New York legal update
On June 17, 2026, New York’s Consumer Litigation Funding Act (A804-C/S1104-A) takes effect. It is the state’s first comprehensive framework for consumer legal funding, and was signed by Governor Hochul in December 2025 with bipartisan support.
This is a practical summary of what the law does, and is not intended to be comprehensive. It is provided for general informational purposes and is not legal advice.
It’s not a loan. If there’s no recovery, the client owes nothing.
What the law does
The Act regulates consumer legal funding, the non-recourse advance a client receives against the future proceeds of their case. What’s new is a uniform set of consumer safeguards and a registration regime for funders.
Key dates
| Date | What happens |
|---|---|
| December 19, 2025 | Signed into law |
| June 17, 2026 | Takes effect; applies to new fundings (earlier fundings are grandfathered) |
| January 31, 2027 | First annual funding company reports due to the state |
Protections for consumers
- Full cost transparency. Contracts must be written in clear, everyday language and state, up front, the amount funded, every charge, and the maximum total the client could repay.
- A 10-business-day right to cancel, penalty-free, if the client returns the funds.
- The client stays in control. Funders are barred from any role in whether, when, or how much a case settles, and from interfering with the attorney’s professional judgment.
- No steering. Funders may not pay or accept referral fees, or push clients toward particular attorneys or medical providers.
- Accountability. Funders must register with the New York Department of State, post a bond, and file annual reports, all enforceable by the Attorney General.
What the law asks of attorneys
On funded cases, the consumer’s attorney provides a short written acknowledgement. In practice, the attorney confirms that they:
- Reviewed the required disclosures with the client
- Are retained on a written contingency-fee agreement
- Will disburse proceeds through the attorney trust account or a settlement fund
- Have not received, and will not receive, a referral fee from the funder
- Gave no financial, tax, or benefit-planning advice on the funding itself
An attorney may also not hold a financial interest in the funding company. None of this changes how an attorney manages the case. It puts in writing the arm’s-length relationship that should already exist.
Practical takeaways for Cartiga customers
One signed agreement per funding
To ensure maximum cost transparency, each advance to a client will have its own signed contract. Multiple advances will no longer be bundled under a single open contract. For firms that use rolling fundings, Cartiga can still pre-approve and pre-schedule the full amount, then capture a signature on each disbursement.
| Change | What it means |
|---|---|
| One agreement per funding | Each advance is separately signed by the client and acknowledged by the attorney; multiple advances can no longer be bundled on one contract. |
| Max $500,000 funding per case | Total funded amount per legal claim is capped at $500,000 over the life of the case. Actual funded amounts may be lower, and are subject to ordinary underwriting review and approval. |
| 25% cap on charges | Fees and interest combined cannot exceed 25% of the gross proceeds from the underlying legal claim. This is a cap on the funder’s share of the recovery, not an interest-rate or APR cap, and charges are only ever paid out of proceeds actually recovered. |
Registration and reporting
Funders must register with the New York Department of State, post a bond, and pass a character-and-fitness review. Beginning January 31, 2027, every funder must file an annual report stating the number of fundings, the total dollars funded, and total charges.
Looking ahead
We welcome this law. As a member of the American Legal Finance Association (ALFA), we’ve long supported sound regulation of this industry. For the attorneys and clients we work with, the new law largely confirms how we already do business.
“Consumer legal funding serves a vital purpose. It helps level the playing field for plaintiffs litigating against large insurance defendants and facilitates equitable claim resolution. In the absence of funding, plaintiffs frequently have no choice but to accept lower settlements that undercompensate them relative to the actual damages they suffer. The New York bill, which Cartiga and industry trade organizations strongly advocated for, is a step in the right direction, as Cartiga believes that greater regulation and institutionalization of the consumer funding industry will benefit good actors in the sector, consumer plaintiffs and the tort system overall. Cartiga will continue to encourage additional regulation that further protects consumer plaintiffs, including greater supervision over broker selling practices and potential conflicts of interest.”
Sam Wathen, CEO, Cartiga
This summary is provided for general informational purposes, is not intended to be comprehensive, and is not legal advice. Please consult with an attorney of your choice for assistance in interpreting the new law.
