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New York Enacts Landmark Consumer Legal Funding Legislation

By Eric Schuller |
December 22, 2025

New York Enacts Landmark Consumer Legal Funding Legislation

The Alliance for Responsible Consumer Legal Funding (ARC) applauds New York Governor Kathy Hochul for signing into law Assembly Bill 804C/Senate Bill 1104, a landmark measure establishing thoughtful regulation for Consumer Legal Funding in the Empire State.

Sponsored by Assemblymember William B. Magnarelli and Senator Jeremy Cooney, this legislation creates a clear framework that protects consumers while preserving access to a vital financial resource that helps individuals cover essential living expenses—such as rent, mortgage, and utilities, while their legal claims are pending.

“I am pleased that the Governor signed this important bill into law today.  It is the culmination of 8-years of hard work on this issue.  This law will provide a sound framework to regulate financing agreements and provide protections to consumers.  I want to thank the Alliance for Responsible Consumer Legal Funding and its President, Eric K. Schuller for working with me to get this bill over the finish line.  I would also like to thank and acknowledge my late colleague, Assemblyman Michael Simanowitz, who was the original sponsor of this legislation.”  — William B. Magnarelli, 129th Assembly District 

For many New Yorkers, Consumer Legal Funding provides a critical financial lifeline while a legal claim is pending, often for months or years. Injured consumers frequently face lost income and mounting household expenses at the very moment they are least able to manage financial strain. Consumer Legal Funding allows individuals to cover essential living costs, such as rent, utilities, transportation, and groceries, without being forced into an early or unfair settlement simply to make ends meet.

Senator Jeremy Cooney stated: “Today marks a historic step forward in protecting everyday New Yorkers from opaque and often predatory litigation financing practices. For too long, vulnerable plaintiffs have been left in the dark about the true cost of third-party funding, only to see the majority of their hard-earned legal recovery eroded by fees and unclear terms. I’m proud to sponsor this bill that brings transparency, accountability, and basic consumer protections to this industry, ensuring New Yorkers can pursue justice without sacrificing financial security.”

Because Consumer Legal Funding is non-recourse, consumers repay funds only if they recover proceeds from their legal claim, if there is no recovery, they owe nothing. This structure protects consumers from taking on debt, preserves their financial stability, and ensures they retain full control over their legal decisions. By enacting this legislation, New York affirms that Consumer Legal Funding supports financial stability and access to justice.

“This law strikes the right balance between consumer protection and financial empowerment, by establishing clear rules of the road, New York ensures that consumers retain freedom of choice, transparency, and access to funds that help them meet their immediate needs during one of the most difficult times in their lives.” said Eric K. Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). “We thank Governor Hochul for her leadership and Assemblymember Magnarelli and Senator Cooney for their commitment to fairness and consumer choice. This new law affirms that Consumer Legal Funding is about funding lives, not litigation.” 


Under the new law, Consumer Legal Funding is defined as a non-recourse transaction in which a company purchases a contingent right to receive proceeds from a consumer’s legal claim. The law contains several key consumer safeguards, including:

• Clear Contract Disclosures: All terms, charges, and cumulative repayment amounts must be plainly stated and initialed by the consumer.
• Right to Cancel: Consumers have ten business days to cancel a contract without penalty.
• Attorney Oversight: Attorneys must acknowledge reviewing mandatory disclosures and are prohibited from accepting referral fees or having a financial interest in funding companies.
• Prohibited Practices: Funding companies may not influence settlement decisions, mislead consumers through advertising, or refer clients to specific attorneys or medical providers.
• Registration and Reporting: All funding companies must register with the State of New York and file annual reports, and meet bonding and disclosure requirements.

The act takes effect 180 days after becoming law and marks another milestone in advancing consumer protection and responsible business practices across the nation.

About ARC

The Alliance for Responsible Consumer Legal Funding (ARC) is the national trade association representing companies that provide Consumer Legal Funding—non-recourse financial assistance that helps consumers meet everyday living expenses while their legal claims proceed. ARC advocates for policies that protect consumers and ensure access to fair, transparent, and responsible funding options.

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Eric Schuller

Eric Schuller

Consumer

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Consumer

Consumer Legal Funding Framed as a Stabilizer for Households and Local Economies

By John Freund |

A new commentary argues that consumer legal funding plays a meaningful role in sustaining households through financial hardship and, by extension, in strengthening the local economies where funded consumers live and spend. The piece positions the product not as a litigation tool alone but as a form of short-term liquidity that helps injured plaintiffs avoid cascading financial setbacks while their cases proceed.

As reported by The National Law Review, the author contends that consumer legal funding is "about ensuring that financial hardship does not disrupt lives, destabilize communities, or weaken local economies." The analysis highlights that many recipients use advances to cover rent, groceries, transportation, and medical expenses while waiting for case resolution, rather than for discretionary spending.

The framing arrives as state legislatures continue to debate consumer legal funding regulation, with recent activity in Kansas and elsewhere focusing on disclosure, fee caps, and licensing. Industry advocates have increasingly emphasized the product's household-level impact to counter characterizations of the sector as purely a financial-services play, pointing to the demographic profile of consumers who turn to funders after an accident or injury.

For the broader litigation finance industry, the commentary reinforces an argument that has become central to the consumer side's legislative strategy: that restricting access to funding has downstream effects on working families who lack other bridge-financing options. How that argument lands with lawmakers weighing new transparency and pricing rules will continue to shape the regulatory map in 2026.

Consumer

Kansas Enacts Transparency in Consumer Legal Funding Act

By John Freund |

Kansas has become the latest state to adopt a regulatory framework for consumer legal funding, with Governor Laura Kelly signing the Transparency in Consumer Legal Funding Act into law. The measure passed with unanimous bipartisan support in both chambers of the Kansas legislature and establishes baseline standards for how consumer legal funding companies operate in the state.

According to EIN Presswire, the new law affirms that consumer legal funding is not a loan and codifies several consumer protections. Those include a 10-day cancellation window allowing consumers to rescind agreements without penalty, a non-recourse structure ensuring consumers owe nothing if their case is unsuccessful, and a requirement that contracts be written in plain language. Funding companies must also provide full financial disclosure of funded amounts, fees, and maximum repayment schedules.

The statute additionally prohibits funders from influencing settlement decisions or the direction of litigation, preserving attorney independence and client control over case strategy. A referral fee ban eliminates kickbacks to attorneys or medical providers, addressing a long-standing concern among industry critics.

Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding, called the legislation "a thoughtful, balanced framework that ensures consumers fully understand their agreements while preserving access to critical financial support during litigation." The Kansas law adds to a growing patchwork of state-level consumer legal funding regulations and reflects continued momentum toward standardized disclosure requirements across the industry.

Consumer

Legal Bay Provides 2026 Mass Tort Litigation Update on Talc, Depo-Provera, and Cartiva Claims

By John Freund |

Pre-settlement funding provider Legal Bay LLC has released its 2026 outlook on three major mass tort cases it continues to monitor and fund, covering talc ovarian cancer litigation, Depo-Provera brain tumor claims, and the emerging Cartiva toe implant lawsuits.

As reported by PR Newswire, Legal Bay CEO Chris Janish said talc litigation against Johnson & Johnson has "clearly reached a mature phase," with multiple bankruptcy attempts dismissed and cases returned to traditional proceedings. The company believes 2026 may finally bring a meaningful global resolution, noting that J&J's stock price has nearly doubled from litigation-driven lows.

The Depo-Provera docket, which alleges the injectable contraceptive caused meningioma brain tumors, is moving into a bellwether testing phase. Courts are increasingly scrutinizing litigation funding agreements in these cases for disclosure. Janish acknowledged that "disclosure requirements are becoming a larger part of complex litigation."

The third area of focus — Cartiva synthetic cartilage toe implants — represents an early-stage medical device docket involving reported implant failures and revision surgeries. Legal Bay noted growing plaintiff interest in this emerging litigation.

The company emphasized that its non-recourse funding agreements do not interfere with attorney-client relationships or settlement authority, and that clients owe nothing if they do not secure a recovery.