California Implements Stricter Regulations on Legal Funding and Attorney Advertising

California lawmakers have implemented significant reforms to 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 regulations for litigation funding arrangements that affect both consumers and legal professionals.

AB 931 mandates that all legal funding contracts must be written in plain language understandable without professional guidance, requiring explicit disclosure of all associated fees and the maximum award consumers can expect to receive. The legislation also prohibits attorneys from receiving referral fees from legal funders, addressing potential conflicts of interest that could compromise attorney-client relationships. These measures are designed to protect consumers, maintain attorney-client privilege, and ensure ethical interactions between funding companies and clients.

Simultaneously, lawmakers passed Senate Bill 37, which imposes stricter parameters on attorney advertising practices. The new law prohibits California-licensed attorneys from referencing past judgments in ways that might improperly influence consumers to engage their services. Additionally, attorneys cannot use awards in their promotional materials if recipients paid to receive them, closing a loophole that allowed misleading credential claims in legal marketing.

The enforcement of SB 37 aims to protect consumers from manipulative or unethical marketing strategies that have become increasingly common in legal advertising. Both laws represent a significant shift toward greater transparency in legal services, addressing concerns about predatory lending practices in litigation funding and misleading advertising tactics that can pressure vulnerable consumers into legal decisions.

These regulatory changes come amid growing concerns about third-party litigation funding and aggressive attorney marketing practices nationwide. California's approach establishes one of the most comprehensive regulatory frameworks in the United States, potentially serving as a model for other states considering similar consumer protection measures. The laws balance the need for access to legal funding with protections against exploitative practices that could undermine the integrity of legal proceedings.

The implementation of these regulations is expected to reshape how legal services are marketed and funded in California, with implications for attorney ethics, consumer protection, and the broader legal services industry. Legal professionals must now adapt their business practices to comply with the new requirements, while consumers gain additional safeguards against potentially predatory financial arrangements and misleading advertising claims.