BUFFALO, N.Y. -- Economic and financial analysis firm the Perryman Group released a report this month suggesting third-party litigation funding, also known as lawsuit lending, costs New York nearly $420 million annually in gross product, more than $73 million in lost tax revenue and about 3,600 jobs.

"What it is, it's an advance on your lawsuit, so essentially they take a portion of your winnings if you win but that portion is not subject to really any lending laws," Lawsuit Reform Alliance Executive Director Tom Stebbins said.

Stebbins said the study illustrated why New York should regulate the industry more. The alliance along with a number of business groups and regional chambers of commerce has asked the governor and legislative leaders to prioritize reform this year.

"We're asking Gov. [Kathy] Hochul and the budget committees to regulate these lenders, impose an interest rate cap and impose some kind of disclosure so we know what's going on in our courtrooms," he said.

The American Legal Finance Association, or ALFA, represents the 40 major funding companies involved in consumer litigation.

"Consumer litigation funding is the providing of small amounts of money, $3,000, $5,000, to a plaintiff involved in a personal injury case, a car accident for example and the money is used to help the individual pay for personal needs," Managing Director Jack Kelly said.

Kelly said the Perryman report focused on commercial funding, which typically involves much larger sums and is used directly to pay for the costs of litigation. Still, he did question some of the methodology and data in the report, including using a model that projects policy impacts, reliance on 2021 data and the suggestion reform could result in increased employment.

"The question would be, if full employment is 5% and we're at 4.4% now, where are the jobs that are suddenly going to be increased by the change of this legislation?" Kelly said.

ALFA does support legislation sponsored by state Sen. Jeremy Cooney and state Assemblyman Bill Magnarelli which would require lawsuit lenders register with the Department of State, promotes transparency and caps interest rates at 36%. That is still more than other lenders can charge.

"The New York Courts have long held that this is not a loan. Remember, this transaction is the providing of fundings to an individual for their funding needs and is only paid back if the individual prevails in their case," Kelly said.

Both groups said the current lack of a regulatory environment makes it ripe for largescale fraud.