New York litigation funding regulations changed on June 17, 2026, when the core provisions of the Consumer Litigation Funding Act took effect. For plaintiff attorneys, the practical question is not simply whether a client can obtain an advance. It is whether the funding agreement is within the operative law, preserves the client’s control over the case, protects confidential information, and leaves the client with a fair share of any recovery.

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This guide summarizes the rules that matter most when a New York plaintiff asks about consumer litigation funding. It is educational information, not legal advice. Attorneys should review the current statute, applicable court rules, the signed agreement, and the facts of the individual matter.

What do New York litigation funding regulations cover?

Consumer litigation funding is an arrangement in which a company provides money to a consumer who is a plaintiff in a lawsuit in exchange for an agreed payment from a future settlement or court award. Under Financial Services Law Article 10, the covered transaction is generally no more than $500,000 to a natural person who resides or is domiciled in New York, where the civil claim is filed or will be filed in a New York state or federal court. The New York Department of Financial Services describes the arrangement in its consumer guidance. The funding is generally non-recourse, meaning repayment is tied to a successful monetary recovery rather than a personal promise to repay from other assets. Attorneys can also review the Foundation’s plain-language funding FAQ when explaining non-recourse terms to a client.

The operative framework is Financial Services Law Article 10, sections 1001 through 1011, enacted through New York Assembly Bill A9442, Chapter 11 of the Laws of 2026. The 2025 version placed similar provisions in General Business Law Article 39-H, but A9442 repealed that article and moved the framework to Financial Services Law Article 10 under DFS. Older summaries that cite Article 39-H or the Department of State may describe the repealed framework, not the law attorneys should use today.

Most contract, disclosure, rescission, privilege, and charge-limit provisions apply to agreements entered on or after June 17, 2026. Registration and reporting provisions in sections 1009 and 1010 have a separate delayed effective date under A9442. Attorneys should check the current DFS implementation guidance before stating that a provider is registered or that a registration requirement is already operative. The law does not eliminate transaction-specific analysis: identify who receives the funds, how they may be used, which claim proceeds support repayment, and whether the request is consumer-directed or lawyer-directed.

What protections does the New York Litigation Funding Act provide?

The statute and New York’s official consumer guidance focus on several protections that should be visible in the agreement and in the funding process.

• A limit on the amount owed. The statutory formulation limits the maximum amount to the funded amount plus 25% of the gross recovered amount received for the claim, subject to the rule that payment cannot exceed available claim proceeds. If there is no monetary award or settlement, the consumer generally owes nothing under the funding arrangement, subject to the contract’s treatment of fraud or other violations.
• No control over the litigation. A funding company cannot influence legal strategy, settlement decisions, or how the claim is resolved. The attorney’s duty remains to the client, not to the funder.
• Plain-language contract terms. The agreement must be complete before it is presented for signature and must disclose the payment terms, charges, and obligations. Terms should not be left open for later determination.
• Copies for the consumer and attorney. The consumer and the attorney should each receive a copy of the signed contract. Retaining the complete version in the matter file makes later review easier.
• A 10-business-day cancellation period. The consumer may cancel within 10 business days after receiving the funding without penalty or further obligation if the consumer returns all money received.

These protections are a floor for review, not a substitute for reading the entire contract. An attorney should compare the amount advanced with the total projected repayment at several possible resolution dates, not only the first balance shown in a sales conversation. The agreement should also make clear that repayment is made from claim proceeds after the claim has fully resolved, including any applicable appeal period.

What is the required Acknowledgment of Counsel?

For a covered funding contract, the consumer’s attorney must complete the statutory Acknowledgment of Counsel. This is more than a courtesy signature. The acknowledgment confirms that the attorney reviewed the required disclosures with the client, represents the client under a written contingency-fee agreement, will handle claim proceeds through the attorney trust account or a settlement fund, and will take reasonable steps to distribute proceeds and facilitate compliance with the funding agreement.

The attorney also acknowledges that the attorney has not received and will not receive a referral fee or other consideration from the funding company, and that the attorney has not provided tax, public or private benefit planning, or financial advice about the funding transaction. If the required acknowledgment is not completed, the funding contract shall be null and void under the statute. Read the acknowledgment before the client signs, correct any inaccurate statement, and do not sign a form that describes the representation or payment arrangement incorrectly.

How should attorneys evaluate charges and repayment?

A New York attorney reviewing a funding agreement should separate three figures: the amount the plaintiff receives, the charges that may accrue, and the maximum amount that may be paid from the claim proceeds. The contract should make each figure easy to locate. Ask whether any administrative, origination, underwriting, servicing, or other fee is included, and ask how the balance changes if the case resolves sooner or later than expected.

The statutory limit does not mean that every funding product has the same economic effect. Two agreements may advance the same amount but produce different net recoveries because of their rate structure, timing, fees, payment priority, or treatment of multiple advances. The safest comparison is a written repayment illustration that shows the projected balance at six months, one year, and the expected case timeline.

Simple interest and compound interest are also different. Simple interest is calculated on the original amount advanced. Compound interest adds accrued interest to the balance, so later interest may be charged on earlier interest. Attorneys should identify the method in plain language and avoid relying on labels such as “rate” or “factor” without a dollar example. The Foundation’s simple-interest explanation provides a separate consumer-facing example.

What ethical issues should a New York plaintiff attorney consider?

Funding can affect the attorney-client relationship even when the funder has no authority over the case. New York ethics guidance highlights conflicts, confidentiality, privilege, and professional independence as issues that deserve attention before information is shared or an agreement is signed.

Protect client confidentiality and privilege

The Association of the Bar of the City of New York’s Formal Opinion 2024-2 explains that a lawyer may not disclose client confidential information to a funder without the client’s consent. The current Financial Services Law adds an important protection: section 1008 provides that communications between the consumer’s attorney and the funding company concerning the covered claim do not constitute a waiver of attorney-client privilege or work-product protection. The statutory non-waiver rule does not eliminate the need for informed client consent or careful information handling.

In practice, the attorney should ask what information the funder needs, whether the request includes legal strategy or attorney work product, who will receive the information, and how the information may be used. Client consent should be informed, specific, and documented. Use the current statutory protection as part of the analysis, not as permission to disclose everything in the file, and consider a suitable nondisclosure agreement when appropriate.

Check for financial conflicts

A lawyer or law firm should not recommend or handle a funding arrangement without examining whether the firm or a lawyer has a financial interest in the funder. New York State Bar Association Opinion 1145 and the New York City Bar’s 2024 opinion discuss the conflict risks when a lawyer invests in a funding company or receives a financial benefit connected to a referral. Financial Services Law section 1003 prohibits a funding company from entering a covered contract when it knows the consumer is represented by an attorney or law firm that has a financial interest in that funding company. The statute also prohibits referral consideration connected to the transaction.

These are not merely best-practice disclosures. The attorney should preserve independent judgment, refuse prohibited referral compensation, and address any disqualifying financial relationship before the client signs. A funder’s interest in the speed or amount of a recovery may not match the client’s interests, and selecting a funder must remain the client’s decision after appropriate advice.

Does New York require litigation funding to be disclosed in court?

Attorneys should distinguish contract disclosure from court disclosure. The Consumer Litigation Funding Act requires clear contract information and copies for the consumer and attorney. That is different from a blanket rule requiring every funding agreement to be filed in every civil case.

Whether a funding agreement or related information must be disclosed in a particular action can depend on the court, the procedural posture, a judge’s order, the claims involved, and the information requested in discovery. The New York City Bar’s Formal Opinion 2024-2 emphasizes that privilege and work-product questions require careful analysis and informed client consent. Do not promise a client that an agreement will remain confidential without reviewing the governing rules and the facts.

A useful file note should record what was reviewed, what the client authorized the attorney to share, whether a nondisclosure provision was requested, and whether any court-specific disclosure obligation was checked.

What should an attorney check before a client signs?

The following checklist turns the New York rules into a practical review process:

1. Confirm the transaction. Identify the consumer, the underlying claim, the funder, the amount advanced, and whether the request is covered consumer litigation funding.
2. Confirm the provider. Ask whether the provider is registered with the New York Department of Financial Services when the registration provisions are operative, and retain the provider’s response or registration information. Until the delayed registration rules take effect, confirm which current DFS guidance applies.
3. Read the complete agreement. Make sure no material term, fee, payment schedule, or formula is left blank or reserved for later. Confirm that the agreement uses the operative Financial Services Law Article 10 framework, not a repealed Article 39-H form.
4. Calculate the net recovery. Compare the funded amount, all charges, the funded amount plus 25% of the gross recovered amount received for the claim, and the projected balance at realistic resolution dates.
5. Check control provisions. Reject terms that allow the funder to direct strategy, control settlement decisions, or interfere with the attorney’s independent judgment.
6. Review information rights. Limit disclosures to what is necessary, obtain informed client consent, and address privilege and work-product risks under the current statutory non-waiver rule.
7. Confirm attorney independence. Refuse referral compensation and investigate ownership interests or any other financial relationship that the statute prohibits.
8. Complete the Acknowledgment of Counsel. Review each representation, including contingency-fee status, trust-account handling, required disclosures, distribution duties, and the absence of referral consideration or tax and financial advice.
9. Document delivery and cancellation rights. Give the client a copy, retain the signed agreement, and explain the 10-business-day cancellation period and the requirement to return the funds.

This process also helps an attorney explain why a low advertised advance is not necessarily a low-cost advance. The right comparison is the client’s expected net recovery after repayment, not only the amount deposited at the beginning.

How does nonprofit funding compare with a traditional lawsuit loan?

Many people use the phrases lawsuit loan, lawsuit advance, and litigation funding interchangeably, but the contract terms matter more than the label. The Milestone Foundation is the first and only 501(c)(3) nonprofit consumer litigation funding organization in the United States. Its mission-driven model is designed as an alternative to for-profit funding arrangements that may use compounding charges or unclear repayment formulas.

When pricing is relevant, The Milestone Foundation offers pre-settlement funding at 15% simple annual interest and post-settlement funding at 10% simple interest. Interest never compounds. Funding is non-recourse, and there are no hidden fees. Attorney participation is required for plaintiff funding applications, which gives counsel an opportunity to review the terms and discuss whether funding supports the client’s interests. Attorneys can review the funding application requirements and the separate post-settlement funding guide before directing a client to the appropriate next step.

The practical questions remain the same in New York: Is the agreement complete and understandable? What will the client owe at each likely resolution date? Does the funder stay out of settlement decisions? Are confidential materials handled with informed consent? A nonprofit model does not remove the need for attorney review, but transparent simple-interest terms can make the review more straightforward and help protect more of the client’s recovery.

Contact The Milestone Foundation About Fair Funding

New York litigation funding regulations FAQ

Is litigation funding legal in New York?

Consumer litigation funding is permitted in New York, subject to Financial Services Law Article 10 and other applicable law. The funding agreement must follow the required contract, disclosure, rescission, privilege, and repayment rules. Registration and reporting requirements have a separate delayed effective date, so attorneys should check the current DFS implementation schedule rather than assume registration is already operative.

What is the New York repayment limit?

New York’s current framework limits the maximum amount to the funded amount plus 25% of the gross recovered amount received for the claim, subject to the rule that payment cannot exceed available claim proceeds. Attorneys should read Financial Services Law Article 10 and the contract together because the exact calculation depends on the transaction.

Can a funder decide when a case settles?

No. A funding company cannot influence legal strategy, settlement decisions, or how the claim is resolved. The attorney must act in the client’s interests and preserve independent professional judgment.

Can a plaintiff cancel a New York funding agreement?

Yes. The consumer may cancel within 10 business days after receiving the funding without penalty or further obligation if the consumer returns all money received. The agreement should explain this right clearly.

Does an attorney have to review the agreement?

Yes, the attorney must complete the statutory Acknowledgment of Counsel for a covered funding contract to be valid. The acknowledgment includes review of the required disclosures, contingency-fee status, trust-account handling, distribution duties, and the absence of referral consideration or tax and financial advice. The Milestone Foundation also requires attorney participation for plaintiff funding applications, giving counsel an opportunity to review the terms and discuss whether funding supports the client’s interests.

Does the law require the funder to be registered today?

Not necessarily. A9442 delays the registration and reporting provisions until one year after enactment, which is February 13, 2027 based on the legislative history, separate from the June 17, 2026 effective date for the core contract protections. Attorneys should confirm the current DFS implementation schedule and the provider’s status before advising a client or characterizing a provider as registered.

Are communications with a funder automatically unprotected?

No. Financial Services Law section 1008 provides a statutory non-waiver rule for communications between the consumer’s attorney and the funding company concerning the covered claim. The attorney should still obtain informed client consent, disclose only necessary information, and review the specific facts and governing ethics duties.

Is this article legal advice?

No. This article is general educational information. New York rules and agency guidance can change, and a lawyer should review the current law, court requirements, and the specific funding agreement before advising a client.

Sources

• New York Department of Financial Services, Litigation Funding consumer guidance
• New York Assembly Bill A9442, Chapter 11 of the Laws of 2026, Financial Services Law Article 10
• New York City Bar Formal Opinion 2024-2 on client-funder litigation funding agreements
• New York State Bar Association Opinion 1145 on litigation financing conflicts