Another win for PIANY: Lawsuit lending reform bill signed into law 

When it comes to protecting consumers and reining in unnecessary litigation costs, PIANY has been leading the charge—and this week, it scored another key victory. 

New York Gov. Kathy Hochul has officially enacted the Consumer Litigation Funding Act (S.1104-A/A.804-C), a much-needed reform to regulate the previously unchecked world of third-party lawsuit lending. It’s a move that will protect vulnerable plaintiffs, curb predatory financial practices, and help contain rising insurance costs for businesses and consumers alike. 

This legislation was a top priority for PIANY during the 2025 legislative session—and we’re proud to see our advocacy pay off. 

So, what does this law do? 

At its core, the Consumer Litigation Funding Act brings long-overdue transparency and oversight to companies that offer cash advances to plaintiffs in exchange for a share of any future settlement or judgment. These arrangements, often marketed as financial lifelines, can quickly become financial traps. 

Under the new law, companies providing this type of funding must now: 

• register with the state Department of State; 

• adhere to disclosure requirements that clearly spell out fees and repayment obligations; 

• cap their total charges at 25% of the plaintiff’s gross recovery; 

• allow a 10-business-day rescission period for plaintiffs to cancel agreements without penalty; and 

• avoid interfering in litigation strategy or attorney-client decisions. 

This regulatory framework brings much-needed accountability to an industry that has quietly influenced litigation behind the scenes, often increasing settlement demands, prolonging cases, and ultimately driving up the cost of claims—and insurance. 

Why it matters to insurance professionals 

Lawsuit lending doesn’t just hurt plaintiffs—it distorts the legal system and inflates liability costs across the board. These third-party funders have a financial incentive to push for maximum settlements, regardless of fairness or timeliness, which in turn forces insurers to pay more or litigate longer. That cost eventually gets passed on to policyholders in the form of higher premiums. 

By placing reasonable limits and oversight on this industry, New York state is making a smart move to protect both consumers and the broader insurance market. 

But, there’s still room for improvement 

While the new law is a big step forward, there’s one area where PIANY believes additional action is needed: transparency during active litigation. 

As it stands, the law does not require that the existence of a lawsuit lending agreement be disclosed during the litigation process. That means insurers, defense attorneys, and even courts may be negotiating in the dark, unaware that a third-party financial player is influencing a plaintiff’s settlement expectations. 

The good news? Hochul has requested chapter amendments to address this concern. PIANY would welcome that next step—and we’re prepared to work with lawmakers to ensure that litigation remains transparent and fair for everyone involved. 

A legislative win worth celebrating 

The signing of the Consumer Litigation Funding Act marks a major milestone for fairness in the state’s legal and insurance systems. It’s a legislative win for consumers, for insurers, and for agents who’ve seen firsthand how inflated litigation costs can ripple through the marketplace. 

PIANY is proud to have championed this bill—and we’re not done yet. We’ll continue advocating for greater transparency and accountability in the legal funding space, and we’ll keep members updated every step of the way.