California has implemented significant new regulations governing legal funding practices and attorney advertising through two recently signed bills. Governor Gavin Newsom signed Assembly Bill 931 into law on October 13, 2025, establishing comprehensive requirements for litigation funding contracts and attorney interactions with legal funders.
Under AB 931, all legal funding contracts must be written in plain language that consumers can understand without professional guidance. The legislation mandates that all fees associated with legal funding be explicitly outlined in contracts, including the maximum award consumers can expect to receive. Additionally, the law prohibits attorneys from receiving referral fees from legal funders, a practice that could create conflicts of interest. The legislation aims to protect consumers, maintain attorney-client privilege, and ensure that companies providing litigation funding operate with honesty and ethical standards.
Lawmakers also passed Senate Bill 37, which imposes stricter parameters on attorney advertising and promotional materials. California-licensed attorneys are now prohibited from referencing past judgments in ways that might improperly influence consumers to engage their services. The law also bans the use of awards in advertising when recipients must pay to receive them, addressing concerns about misleading credentials. The enforcement of SB 37 is designed to protect consumers from manipulative or unethical marketing strategies that could compromise their ability to make informed decisions about legal representation.
These regulatory changes represent California's effort to address growing concerns about predatory practices in the legal funding industry and misleading advertising by attorneys. Legal funding companies, which provide advances to plaintiffs awaiting lawsuit settlements, have faced criticism for charging excessive fees and using complex contract terms that disadvantage consumers. The new transparency requirements aim to ensure consumers fully understand the financial terms before entering into funding agreements.
The advertising restrictions respond to increasing complaints about attorney marketing that creates unrealistic expectations or misrepresents legal capabilities. By prohibiting references to past judgments in persuasive contexts and banning paid awards from promotional materials, the legislation seeks to maintain professional standards and prevent consumer deception. Both laws reflect California's commitment to consumer protection in legal services while balancing the need for access to legal funding options for individuals who might otherwise struggle to pursue legitimate claims.
