California Implements Stricter Regulations on Legal Funding and Attorney Advertising
California has enacted new laws imposing stricter oversight on legal funding contracts and attorney advertising practices to enhance consumer protection and ethical standards in the legal industry.
California lawmakers have implemented significant new regulations governing legal funding practices and attorney advertising standards 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 that affect how California-licensed attorneys can engage with third-party funding sources.
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 new law prohibits attorneys from receiving referral fees from legal funders, a practice that could create conflicts of interest. These measures are designed to protect consumers, maintain attorney-client privilege, and ensure that companies providing litigation funding interact with consumers honestly and ethically.
Lawmakers also passed Senate Bill 37, which imposes stricter parameters on attorney advertising practices. California-licensed attorneys now face limitations on what they can include in promotional materials, including prohibitions against referencing past judgments in ways that might influence consumers to engage their services. The law also bans the use of awards where recipients pay to receive them in advertising campaigns. The enforcement of SB 37 aims to protect consumers from manipulative or unethical marketing strategies that could compromise their ability to make informed decisions about legal representation.
The combined effect of these legislative changes represents a substantial shift in how legal services are marketed and funded in California. Consumer advocacy groups have long raised concerns about predatory lending practices in legal funding and misleading advertising tactics that could pressure vulnerable individuals into making hasty decisions about legal representation. These new regulations address those concerns by establishing clearer guidelines and enforcement mechanisms.
The legal industry has been monitoring these developments closely, as California often sets trends that other states follow in regulating legal services. The implementation of these laws could influence how attorneys structure their practices and how legal funding companies operate nationwide. For consumers, the changes mean greater transparency in legal funding arrangements and more reliable information when evaluating attorney advertising, potentially leading to more informed decisions about legal representation.