N.Y.
Financial Services Law Section 1002
Contract requirements
- right of rescission
(a)
All litigation funding contracts shall meet the following requirements:(i)
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;(ii)
the contract shall be completely filled in when presented to the consumer for signature;(iii)
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 litigation funding company the full amount of the funded amount;(iv)
the contract shall contain a space for the consumer to initial each page;(v)
a statement that there is nothing to be paid by the consumer other than the charges that are disclosed in the contract;(vi)
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 under all contracts, provided that a litigation funding company may not obtain an interest that, in aggregate, would result in charges that exceed the funded amount plus twenty-five percent of the gross proceeds of the consumer’s legal claim;(vii)
a statement of the maximum charges the consumer may be obligated to pay under the contract;(viii)
a statement that a consumer may be liable for a breach of contract claim if they materially breach a contract or engage in fraud or material misrepresentation relating to a contract; and(ix)
a clear explanation of how and when the consumer is obligated to pay the charges to the litigation funding company, including an explanation of the consumer’s payment obligations if the proceeds of the legal claim will be paid to the consumer over time.(b)
The contract shall contain a written acknowledgement by the attorney retained by the consumer in the legal claim that attests to the following:(i)
the attorney has reviewed the mandatory disclosures in § 1005 (Disclosures)section one thousand five of this article with the consumer;(ii)
the attorney is being paid on a contingency basis pursuant to a written fee agreement;(iii)
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;(iv)
the attorney is obligated to take all reasonable steps to disburse funds from the legal claim and to ensure that the terms of the litigation funding contract are fulfilled;(v)
the attorney has not received a referral fee or other consideration from the litigation funding company in connection with the litigation funding, nor will the attorney receive such fee or other consideration in the future; and(vi)
the attorney in the legal claim has provided no tax, public or private benefit planning, or financial advice regarding this transaction.(c)
In the event that the acknowledgement required pursuant to paragraph (iii) of subsection (b) 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.(d)
Notwithstanding paragraph b of subdivision three of General Obligations Law § 5-501 (Rate of interest)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 a litigation funding contract shall be unenforceable. * NB Effective June 17, 2026
Source:
Section 1002 — Contract requirements; right of rescission, https://www.nysenate.gov/legislation/laws/FIS/1002 (updated Feb. 20, 2026; accessed Feb. 28, 2026).
