S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   3228
 
                        2019-2020 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             January 29, 2019
                                ___________
 
 Introduced  by M. of A. DILAN -- read once and referred to the Committee
   on Consumer Affairs and Protection
 
 AN ACT to amend the general business law, in relation to consumer  liti-
   gation funding
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. Short title. This act shall be known and may  be  cited  as
 the "consumer litigation funding act".
   §  2. Legislative intent. In an effort to promote consumer protections
 related to consumer litigation funding  transactions,  this  act  estab-
 lishes  that such transactions should be subject to state regulation and
 sets forth requirements regarding disclosure, licensing, funding company
 and attorney responsibilities  and  limitations,  violations  and  other
 items.
   §  3. The general business law is amended by adding a new article 39-H
 to read as follows:
                               ARTICLE 39-H
                     THIRD PARTY LITIGATION FINANCING
 SECTION 899-CCC. DEFINITIONS.
         899-DDD. CONTRACT REQUIREMENTS; RIGHT OF RESCISSION.
         899-EEE. PROHIBITIONS.
         899-FFF. CONTRACTED AMOUNTS.
         899-GGG. DISCLOSURES.
         899-HHH. VIOLATIONS.
         899-III. ASSIGNABILITY; LIENS.
         899-JJJ. EFFECT OF COMMUNICATION ON PRIVILEGES.
         899-KKK. REGISTRATION.
         899-LLL. REPORTING.
         899-MMM. SEVERABILITY.
   § 899-CCC. DEFINITIONS. AS USED IN THIS ARTICLE, THE  FOLLOWING  TERMS
 SHALL HAVE THE FOLLOWING MEANINGS:
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD02265-01-9

 A. 3228                             2

   1.  "ADVERTISE"  MEANS PUBLISHING OR DISSEMINATING ANY WRITTEN, AURAL,
 ELECTRONIC OR PRINTED COMMUNICATION OR ANY  COMMUNICATION  BY  MEANS  OF
 RECORDED  TELEPHONE MESSAGES OR TRANSMITTED OR BROADCAST ON RADIO, TELE-
 VISION, THE INTERNET OR SIMILAR COMMUNICATIONS  MEDIA,  INCLUDING  AUDIO
 RECORDINGS,  FILM STRIPS, MOTION PICTURES AND VIDEOS, PUBLISHED, DISSEM-
 INATED, CIRCULATED OR PLACED BEFORE THE PUBLIC, DIRECTLY OR  INDIRECTLY,
 FOR  THE  PURPOSE  OF INDUCING A CONSUMER TO ENTER INTO A CONSUMER LITI-
 GATION FUNDING.
   2. "CHARGES" MEANS THE AMOUNT OF MONEY TO  BE  PAID  TO  THE  CONSUMER
 LITIGATION  FUNDING  COMPANY  BY OR ON BEHALF OF THE CONSUMER, ABOVE THE
 FUNDED AMOUNT PROVIDED BY OR ON BEHALF OF THE  COMPANY  TO  A  NEW  YORK
 CONSUMER  PURSUANT  TO THIS ARTICLE. CHARGES INCLUDE ALL ADMINISTRATIVE,
 ORIGINATION, UNDERWRITING OR OTHER FEES NO MATTER HOW DENOMINATED.
   3. "CONSUMER LITIGATION FUNDING" MEANS A NON-RECOURSE  TRANSACTION  IN
 WHICH  A  CONSUMER  LITIGATION  FUNDING COMPANY PURCHASES AND A CONSUMER
 ASSIGNS TO THE COMPANY A CONTINGENT RIGHT TO RECEIVE AN  AMOUNT  OF  THE
 POTENTIAL PROCEEDS OF A SETTLEMENT, JUDGMENT, AWARD, OR VERDICT OBTAINED
 IN THE CONSUMER'S LEGAL CLAIM.
   4.  "CONSUMER  LITIGATION FUNDING COMPANY" OR "COMPANY" MEANS A PERSON
 OR ENTITY THAT ENTERS INTO A CONSUMER LITIGATION FUNDING WITH A  CONSUM-
 ER. THIS TERM SHALL NOT INCLUDE:
   (A) AN IMMEDIATE FAMILY MEMBER OF THE CONSUMER;
   (B) A BANK, LENDER, FINANCING ENTITY, OR OTHER SPECIAL PURPOSE ENTITY:
   (I)  THAT PROVIDES FINANCING TO A CONSUMER LITIGATION FUNDING COMPANY;
 OR
   (II) TO WHICH A CONSUMER LITIGATION FUNDING COMPANY GRANTS A  SECURITY
 INTEREST  OR  TRANSFERS  ANY RIGHTS OR INTEREST IN A CONSUMER LITIGATION
 FUNDING; OR
   (C) AN ATTORNEY OR ACCOUNTANT WHO PROVIDES SERVICES TO A CONSUMER.
   5. "CONSUMER" MEANS A NATURAL PERSON WHO HAS A PENDING LEGAL CLAIM AND
 WHO RESIDES OR IS DOMICILED IN NEW YORK.
   6. "FUNDED AMOUNT" MEANS THE AMOUNT  OF  MONIES  PROVIDED  TO,  OR  ON
 BEHALF  OF,  THE  CONSUMER  IN  THE CONSUMER LITIGATION FUNDING. "FUNDED
 AMOUNT" EXCLUDES CHARGES.
   7. "FUNDING DATE" MEANS THE DATE ON WHICH THE FUNDED AMOUNT IS  TRANS-
 FERRED TO THE CONSUMER BY THE CONSUMER LITIGATION FUNDING COMPANY EITHER
 BY  PERSONAL  DELIVERY  OR  VIA  WIRE,  ACH OR OTHER ELECTRONIC MEANS OR
 MAILED BY INSURED, CERTIFIED OR REGISTERED UNITED STATES MAIL.
   8. "IMMEDIATE FAMILY MEMBER" MEANS A PARENT; SIBLING; CHILD BY  BLOOD,
 ADOPTION, OR MARRIAGE; SPOUSE; GRANDPARENT OR GRANDCHILD.
   9. "LEGAL CLAIM" MEANS A BONA FIDE CIVIL CLAIM OR CAUSE OF ACTION.
   10.  "RESOLUTION  DATE"  MEANS  THE  DATE  THE FUNDED AMOUNT, PLUS THE
 AGREED UPON CHARGES, ARE DELIVERED TO THE  CONSUMER  LITIGATION  FUNDING
 COMPANY BY THE CONSUMER, THE CONSUMER'S ATTORNEY OR OTHERWISE.
   § 899-DDD. CONTRACT REQUIREMENTS; RIGHT OF RESCISSION. 1. ALL CONSUMER
 LITIGATION FUNDING CONTRACTS SHALL MEET THE FOLLOWING REQUIREMENTS:
   (A)  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;
   (B)  THE  CONTRACT SHALL BE COMPLETELY FILLED IN WHEN PRESENTED TO THE
 CONSUMER FOR SIGNATURE;
   (C) THE CONTRACT SHALL CONTAIN, IN TWELVE  POINT  BOLD  TYPE  FONT,  A
 RIGHT  OF RESCISSION, ALLOWING THE CONSUMER TO CANCEL THE CONTRACT WITH-

 A. 3228                             3
 
 OUT PENALTY OR FURTHER OBLIGATION IF, WITHIN FIVE  BUSINESS  DAYS  AFTER
 THE FUNDING DATE, THE CONSUMER EITHER:
   (I) RETURNS TO THE CONSUMER LITIGATION FUNDING COMPANY THE FULL AMOUNT
 OF THE DISBURSED FUNDS BY DELIVERING THE COMPANY'S UNCASHED CHECK TO THE
 COMPANY'S OFFICE IN PERSON; OR
   (II)  MAILS,  BY INSURED, CERTIFIED, OR REGISTERED UNITED STATES MAIL,
 TO THE ADDRESS SPECIFIED IN THE CONTRACT, A NOTICE OF  CANCELLATION  AND
 INCLUDES  IN SUCH MAILING A RETURN OF THE FULL AMOUNT OF DISBURSED FUNDS
 IN THE FORM OF THE COMPANY'S UNCASHED CHECK OR A REGISTERED OR CERTIFIED
 CHECK OR MONEY ORDER;
   (D) THE CONTRACT SHALL CONTAIN THE INITIALS OF THE  CONSUMER  ON  EACH
 PAGE;
   (E)  A  STATEMENT  THAT THERE ARE NO FEES OR CHARGES TO BE PAID BY THE
 CONSUMER OTHER THAN WHAT IS DISCLOSED ON THE DISCLOSURE FORM;
   (F) 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,  INCLUDING  CHARGES
 UNDER  ALL  CONTRACTS, IF REPAYMENT IS MADE ANY TIME AFTER THE CONTRACTS
 ARE EXECUTED;
   (G) A STATEMENT OF THE MAXIMUM AMOUNT THE CONSUMER MAY BE OBLIGATED TO
 PAY UNDER THE CONTRACT OTHER THAN IN A CASE OF MATERIAL BREACH, FRAUD OR
 MISREPRESENTATION BY OR ON BEHALF OF THE CONSUMER; AND
   (H) CLEAR AND CONSPICUOUS DETAIL OF HOW CHARGES, INCLUDING ANY  APPLI-
 CABLE FEES, ARE INCURRED OR ACCRUED.
   2.  THE CONTRACT SHALL CONTAIN A WRITTEN ACKNOWLEDGEMENT BY THE ATTOR-
 NEY RETAINED BY THE CONSUMER IN THE LEGAL  CLAIM  THAT  ATTESTS  TO  THE
 FOLLOWING:
   (A)  TO  THE  BEST OF THE ATTORNEY'S KNOWLEDGE, THE FUNDED AMOUNTS AND
 ANY CHARGES RELATING  TO  THE  CONSUMER  LITIGATION  FUNDING  HAVE  BEEN
 DISCLOSED TO THE CONSUMER;
   (B)  THE  ATTORNEY  IS BEING PAID ON A CONTINGENCY BASIS PURSUANT TO A
 WRITTEN FEE AGREEMENT;
   (C) 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;
   (D) THE ATTORNEY IS FOLLOWING THE WRITTEN IRREVOCABLE INSTRUCTIONS  OF
 THE CONSUMER WITH REGARD TO THE CONSUMER LITIGATION FUNDING;
   (E)  THE  ATTORNEY IS OBLIGATED TO DISBURSE FUNDS FROM THE LEGAL CLAIM
 AND TAKE ANY OTHER STEPS TO ENSURE THAT  THE  TERMS  OF  THE  LITIGATION
 FUNDING CONTRACT ARE FULFILLED;
   (F)  THE  ATTORNEY  HAS NOT RECEIVED A REFERRAL FEE OR OTHER CONSIDER-
 ATION FROM THE CONSUMER LITIGATION FUNDING COMPANY  IN  CONNECTION  WITH
 THE  CONSUMER LITIGATION FUNDING, NOR WILL THE ATTORNEY RECEIVE SUCH FEE
 OR OTHER CONSIDERATION IN THE FUTURE; AND
   (G) THE ATTORNEY IN THE LEGAL CLAIM HAS PROVIDED  NO  TAX,  PUBLIC  OR
 PRIVATE  BENEFIT  PLANNING,  OR  FINANCIAL  ADVICE REGARDING THIS TRANS-
 ACTION.
   3. SHOULD THE ACKNOWLEDGEMENT REQUIRED IN PARAGRAPH (C) OF SUBDIVISION
 TWO OF THIS SECTION NOT BE COMPLETED BY THE ATTORNEY OR FIRM RETAINED BY
 THE CONSUMER IN THE LEGAL CLAIM, THE CONTRACT SHALL BE  NULL  AND  VOID.
 THE CONTRACT WILL 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.
   § 899-EEE. PROHIBITIONS.  1.  CONSUMER  LITIGATION  FUNDING  COMPANIES
 SHALL BE PROHIBITED FROM:

 A. 3228                             4
 
   (A)  PAYING  OR  OFFERING  TO PAY COMMISSIONS, REFERRAL FEES, OR OTHER
 FORMS OF CONSIDERATION TO ANY  ATTORNEY,  LAW  FIRM,  MEDICAL  PROVIDER,
 CHIROPRACTOR  OR PHYSICAL THERAPIST OR ANY OF THEIR EMPLOYEES FOR REFER-
 RING A CONSUMER TO THE COMPANY;
   (B)  ACCEPTING  ANY COMMISSIONS, REFERRAL FEES, REBATES OR OTHER FORMS
 OF CONSIDERATION FROM AN ATTORNEY, LAW FIRM,  MEDICAL  PROVIDER,  CHIRO-
 PRACTOR OR PHYSICAL THERAPIST OR ANY OF THEIR EMPLOYEES;
   (C)  INTENTIONALLY ADVERTISING MATERIALLY FALSE OR MISLEADING INFORMA-
 TION REGARDING ITS PRODUCTS OR SERVICES;
   (D) REFERRING, IN FURTHERANCE OF AN INITIAL LEGAL FUNDING, A  CUSTOMER
 OR  POTENTIAL CUSTOMER TO A SPECIFIC ATTORNEY, LAW FIRM, MEDICAL PROVID-
 ER, CHIROPRACTOR OR  PHYSICAL  THERAPIST  OR  ANY  OF  THEIR  EMPLOYEES;
 PROVIDED, HOWEVER, IF A CUSTOMER NEEDS LEGAL REPRESENTATION, THE COMPANY
 MAY  REFER  THE  CUSTOMER  TO  A LOCAL OR STATE BAR ASSOCIATION REFERRAL
 SERVICE;
   (E) KNOWINGLY PROVIDING FUNDING  TO  A  CONSUMER  WHO  HAS  PREVIOUSLY
 ASSIGNED  AND/OR SOLD A PORTION OF THE CONSUMER'S RIGHT TO PROCEEDS FROM
 HIS OR HER LEGAL CLAIM WITHOUT FIRST MAKING PAYMENT TO AND/OR PURCHASING
 A PRIOR UNSATISFIED CONSUMER LITIGATION FUNDING COMPANY'S ENTIRE  FUNDED
 AMOUNT  AND  CONTRACTED  CHARGES,  UNLESS  A  LESSER AMOUNT IS OTHERWISE
 AGREED TO IN WRITING  BY  THE  CONSUMER  LITIGATION  FUNDING  COMPANIES,
 EXCEPT  THAT  MULTIPLE  COMPANIES MAY AGREE TO CONTEMPORANEOUSLY PROVIDE
 FUNDING TO A CONSUMER PROVIDED THAT  THE  CONSUMER  AND  THE  CONSUMER'S
 ATTORNEY CONSENT TO THE ARRANGEMENT IN WRITING;
   (F)  RECEIVING  ANY  RIGHT TO, NOR MAKE, ANY DECISIONS WITH RESPECT TO
 THE CONDUCT OF THE UNDERLYING LEGAL CLAIM OR ANY  SETTLEMENT  OR  RESOL-
 UTION THEREOF. THE RIGHT TO MAKE SUCH DECISIONS SHALL REMAIN SOLELY WITH
 THE CONSUMER AND THE ATTORNEY IN THE LEGAL CLAIM;
   (G)  KNOWINGLY  PAY OR OFFERING TO PAY FOR COURT COSTS, FILING FEES OR
 ATTORNEY'S FEES EITHER DURING OR  AFTER  THE  RESOLUTION  OF  THE  LEGAL
 CLAIM, USING FUNDS FROM THE CONSUMER LITIGATION FUNDING TRANSACTION.
   2. AN ATTORNEY OR LAW FIRM RETAINED BY THE CONSUMER IN THE LEGAL CLAIM
 SHALL  NOT  HAVE A FINANCIAL INTEREST IN THE CONSUMER LITIGATION FUNDING
 COMPANY OFFERING CONSUMER LITIGATION FUNDING TO THAT CONSUMER.
   3. ANY ATTORNEY WHO HAS REFERRED THE CONSUMER TO HIS RETAINED ATTORNEY
 SHALL NOT HAVE A FINANCIAL INTEREST IN THE CONSUMER  LITIGATION  FUNDING
 COMPANY OFFERING CONSUMER LITIGATION FUNDING TO THAT CONSUMER.
   § 899-FFF. CONTRACTED AMOUNTS. THE CONTRACTED AMOUNT TO BE PAID TO THE
 CONSUMER  LITIGATION  COMPANY SHALL BE A PREDETERMINED AMOUNT BASED UPON
 INTERVALS OF TIME FROM THE FUNDING DATE THROUGH THE RESOLUTION DATE, AND
 SHALL NOT BE DETERMINED AS A PERCENTAGE OF THE RECOVERY FROM  THE  LEGAL
 CLAIM.
   §  899-GGG.  DISCLOSURES.  ALL  CONSUMER  LITIGATION FUNDING CONTRACTS
 SHALL CONTAIN THE DISCLOSURES SPECIFIED IN  THIS  SECTION,  WHICH  SHALL
 CONSTITUTE  MATERIAL  TERMS OF THE CONTRACT. UNLESS OTHERWISE SPECIFIED,
 THE DISCLOSURES SHALL BE TYPED IN AT LEAST TWELVE POINT BOLD  TYPE  FONT
 AND BE PLACED CLEARLY AND CONSPICUOUSLY WITHIN THE CONTRACT, AS FOLLOWS:
   1. ON THE FRONT PAGE UNDER APPROPRIATE HEADINGS, LANGUAGE SPECIFYING:
   (A) THE FUNDED AMOUNT TO BE PAID TO THE CONSUMER BY THE CONSUMER LITI-
 GATION FUNDING COMPANY;
   (B) AN ITEMIZATION OF ONE-TIME CHARGES;
   (C)  THE  MAXIMUM  TOTAL  AMOUNT TO BE ASSIGNED BY THE CONSUMER TO THE
 COMPANY, INCLUDING THE FUNDED AMOUNT AND ALL CHARGES; AND
   (D) A PAYMENT SCHEDULE TO INCLUDE THE FUNDED AMOUNT AND CHARGES, LIST-
 ING ALL DATES AND THE AMOUNT DUE AT THE END OF EACH ONE  HUNDRED  EIGHTY
 DAY  PERIOD FROM THE FUNDING DATE, UNTIL THE DATE THE MAXIMUM AMOUNT DUE

 A. 3228                             5
 
 TO THE COMPANY BY THE CONSUMER TO SATISFY THE AMOUNT DUE PURSUANT TO THE
 CONTRACT.
   2.  PURSUANT  TO  THE PROVISIONS SET FORTH IN THIS SECTION, WITHIN THE
 BODY OF THE CONTRACT: "CONSUMER'S RIGHT TO CANCELLATION: YOU MAY  CANCEL
 THIS  CONTRACT  WITHOUT  PENALTY  OR  FURTHER OBLIGATION WITHIN FIVE (5)
 BUSINESS DAYS AFTER THE FUNDING DATE IF YOU EITHER:
   (A) RETURN TO THE CONSUMER LITIGATION FUNDING COMPANY THE FULL  AMOUNT
 OF THE DISBURSED FUNDS BY DELIVERING THE COMPANY'S UNCASHED CHECK TO THE
 COMPANY'S OFFICE IN PERSON; OR
   (B)  MAIL,  BY INSURED, CERTIFIED OR REGISTERED UNITED STATES MAIL, TO
 THE COMPANY AT THE ADDRESS  SPECIFIED  IN  THE  CONTRACT,  A  NOTICE  OF
 CANCELLATION  AND INCLUDE IN SUCH MAILING A RETURN OF THE FULL AMOUNT OF
 DISBURSED FUNDS IN THE FORM OF THE COMPANY'S UNCASHED CHECK OR A  REGIS-
 TERED OR CERTIFIED CHECK OR MONEY ORDER."
   3.  THE  CONSUMER  LITIGATION  FUNDING  COMPANY  SHALL HAVE NO ROLE IN
 DECIDING WHETHER, WHEN AND HOW MUCH THE  LEGAL  CLAIM  IS  SETTLED  FOR,
 HOWEVER, THE CONSUMER AND CONSUMER'S ATTORNEY MUST NOTIFY THE COMPANY OF
 THE  OUTCOME  OF  THE LEGAL CLAIM BY SETTLEMENT OR ADJUDICATION PRIOR TO
 THE RESOLUTION DATE. THE COMPANY MAY SEEK UPDATED INFORMATION ABOUT  THE
 STATUS  OF  THE  LEGAL CLAIM BUT IN NO EVENT SHALL THE COMPANY INTERFERE
 WITH THE INDEPENDENT PROFESSIONAL  JUDGEMENT  OF  THE  ATTORNEY  IN  THE
 HANDLING OF THE LEGAL CLAIM OR ANY SETTLEMENT THEREOF.
   4. WITHIN THE BODY OF THE CONTRACT, IN ALL CAPITAL LETTERS IN AT LEAST
 TWELVE  POINT BOLD TYPE FONT CONTAINED WITHIN A BOX:  "THE FUNDED AMOUNT
 AND AGREED UPON CHARGES SHALL BE PAID ONLY FROM  THE  PROCEEDS  OF  YOUR
 LEGAL  CLAIM, AND SHALL BE PAID ONLY TO THE EXTENT THAT THERE ARE AVAIL-
 ABLE PROCEEDS FROM YOUR LEGAL CLAIM. YOU WILL NOT OWE  (INSERT  NAME  OF
 THE  CONSUMER  LITIGATION  FUNDING  COMPANY)  ANYTHING  IF  THERE ARE NO
 PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU HAVE  VIOLATED  ANY  MATERIAL
 TERM  OF  THIS CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST (INSERT NAME
 OF CONSUMER LITIGATION FUNDING COMPANY)."
   5. LOCATED IMMEDIATELY ABOVE THE  PLACE  ON  THE  CONTRACT  WHERE  THE
 CONSUMER'S  SIGNATURE  IS  REQUIRED, IN TWELVE POINT BOLD TYPE FONT: "DO
 NOT SIGN THIS CONTRACT BEFORE YOU READ IT COMPLETELY. DO NOT  SIGN  THIS
 CONTRACT  IF  IT  CONTAINS  ANY  BLANK  SPACES.  YOU  ARE  ENTITLED TO A
 COMPLETELY FILLED-IN COPY OF THE CONTRACT BEFORE YOU SIGN THIS CONTRACT.
 YOU SHOULD OBTAIN THE ADVICE OF ANY ATTORNEY. DEPENDING ON  THE  CIRCUM-
 STANCES, YOU MAY WANT TO CONSULT A TAX, PUBLIC OR PRIVATE BENEFITS PLAN-
 NING,  OR  FINANCIAL PROFESSIONAL. YOU ACKNOWLEDGE THAT YOUR ATTORNEY IN
 THE LEGAL CLAIM HAS PROVIDED NO TAX, PUBLIC OR PRIVATE BENEFIT PLANNING,
 OR FINANCIAL ADVICE REGARDING THIS TRANSACTION. YOU FURTHER  ACKNOWLEDGE
 THAT YOUR ATTORNEY HAS EXPLAINED THE TERMS AND CONDITIONS OF THE CONSUM-
 ER LITIGATION FUNDING CONTRACT."
   6.  A COPY OF THE EXECUTED CONTRACT SHALL PROMPTLY BE DELIVERED TO THE
 ATTORNEY FOR THE CONSUMER.
   § 899-HHH. VIOLATIONS. 1. IF A COURT OF COMPETENT JURISDICTION  DETER-
 MINES  THAT A CONSUMER  LITIGATION FUNDING COMPANY HAS WILLFULLY COMMIT-
 TED A DECEPTIVE AND ABUSIVE VIOLATION OF THIS ARTICLE WITH REGARD  TO  A
 SPECIFIC  CONSUMER  LITIGATION  FUNDING,  THE CONTRACT SHALL BE NULL AND
 VOID.
   2. NOTHING IN THIS ARTICLE SHALL BE CONSTRUED TO RESTRICT THE EXERCISE
 OF POWERS OR THE PERFORMANCE OF THE DUTIES OF THE NEW YORK STATE  ATTOR-
 NEY  GENERAL,  WHICH  HE  OR SHE IS AUTHORIZED TO EXERCISE OR PERFORM BY
 LAW.

 A. 3228                             6
 
   § 899-III. ASSIGNABILITY; LIENS. 1. THE CONTINGENT RIGHT TO RECEIVE AN
 AMOUNT OF THE POTENTIAL PROCEEDS OF A LEGAL CLAIM  IS  ASSIGNABLE  BY  A
 CONSUMER.
   2.  NOTHING  CONTAINED IN THIS ARTICLE SHALL BE CONSTRUED TO CAUSE ANY
 CONSUMER LITIGATION FUNDING TRANSACTION CONFORMING TO THIS ARTICLE TO BE
 DEEMED A LOAN OR TO BE SUBJECT TO ANY OF THE PROVISIONS GOVERNING LOANS.
 A CONSUMER LITIGATION FUNDING TRANSACTION THAT COMPLIES WITH THIS  ARTI-
 CLE  IS  NOT  SUBJECT  TO  ANY  OTHER STATUTORY OR REGULATORY PROVISIONS
 GOVERNING LOANS OR INVESTMENT CONTRACTS. TO THE EXTENT THAT THIS ARTICLE
 CONFLICTS WITH ANY OTHER LAW, THIS ARTICLE SUPERSEDES ANY OTHER LAW  FOR
 THE  PURPOSES  OF REGULATING CONSUMER LITIGATION FUNDING IN THE STATE OF
 NEW YORK.
   3. ONLY ATTORNEY'S LIENS RELATED TO  THE  LEGAL  CLAIM  WHICH  IS  THE
 SUBJECT OF THE CONSUMER LITIGATION FUNDING OR MEDICARE OR OTHER STATUTO-
 RY LIENS RELATED TO THE LEGAL CLAIM SHALL TAKE PRIORITY OVER ANY LIEN OF
 THE  CONSUMER  LITIGATION  FUNDING  COMPANY.  ALL OTHER LIENS SHALL TAKE
 PRIORITY BY NORMAL OPERATION OF LAW.
   § 899-JJJ. EFFECT OF COMMUNICATION ON  PRIVILEGES.  ALL  COMMUNICATION
 BETWEEN  THE  CONSUMER'S  ATTORNEY  IN  THE LEGAL CLAIM AND THE CONSUMER
 LEGAL FUNDING COMPANY AS IT PERTAINS TO THE CONSUMER LEGAL FUNDING SHALL
 FALL WITHIN THE SCOPE OF THE ATTORNEY CLIENT PRIVILEGE, INCLUDING, WITH-
 OUT LIMITATION, THE WORK-PRODUCT DOCTRINE.
   § 899-KKK. REGISTRATION.  1.  UNLESS  A  CONSUMER  LITIGATION  FUNDING
 COMPANY HAS FIRST REGISTERED WITH THE STATE OF NEW YORK PURSUANT TO THIS
 ARTICLE,  THE  COMPANY  MAY NOT ENGAGE IN THE BUSINESS OF CONSUMER LITI-
 GATION FUNDING IN THIS STATE.
   2. AN APPLICANT'S REGISTRATION MUST BE FILED IN THE MANNER  PRESCRIBED
 BY  THE SECRETARY OF STATE AND MUST CONTAIN ALL THE INFORMATION REQUIRED
 BY THE DEPARTMENT OF STATE TO MAKE AN EVALUATION OF  THE  CHARACTER  AND
 FITNESS OF THE APPLICANT COMPANY. THE INITIAL APPLICATION MUST BE ACCOM-
 PANIED BY A FIVE HUNDRED DOLLAR FEE. A RENEWAL REGISTRATION MUST INCLUDE
 A TWO HUNDRED DOLLAR FEE. A REGISTRATION MUST BE RENEWED EVERY TWO YEARS
 AND EXPIRES ON THE THIRTIETH OF SEPTEMBER.
   3.  A CERTIFICATE OF REGISTRATION MAY NOT BE ISSUED UNLESS THE DEPART-
 MENT OF STATE, UPON INVESTIGATION, FINDS THAT THE CHARACTER AND  FITNESS
 OF THE APPLICANT COMPANY, AND OF THE OFFICERS AND DIRECTORS THEREOF, ARE
 SUCH  AS  TO  WARRANT BELIEF THAT THE BUSINESS WILL BE OPERATED HONESTLY
 AND FAIRLY WITHIN THE PURPOSES OF THIS ARTICLE.
   4. EVERY REGISTRANT SHALL ALSO, AT THE TIME OF  FILING  SUCH  APPLICA-
 TION,  FILE  WITH THE DEPARTMENT OF STATE, IF THE DEPARTMENT OF STATE SO
 REQUIRES, A BOND SATISFACTORY TO THE DEPARTMENT OF STATE  IN  AN  AMOUNT
 NOT  TO EXCEED FIFTY THOUSAND DOLLARS. IN LIEU OF THE BOND AT THE OPTION
 OF THE REGISTRANT, THE REGISTRANT MAY  POST  AN  IRREVOCABLE  LETTER  OF
 CREDIT.  THE  TERMS  OF  THE BOND MUST RUN CONCURRENT WITH THE PERIOD OF
 TIME DURING WHICH THE REGISTRATION WILL BE  IN  EFFECT.  THE  BOND  MUST
 PROVIDE  THAT THE REGISTRANT WILL FAITHFULLY CONFORM TO AND ABIDE BY THE
 PROVISIONS OF THIS ARTICLE AND TO ALL RULES LAWFULLY MADE BY THE  ADMIN-
 ISTRATOR  UNDER  THIS  ACT AND TO ANY SUCH PERSON OR PERSONS ANY AND ALL
 AMOUNTS OF MONEY THAT MAY BECOME DUE OR OWING TO THE STATE  OR  TO  SUCH
 PERSON  OR PERSONS FROM THE REGISTRANT UNDER AND BY VIRTUE OF THIS ARTI-
 CLE DURING THE PERIOD FOR WHICH THE BOND IS GIVEN.
   5. UPON WRITTEN REQUEST, THE APPLICANT SHALL BE ENTITLED TO A  HEARING
 ON THE QUESTION OF THE APPLICANT'S QUALIFICATIONS FOR REGISTRATION IF:
   (A) THE DEPARTMENT OF STATE HAS NOTIFIED THE APPLICANT IN WRITING THAT
 THE APPLICATION HAS BEEN DENIED, OR

 A. 3228                             7
 
   (B) THE DEPARTMENT OF STATE HAS NOT ISSUED A REGISTRATION WITHIN SIXTY
 DAYS AFTER THE APPLICATION FOR THE REGISTRATION WAS FILED.
   6.  A  REQUEST  FOR  A  HEARING MAY NOT BE MADE MORE THAN FIFTEEN DAYS
 AFTER THE DEPARTMENT HAS MAILED A WRITTEN NOTICE TO THE  APPLICANT  THAT
 THE  APPLICATION HAS BEEN DENIED AND STATING IN SUBSTANCE THE DEPARTMENT
 OF STATE'S FINDINGS SUPPORTING DENIAL OF THE APPLICATION.
   7. NOTWITHSTANDING THE PRIOR APPROVAL REQUIREMENT OF  SUBDIVISION  ONE
 OF  THIS  SECTION, A CONSUMER LITIGATION FUNDING COMPANY THAT REGISTERED
 WITH THE DEPARTMENT OF STATE BETWEEN THE EFFECTIVE DATE OF THIS  ARTICLE
 OR  WHEN  THE DEPARTMENT OF STATE HAS MADE APPLICATIONS AVAILABLE TO THE
 PUBLIC, WHICHEVER IS LATER, AND ONE HUNDRED EIGHTY DAYS  THEREAFTER  MAY
 ENGAGE  IN  CONSUMER LITIGATION FUNDING WHILE THE COMPANY'S REGISTRATION
 IS PENDING APPROVAL WITH THE DEPARTMENT OF STATE. ALL FUNDING AGREEMENTS
 ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF THIS ARTICLE ARE NOT SUBJECT
 TO THE TERMS OF THIS ARTICLE.
   8. NO CONSUMER LITIGATION FUNDING COMPANY MAY USE ANY FORM OF CONSUMER
 LITIGATION FUNDING CONTRACT IN THIS STATE UNLESS IT HAS BEEN FILED  WITH
 THE  DEPARTMENT  OF  STATE  IN ACCORDANCE WITH THE FILING PROCEDURES SET
 FORTH BY THE SECRETARY OF STATE.
   9. THE SECRETARY OF STATE IS HEREBY  AUTHORIZED  TO  ADOPT  RULES  AND
 REGULATIONS TO IMPLEMENT THE PROVISIONS OF THIS SECTION AS NEEDED.
   § 899-LLL. REPORTING. 1. EACH CONSUMER LITIGATION FUNDING COMPANY THAT
 ENGAGES IN BUSINESS IN THE STATE SHALL SUBMIT A REPORT TO THE DEPARTMENT
 OF  FINANCIAL SERVICES NO LATER THAN THE THIRTY-FIRST OF JANUARY OF EACH
 YEAR SPECIFYING:
   (A) NUMBER OF CONSUMER LITIGATION FUNDINGS BY THE COMPANY;
   (B) SUMMATION OF FUNDED AMOUNTS IN DOLLAR FIGURE; AND
   (C) ANNUAL PERCENTAGE CHARGED TO EACH  CONSUMER  WHERE  REPAYMENT  WAS
 MADE.
   2.  THE  DEPARTMENT OF STATE SHALL MAKE THESE FIGURES AVAILABLE TO THE
 PUBLIC, IN A MANNER WHICH MAINTAINS THE CONFIDENTIALITY OF THE  NAME  OF
 EACH  COMPANY AND CONSUMER, NO LATER THAN ONE YEAR AFTER THE REPORTS ARE
 DELIVERED.
   § 899-MMM. SEVERABILITY. IF ANY PROVISION OF THIS ARTICLE IS, FOR  ANY
 REASON,  DECLARED  UNCONSTITUTIONAL  OR INVALID, IN WHOLE OR IN PART, BY
 ANY COURT OF COMPETENT JURISDICTION, SUCH PORTION SHALL BE DEEMED SEVER-
 ABLE, AND SUCH UNCONSTITUTIONALITY OR INVALIDITY SHALL  NOT  AFFECT  THE
 VALIDITY  OF  THE  REMAINING  PORTIONS  OF THIS ARTICLE, WHICH REMAINING
 PORTIONS SHALL CONTINUE IN FULL FORCE AND EFFECT.
   § 4. This act shall take effect on the one hundred eightieth day after
 it shall have become a law; provided, however, it shall not apply or  in
 any  way affect or invalidate any consumer litigation funding previously
 effectuated prior to the effective date of this act.