New York Should Regulate Consumer Legal Funding, Not Mischaracterize It

Recent commentary calling on New York to “stop lawsuit funding companies” reflects a familiar pattern: real concerns about consumer protection are raised, but they are aimed at an oversimplified and often inaccurate picture of how consumer legal funding actually operates. The result is a policy debate driven more by fear than by facts.

Fortunately, New York lawmakers have already done the hard work of addressing those concerns responsibly. Assembly Bill A.804-C, the “Consumer Litigation Funding Act,” responds directly to the issues raised in the recent Press & Sun-Bulletin opinion piece, not by banning consumer legal funding, but by regulating it rigorously, transparently, and in a way that prioritizes consumers.

This is precisely what sound public policy looks like.

The Article’s Core Concerns, and Why They Matter

The opinion article raises several recurring critiques of consumer legal funding: that consumers do not understand the terms, that costs can spiral beyond expectations, that funders improperly influence litigation decisions, and that the industry operates in the shadows without meaningful oversight.

These concerns are not new. They have appeared in editorial pages for more than a decade, often without acknowledgment that many states have already enacted comprehensive consumer protection frameworks to address them. New York’s A.804-C is one of the most detailed and consumer-focused statutes proposed anywhere in the country.

Rather than eliminating access to a financial option used by injured New Yorkers to pay rent, buy groceries, or keep utilities on, the bill directly confronts the alleged abuses through enforceable statutory limits.

Transparency Is Not Optional Under A.804-C

One of the article’s central claims is that consumers enter funding agreements without fully understanding the financial consequences. A.804-C squarely addresses this concern.

The bill mandates plain-language contracts written so that an average consumer can understand them without professional assistance. Every contract must be fully completed before signature, include consumer initials on every page, and prominently disclose the funded amount, itemized charges, and the maximum amount the consumer may ever be required to repay.

Critically, the bill requires a detailed payment schedule showing the exact amount owed at six-month intervals from funding through resolution. This is not vague disclosure. It is precision disclosure, designed to eliminate surprises and allow consumers, attorneys, and insurers to understand obligations from day one

A Statutory Right to Walk Away

The article suggests consumers are locked into unfair arrangements. A.804-C directly rebuts this narrative by providing a ten-business-day right of rescission.

During this period, a consumer may cancel the contract without penalty by returning the funded amount. No interest, no fees, no retaliation. This cooling-off period mirrors protections found in other consumer finance statutes and ensures funding decisions are deliberate, not impulsive.

If consumer legal funding were truly predatory, such a rescission right would be commercially impossible. The bill proves otherwise.

Zero Control Over Litigation Decisions

Perhaps the most damaging misconception repeated in the article is that consumer funding companies interfere with lawsuits or pressure consumers to prolong litigation. A.804-C expressly prohibits this.

Funding companies are barred from receiving any right to make or influence decisions about litigation strategy, settlement timing, or resolution amounts. Those decisions remain solely with the consumer and their attorney. Any attempt to interfere violates the statute and triggers penalties.

The bill also bans referral fees, kickbacks, or financial relationships between funders and attorneys, medical providers, or chiropractors. These provisions ensure that funding decisions remain separate from legal representation and medical care.

If the concern is independence of the justice system, A.804-C protects it explicitly.

Attorney Oversight Without Conflicts

Unlike the caricature presented in many opinion pieces, A.804-C integrates attorneys into the consumer protection framework without compromising their independence.

Attorneys must acknowledge in writing that they have reviewed mandatory disclosures with the consumer, are working on contingency, and have not received or been promised any financial consideration from the funding company. They also confirm that they have provided no tax or benefits advice related to the transaction.

At the same time, the bill preserves attorney-client privilege for communications related to funding, preventing disclosure from becoming a backdoor discovery tool.

This is a balanced approach that respects ethical boundaries while reinforcing transparency.

Registration, Reporting, and Public Oversight

The article implies that consumer legal funding operates in the shadows. A.804-C dispels that claim entirely.

Funding companies must register with the State of New York, undergo character and fitness review, post a bond or letter of credit, file their contract forms for approval, and submit annual reports detailing the number of fundings, total amounts, and charges.

Failure to comply means the company cannot legally operate in New York.

That is not an unregulated market. That is a supervised, accountable one.

Regulation That Preserves Consumer Choice

What the opinion piece ultimately overlooks is the consequence of prohibition. Eliminating consumer legal funding does not eliminate financial need. It simply removes one option from injured New Yorkers who may already be facing lost wages, medical bills, and months or years of litigation delay.

A.804-C recognizes that reality. It does not endorse abuse. It prevents it. It does not promote secrecy. It mandates disclosure. It does not empower funders over consumers. It limits funders’ rights and strengthens consumer remedies.

New York does not need to “stop” consumer legal funding. It needs to regulate it intelligently. Assembly Bill A.804-C does exactly that.

In a policy environment too often dominated by slogans, A.804-C stands out as serious legislation responding to real concerns with real solutions. That is the difference between opinion and governance.