A single line item in a vendor agreement can now expose your firm to statutory damages. That is the practical weight of the referral fees ban written into AB 931, and it changes how every personal injury firm in the state evaluates its funding relationships. The law does not care what you call the payment. If money or value flows from a consumer legal funder to your firm because you sent clients its way, the arrangement sits inside the prohibited zone.
This piece skips the vague warnings and gives you a concrete way to test whether you are working with a compliant funding partner.
What The Ab 931 Referral Fees Ban Actually Covers
AB 931 prohibits a consumer legal funding company from paying commissions, referral fees, or other consideration to an attorney, a firm, or their employees in exchange for referring a consumer. Read that scope carefully. It reaches beyond the named partners on the letterhead and includes staff who might steer a client toward a particular funder. The statute pairs the prohibition with statutory damages, so a breach is not a matter of reputational risk alone. Confirm the current damages figure and the governing code section before you cite either in a client memo or an internal policy, because the number matters when you weigh your exposure.
Here is the part most vendor compliance content skips. The liability does not stop with the funder that writes the check. A firm that accepts value tied to referrals shares in the exposure. So the question is not only whether your funding partner behaves. It is whether any dollar reaching your firm can be traced back to the clients you send. For a fuller walkthrough of how the funder and firm relationship shifts under the new rules, review our breakdown of how the legal funder and attorney relationship changes under AB 931.
Arrangements That Can Quietly Breach The Rule
Most breaches will not announce themselves. They arrive dressed as something more respectable. When you audit your current setup, treat any of the following as a signal worth a closer look:
- Revenue shares or per-file bonuses framed as marketing support. The label changes, but the trigger is still the referral.
- Sponsorships, event underwriting, or “education” payments that scale with the volume of clients you send.
- Preferred-vendor arrangements that route plaintiffs to a funder in exchange for consideration of any kind.
Consider a common setup. A funder offers your firm a quarterly marketing stipend and, in the same conversation, notes that firms sending more files receive a larger stipend. Nothing in that offer uses the word referral, yet the payment rises and falls with the clients you send. That is exactly the mechanic the statute targets. The same logic covers a paid speaking slot at your retreat, a co-branded intake tool, or a booth sponsorship, whenever the value tracks referral volume rather than a genuine, separately priced service.
Legal funding referral fees rarely appear on an invoice under that name. The safer habit is to label and review every dollar that moves between your firm and a funder, then ask what that dollar actually buys. If the honest answer is client referrals, you have found your problem. Under the AB 931 referral fees prohibition, intent and paperwork will not rescue a payment that depends on the flow of clients.
How To Test Your Partner Before You Sign
You do not need a forensic audit to protect the file. A short, documented conversation does most of the work. Run this test on any current or prospective funder:
- Ask directly whether any payment, credit, or in-kind benefit depends on client referrals. Vague answers are answers.
- Request the standard funding contract and read it for referral-linked consideration. A compliant funding partner hands it over without friction.
- Document the responses in the vendor file so the record shows you performed diligence.
A written vendor attestation costs almost nothing and gives your firm a clean paper trail if anyone questions the arrangement later. Firms that already run tight financial controls, including those using dedicated law firm banking services, tend to fold this step into existing vendor review with little effort.
Keep the standard short so the habit sticks. A one-page memo that names the funder, records the date, states plainly that no payment depends on referrals, and attaches the current contract covers most files. Refresh it whenever you renew the relationship or add a new funder to your approved list. If a partner resists any of these steps, treat the resistance itself as data. A funder confident in its structure has no reason to hedge on a direct question.
Fitting The Ban Into Your Existing Ethics Review
The referral fees ban does not stand alone. It layers on top of the attorney referral fee rules California already applies to lawyer conduct, and it targets a specific relationship: the one between a funding company and the firms that could send it clients. The professional conduct rules govern how lawyers share fees with each other. This statute governs what a funder may and may not offer you. A firm that conflates the two can miss the funding-specific exposure entirely.
Partners and office managers carry this review together. The attorney sets the policy, and the office manager usually spots the odd line item first. When both understand that the attorney referral fee rules California enforces now include a funder-facing prohibition, the firm closes the gap before it becomes a claim. Treat this as a distinct checkpoint in your compliance calendar rather than a footnote to your general ethics policy.
What A Clean Arrangement Looks Like
A compliant structure is easy to describe. The funder advances money to the plaintiff, the plaintiff repays from the settlement, and nothing about the firm’s referral activity changes what the firm receives. No stipend, no bonus, and no sponsorship rides on the count of clients you send. When legal funding referral fees are absent by design, your diligence file practically writes itself, because there is no disguised payment to explain.
Plenty of funders operating across California already run this way, so you are not choosing between compliance and access to capital. You are choosing a partner whose paperwork can survive a hard question from opposing counsel, a bar auditor, or your own risk committee. Ask every candidate to show you that structure in writing, and let the ones who cannot fall out of your rotation.
What You Should Know
The referral fees ban rewrites the standard for choosing a funder. The winning move is simple and cheap: ask the direct question, read the contract, and keep the record. If the value flowing to your firm cannot be traced to referrals, you stand on solid ground. If it can, no clever label saves the arrangement, and the firm accepting the value shares the exposure.
Fund Capital America structures its funding without referral-linked payments to firms, which keeps the diligence conversation short for the attorneys and providers it works with. If you want to confirm how a specific arrangement holds up under the current rules, you can talk through the details with the Fund Capital America team and get the documentation your file needs.
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.
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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:
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