N.Y. FIS Law § 1002 — New York Code / Act FIS / Article 10 / Section 1002
Contract requirements; right of rescission
Status: in_force

§ 1002. Contract requirements; right of rescission. (a) All litigation\nfunding contracts shall meet the following requirements:\n  (i) a contract shall be written in a clear and coherent manner using\nwords with common, everyday meanings to enable the average consumer who\nmakes a reasonable effort under ordinary circumstances to read and\nunderstand the terms of the contract without having to obtain the\nassistance of a professional;\n  (ii) the contract shall be completely filled in when presented to the\nconsumer for signature;\n  (iii) the contract shall contain, in twelve point bold type font, a\nright of rescission, allowing the consumer to cancel the contract\nwithout penalty or further obligation if, within ten business days after\nthe funding date, the consumer returns to the litigation funding company\nthe full amount of the funded amount;\n  (iv) the contract shall contain a space for the consumer to initial\neach page;\n  (v) a statement that there is nothing to be paid by the consumer other\nthan the charges that are disclosed in the contract;\n  (vi) in the event the consumer seeks more than one litigation funding\ncontract from the same company, a disclosure providing the cumulative\namount due from the consumer for all transactions under all contracts,\nprovided that a litigation funding company may not obtain an interest\nthat, in aggregate, would result in charges that exceed the funded\namount plus twenty-five percent of the gross proceeds of the consumer's\nlegal claim;\n  (vii) a statement of the maximum charges the consumer may be obligated\nto pay under the contract;\n  (viii) a statement that a consumer may be liable for a breach of\ncontract claim if they materially breach a contract or engage in fraud\nor material misrepresentation relating to a contract; and\n  (ix) a clear explanation of how and when the consumer is obligated to\npay the charges to the litigation funding company, including an\nexplanation of the consumer's payment obligations if the proceeds of the\nlegal claim will be paid to the consumer over time.\n  (b) The contract shall contain a written acknowledgement by the\nattorney retained by the consumer in the legal claim that attests to the\nfollowing:\n  (i) the attorney has reviewed the mandatory disclosures in section one\nthousand five of this article with the consumer;\n  (ii) the attorney is being paid on a contingency basis pursuant to a\nwritten fee agreement;\n  (iii) all proceeds of the legal claim will be disbursed via either the\ntrust account of the attorney or a settlement fund established to\nreceive the proceeds of the legal claim on behalf of the consumer;\n  (iv) the attorney is obligated to take all reasonable steps to\ndisburse funds from the legal claim and to ensure that the terms of the\nlitigation funding contract are fulfilled;\n  (v) the attorney has not received a referral fee or other\nconsideration from the litigation funding company in connection with the\nlitigation funding, nor will the attorney receive such fee or other\nconsideration in the future; and\n  (vi) the attorney in the legal claim has provided no tax, public or\nprivate benefit planning, or financial advice regarding this\ntransaction.\n  (c) In the event that the acknowledgement required pursuant to\nparagraph (iii) of subsection (b) of this section is not completed by\nthe attorney or firm retained by the consumer in the legal claim, the\ncontract shall be null and void. The contract shall remain valid and\nenforceable in the event the consumer terminates the initial attorney\nand/or retains a new attorney with respect to the legal claim.\n  (d) Notwithstanding paragraph b of subdivision three of section 5-501\nof the general obligations law, no prepayment penalties or fees shall be\ncharged or collected on consumer litigation funding. A prepayment\npenalty on a litigation funding contract shall be unenforceable.\n