California Implements Stricter Regulations for Legal Funding and Attorney Advertising

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 consumer protections for litigation funding arrangements. The legislation requires all legal funding contracts to be written in plain language that consumers can understand without professional assistance, ensuring transparency in financial agreements between clients and funding companies.

Under AB 931, all fees associated with legal funding must be explicitly detailed in contracts, including the maximum award amounts consumers can expect to receive. The law also prohibits attorneys from receiving referral fees from legal funders, a measure designed to maintain attorney-client privilege and prevent conflicts of interest. These provisions aim to ensure that companies providing litigation funding interact with consumers honestly and ethically, addressing concerns about predatory lending practices in the legal industry.

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 promotional materials in ways that might improperly influence consumers to engage their services. Additionally, SB 37 bans the use of awards that recipients pay to receive in advertising materials, preventing misleading claims about professional recognition and achievements.

The enforcement of SB 37 protects consumers from manipulative or unethical marketing strategies that could compromise their ability to make informed decisions about legal representation. Both laws represent a significant shift toward greater consumer protection in legal services, addressing growing concerns about transparency and ethical conduct in the legal funding and advertising sectors. The legislation reflects California's ongoing commitment to ensuring fair access to justice while maintaining professional standards within the legal community.

These regulatory changes come amid increasing scrutiny of litigation funding practices nationwide, with California joining other states in establishing clearer guidelines for this growing industry. The new requirements for plain language contracts and fee transparency align with broader consumer protection trends across financial services, while the advertising restrictions address specific concerns about professional conduct in legal marketing. The laws are expected to influence similar legislation in other states as regulators continue to balance consumer protection with access to legal services.