • Transparent Fees: Contracts should be required to clearly outline the fee structure, disclose the maximum amount that may be owed to the funder, and include a clear statement that the funds do not need to be repaid unless the victim receives compensation for the claim. This transparency will empower consumers to make informed decisions about their financial obligations.
  • Prohibited Practices: Implement strict prohibitions on consumer legal funding companies engaging in practices such as offering referral fees and kickbacks to law firms and medical providers or exerting undue influence on decision-making in the underlying case. This eliminates financial incentives for bad actors to exploit victims seeking justice while simultaneously ensuring plaintiffs’ autonomy and the integrity of our legal system.
  • Reporting: Mandate that all consumer legal funding companies submit annual, publicly accessible reports to the New York State Attorney General detailing all transactions and fee charges. This will establish a robust framework for oversight and accountability.
  • Penalties: Impose civil penalties for consumer legal funders who engage in abusive or deceitful practices that violate the aforementioned consumer protections. This will serve as a deterrent against harmful actions within the industry.

State Regulation of Consumer Legal Funding

Uniform and Easy-To-Read Contracts

Transparent Fees — Know What You Owe

No Referral Fees

No Role In Legal Proceedings