For years, most personal injury firms treated funding paperwork as someone else’s compliance problem. That assumption no longer holds. AB 931 rewrites who carries the risk when a client uses a funding company, and a large share of that risk now sits with the retained attorney and the firm.
Signed on October 10, 2025, this California legal funding law places consumer legal funding inside the State Bar Act. That single move changes the stakes for firms that refer clients to funding partners or coordinate advances during a case. The obligations reach your file, your contracts, and your own conduct, not only the funder’s disclosures. For firms used to light-touch litigation funding regulation, that shift deserves a close reading before the next client signs anything.
What Ab 931 Actually Regulates
The new statute adds Article 17, beginning at Section 6250, to the Business and Professions Code. Because that code carries the State Bar Act, the rules now govern lawyers directly, not only the companies that provide the funding. A firm can no longer treat the funder’s contract as a document it never has to open.
Three groups fall under the law at the same time. The funding company must meet disclosure and contract standards. The retained attorney must acknowledge specific steps in writing. And the contract itself must contain terms the client can genuinely understand. Several provisions phase in on different dates, and at least one element ties to a January 1, 2030 marker, so confirm the operative date for each section against the current text before you rely on it.
Most coverage of the bill frames it as a plaintiff-protection measure, and that framing is fair as far as it goes. The AB 931 California picture for firms is different, though, because the statute reaches attorney conduct and firm economics in ways a plaintiff explainer never touches. The practical takeaway is simple: treat this as a rule that governs your file, not only your funding partner’s paperwork.
The Attorney Acknowledgement Your File Now Needs
Under the new rules, the funding contract must carry a written attorney acknowledgement. That acknowledgement confirms you reviewed the required disclosures with your client. It is not a signature buried in boilerplate, and it is not something a paralegal can paper over after the fact. It is an affirmative statement that the review actually happened.
The contract standards reach the client experience too, and each one is a condition the file must meet:
- The client initials every page of the agreement, not just the last one.
- The client receives a plain-English written contract they can read without hiring a professional to interpret it.
- If you negotiated the agreement in another language, the client gets a copy in that language and in English.
None of these are aspirational goals. They are gatekeeping items, and a file that skips one may not hold up if anyone reviews it later. The funder and attorney relationship has moved as a result, and firms that want the deeper backstory can review the shifting relationship between legal funders and attorneys before they update their intake steps.
The practical fix is small. Build a short intake step that confirms every one of these items before any advance reaches the client. A single checklist line that reads “disclosures reviewed, pages initialed, language copy provided” turns a legal requirement into a routine that a busy office can actually follow.
Financial-Interest And Referral-Fee Limits That Hit The Firm
Two limits in the statute land directly on firm economics, and both deserve a careful read rather than a skim.
First, a retained attorney and that attorney’s immediate family cannot hold a financial interest in a funding company that serves the same client. If a partner, a spouse, or a close relative owns a stake in the funder, the arrangement runs into the bar set at Section 6256, which carries a January 1, 2030 component you should confirm against the current language. Firms that grew comfortable with quiet ownership arrangements need to map those relationships now, because the conflict is structural, not cosmetic.
Second, the funding company cannot pay the firm a commission or a referral fee for sending clients its way. This is where legal funding compliance stops being an abstraction and starts touching the ledger. The referral-fee ban is not a soft guideline or a matter of professional courtesy. It is a legal requirement, and treating it as optional exposes the firm, not just the funder that wrote the check.
Violations carry statutory penalties. The exact damages figure depends on the operative language, so confirm the current number before you cite it rather than repeating a figure you saw in secondary coverage. The point that matters most is not the size of the penalty. It is that the exposure now attaches to the attorney under the same code that governs a license to practice. Read plainly, the California legal funding law does not merely regulate the funder that wrote the check. It regulates the lawyer who accepted the arrangement, and it does so with the weight of the code behind it.
The practical takeaway here is direct: audit any revenue-share or referral arrangement with a funding partner now, and document what you find. If a legacy agreement includes any form of referral compensation, treat unwinding it as an urgent item rather than a housekeeping task.
How To Vet A Funding Partner Under The New Rules
Vetting a funding partner used to come down to pricing and turnaround. Now it comes down to whether the partner keeps your file clean. A short, repeatable review makes the work manageable:
- Ask for a sample compliant contract and read it against the statute. Check for a clear rescission window, the page-initialing requirement, and a stated maximum obligation the client can owe.
- Confirm the partner neither offers nor expects referral compensation of any kind, and get that confirmation in writing.
- Keep documentation showing your file met the attorney acknowledgement requirement, including who reviewed the disclosures and on what date.
A partner that cannot produce a compliant sample contract on request is telling you something worth hearing. The AB 931 California requirements actually give you a clean, professional reason to ask hard questions of any partner, so use them. Firms that coordinate advances alongside their own operating and trust accounts can fold this review into existing law firm banking controls instead of building a separate process from scratch. The habits that keep a trust account clean are the same habits that keep a funding file defensible. As litigation funding regulation continues to mature across the state, the firms that treat these steps as standard operating procedure will spend the least time worrying about them later.
This is also the moment to standardize. A two-page partner checklist protects the firm at audit time far more than a friendly working relationship ever will. Relationships change, staff turn over, and memory fades. A signed checklist in the file does not.
What You Should Know
The core message is straightforward. This law moves part of the compliance burden onto the firm, and a non-compliant partner now exposes the attorney, not only the funder. Read your funding contracts. Confirm the attorney acknowledgement sits inside every agreement. Audit any referral or ownership arrangement, and unwind the ones that no longer pass. Then keep the records that prove you did each step. The firms that come out ahead will treat legal funding compliance as a routine part of case intake rather than a special project they dust off once a year.
None of this makes working with a funding partner harder than it needs to be, as long as the partner already operates the right way. Fund Capital America works with personal injury firms and their clients on funding arrangements built to meet the current rules, and the team can walk through what a compliant file looks like for your practice. Firms with questions about aligning a funding workflow with the statute can reach out to Fund Capital America directly to talk through the details before the next client signs.
Who is Fund Capital America?
Since 2006, Fund Capital America (FCA) has been a trusted leader in pre-settlement funding, providing cash advance loans to plaintiffs in personal injury and accident cases. Over the years, FCA has proudly served thousands of law firms and tens of thousands of clients, helping them navigate the financial challenges of litigation. While our core service is pre-settlement funding, we also offer a comprehensive range of services to support law firms and their clients from the beginning of the case to the final settlement check distribution.
Fund Capital America’s Services
In addition to pre-settlement funding, FCA provides a broad array of services designed to alleviate the financial and administrative burdens on injury victims, law firms, and medical professionals. Our services include:
- Pre Settlement Funding
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