New York / Litigation Funding
New York rewrote the rules for pre-settlement funding, then moved the entire statute to a new home before it took effect. Here is the current law, in plain language, with the section numbers that control.
Last reviewed: June 15, 2026
The short version
New York now regulates consumer litigation funding under Financial Services Law Article 10, supervised by the New York Department of Financial Services. A funder cannot collect more than the funded amount plus 25% of the gross proceeds of the claim, repayment comes only out of proceeds, and a funding contract is void unless the plaintiff's attorney signs an Acknowledgment of Counsel. Core terms apply to contracts made on or after June 17, 2026.
01 / Background
What is the New York Consumer Litigation Funding Act?
The Consumer Litigation Funding Act is New York's statute governing non-recourse cash advances paid to plaintiffs while their injury or other civil claims are pending. It sets contract and disclosure rules, caps what a funder can collect, requires the plaintiff's lawyer to sign off, and puts funding companies under state registration and reporting.
Non-recourse means the plaintiff repays only if the case produces money, and only from that money. If the claim recovers nothing, the consumer owes nothing. For years these transactions sat outside ordinary lending rules in New York. The Act ends that ambiguity and builds a single, supervised framework around the product.
02 / The move you need to know
Where is the law actually written?
The Act is codified as Article 10 of the New York Financial Services Law, sections 1001 through 1011. Oversight sits with the Department of Financial Services (DFS).
This is the detail most write-ups still get wrong. The original version, passed in late 2025, placed the rules in the General Business Law as Article 39-H and assigned them to the Department of State. Before that version ever took effect, the Legislature passed a chapter amendment that repealed Article 39-H and re-enacted the entire scheme inside the Financial Services Law instead. If you are working from a summary that cites General Business Law section 899 or the Department of State, you are reading the repealed draft.
| Item | Original draft (repealed) | Operative law today |
|---|---|---|
| Vehicle | Chapter 645 of 2025 (A804-C / S1104-A) | Chapter 11 of 2026 (A9442) |
| Codification | Gen. Bus. Law Art. 39-H, § 899 | Fin. Serv. Law Art. 10, §§ 1001 to 1011 |
| Regulator | Department of State | Department of Financial Services |
| Collection cap | Read as 25% of gross recovery | Funded amount plus 25% of proceeds |
| Repayment timing | Not specified the same way | Only after the claim fully resolves, appeals included |
You can read the operative text through the New York State Legislature. See the A9442 bill page for the chapter amendment that controls.
03 / Timing
When does the Act take effect?
Core consumer protections apply to funding contracts entered into on or after June 17, 2026. The registration and reporting provisions phase in later, reported as on or about February 13, 2027.
| Date | What turns on |
|---|---|
| June 17, 2026 | Contract requirements, disclosures, the charge cap, the Acknowledgment of Counsel, rescission rights, and the limits on funding behind another funder. |
| On or about Feb 13, 2027 | Registration with DFS and annual reporting. Funders must be registered to operate once these provisions are live. |
Because registration is staged separately from the substantive rules, the first thing that actually binds a funder is contract and disclosure compliance in June 2026. Registration mechanics will follow DFS rulemaking, which funders should track closely.
04 / The cap
How much can a funder collect?
A funder may not collect more than the funded amount plus 25% of the gross proceeds recovered from the claim, and only when proceeds are actually realized. FSL § 1003
The 25% is layered on top of the principal returned, not a ceiling that swallows the principal. The law does not set an interest-rate cap and does not dictate simple versus compound pricing. It controls the total dollars a funder can take out of the recovery, which is the number that protects the plaintiff.
Worked example
Gross settlement: $80,000
25% of gross proceeds: $80,000 × 0.25 = $20,000
Maximum a funder may collect: $10,000 + $20,000 = $30,000
At just.law we also hold a contractual repayment cap that can sit below the statutory ceiling, so the lower of the two always governs. A statutory limit and a tighter contract limit are not redundant. Whichever produces the smaller number is the one the plaintiff pays.
05 / Pricing questions
Is there a cap on the rate a funder can charge?
No. The Act caps the total amount collected, not the rate. There is no statutory interest-rate ceiling and no required pricing method.
Two contracts can carry very different stated rates and still comply, because compliance is measured at the back end against the funded-amount-plus-25% limit. That makes the disclosures below the place where a plaintiff and attorney should actually compare offers.
When can a funder be repaid?
Repayment is owed only after the legal claim is fully resolved, including any appeals, and only out of the proceeds. A funder cannot demand payment mid-case.
06 / Disclosures
What must a funding contract disclose?
Every consumer funding contract must state its key economics in clear terms so the plaintiff understands the deal before signing. FSL § 1005
- The funded amount paid to the consumer.
- All fees and charges, and how charges accrue over time.
- A payment schedule and the repayment terms.
- The maximum total amount the consumer may have to repay.
- The right to cancel within ten business days.
- A statement that repayment comes only from claim proceeds.
- A statement that the funder has no authority over litigation strategy or settlement.
What is the right of rescission?
A consumer may cancel the funding contract within ten business days of receiving the funds, without penalty, by returning the full funded amount. The transaction then unwinds with nothing owed. FSL § 1002
07 / The attorney's role
What is the Acknowledgment of Counsel?
The Acknowledgment of Counsel (AOC) is a sign-off from the plaintiff's lawyer that the Act requires for a funding contract to be valid. Without a signed AOC, the funding contract is null and void.
By signing, the attorney generally attests that:
- The attorney reviewed the required disclosures with the client.
- The attorney is paid on contingency under a written fee agreement.
- All proceeds will be disbursed through the attorney trust account or a settlement fund.
- The attorney will take reasonable steps to distribute proceeds and facilitate compliance with the funding contract.
- The attorney has received and will receive no referral fee or other consideration from the funder.
- The attorney gave no tax, financial, or planning advice about the funding.
The point of the AOC is independence. It keeps the lawyer's judgment separate from the funder while still letting the two coordinate on payout. For attorneys, the practical takeaway is simple: read the AOC before your client signs anything, because your signature is a condition of the deal existing at all.
Are communications between the attorney and funder protected?
Yes. The Act treats communications between the consumer's attorney and the funding company about the transaction as falling within attorney-client privilege and work-product protection. FSL § 1008 Privileged material still moves to the funder only with the client's consent.
08 / Stacking
Can a funder fund behind an existing funder?
No, not by default. A funder cannot advance on a claim that already carries an unsatisfied funding interest unless the earlier funder is paid off or agrees in writing.
Multiple funders can participate in the same case, but only when the consumer, the attorney, and every funder involved consent in writing. The rule exists to stop obligations from quietly stacking up against one recovery until little is left for the plaintiff.
09 / Registration
Do funders have to register, and how do I verify one?
Yes. Consumer litigation funding companies must register with DFS and file annual reports once the registration provisions take effect. FSL § 1009
Registration includes a review of the company and its officers and directors. DFS is still developing the application process and the public verification method, so the lookup tool that lets attorneys confirm a funder's status is not live yet. Until DFS publishes that process, confirm a counterparty's standing directly and watch for DFS guidance.
10 / Enforcement
What happens if a funder violates the Act?
A funder that willfully violates the Act in a given transaction loses the right to collect its charges on that transaction and can face civil penalties of up to $5,000 per violation. FSL § 1006
The New York Attorney General can also bring separate claims where the conduct supports them, such as deceptive business practices or false advertising. The combined effect is that a sloppy contract does not just risk a fine, it can erase the funder's return on the deal.
11 / Existing deals
Does the Act apply to funding I took out before June 17, 2026?
No. The Act does not reach funding agreements entered into before June 17, 2026. Those remain governed by their own terms and ordinary contract law.
If a plaintiff has both an older advance and a new one, the two are governed by different rules. Attorneys handling a payoff should separate pre-Act and post-Act agreements so the cap and disclosure rules are applied only where they belong.
12 / Practical
What should attorneys and plaintiffs do now?
- Attorneys: confirm any funder you work with is preparing FSL Article 10 contracts, not the repealed Article 39-H form, and read the AOC before your client signs.
- Plaintiffs: compare offers on the maximum repayment figure and the disclosed charges, not the headline rate.
- Both: check the funded-amount-plus-25% math against the contract's stated maximum, and use the ten business day cancellation window if the terms do not hold up.
For more on how funding interacts with case timelines and venue, see our entries on pre-settlement funding and New York venues such as the Bronx.
This article is general information, not legal advice, and does not create an attorney-client relationship. The Consumer Litigation Funding Act is implemented in phases and DFS rulemaking is ongoing, so confirm current requirements against the statute and any DFS guidance before acting. Section references are to the New York Financial Services Law.
Primary sources
- New York Financial Services Law, Article 10 (Litigation Funding), sections 1001 to 1011.
- A9442, Chapter 11 of the Laws of 2026, the chapter amendment that repealed General Business Law Article 39-H and enacted Financial Services Law Article 10. nysenate.gov/legislation/bills/2025/A9442
- A804-C / S1104-A, Chapter 645 of the Laws of 2025, the original (now repealed) General Business Law version, retained here for historical reference.
- New York State Department of Financial Services, for forthcoming registration and reporting rules.
