Article Highlights
- New Ethical Boundaries: California’s AB 931 prohibits attorneys from accepting referral fees or financial incentives from legal funding companies to prevent conflicts of interest.
- Protection of Legal Strategy: The law mandates that legal funders cannot influence litigation strategies, settlement decisions, or case management, preserving the attorney’s independent judgment.
- Plaintiff Transparency: The bill enforces stricter disclosure requirements, ensuring plaintiffs receive clear, plain-language explanations of funding terms and repayment structures before signing.
Legal funding plays a critical role in helping plaintiffs manage expenses while a lawsuit moves through the court system.
In California, lawmakers introduced AB 931 to clarify how legal funders and attorneys may work together and to strengthen protections for plaintiffs who rely on lawsuit funding. These changes affect how attorneys communicate with funders, how funding agreements operate, and how transparency applies across the board.
Understanding AB 931 matters for attorneys, legal funders, and plaintiffs alike. The law reshapes expectations around ethical legal funding and reinforces boundaries that protect the integrity of the attorney client relationship.
What Is AB 931 and Why It Was Introduced
AB 931 updates California legal funding laws to address concerns about transparency and influence in lawsuit funding.
Lawmakers focused on ensuring that legal funders provide financial support without interfering in legal strategy or attorney judgment. The bill reflects growing use of plaintiff financing in personal injury and civil litigation cases across the state.
Industry data shows that lawsuit funding usage has increased steadily over the past decade as cases take longer to resolve. Longer timelines increase financial pressure on plaintiffs, which makes clear rules around legal funding essential for fairness and trust.
Key Changes to Attorney and Funder Relationships
AB 931 places clearer limits on how attorneys and legal funders may interact. The law reinforces that attorneys must always prioritize client interests over financial arrangements with third parties.
Key changes include the following points.
- Attorneys may not accept referral fees or financial incentives from legal funders.
- Legal funders may not influence litigation strategy, settlement decisions, or case management.
- Plaintiffs must receive clear disclosures about funding terms before signing agreements.
These rules aim to prevent conflicts of interest and preserve attorney independence throughout the lawsuit.
How AB 931 Affects Attorneys in Practice
AB 931 changes daily practice for attorneys who regularly work with legal funding providers. Law firms must review funding arrangements more carefully and ensure full compliance with attorney and funder regulations.
Attorneys now need to focus on several compliance steps.
- Review funding contracts for transparency and clarity.
- Explain funding terms to clients in plain language.
- Avoid any communication that could suggest funder influence over case decisions.
For example, if a plaintiff seeks lawsuit funding to cover rent or medical bills, the attorney may confirm basic case details but must not recommend a specific funder based on compensation or benefits.
Impact of AB 931 on Legal Funders
AB 931 also creates stricter expectations for legal funders operating in California. Ethical legal funding requires funders to support plaintiffs financially without controlling or directing litigation.
Legal funders must follow clear standards.
- Provide written disclosures that explain repayment terms and total cost.
- Avoid direct communication with defendants or insurers.
- Respect attorney authority over all legal decisions.
Research from consumer protection groups shows that transparent funding agreements reduce disputes and improve plaintiff satisfaction. Clear rules benefit both funders and borrowers by reducing misunderstandings later in the case.
What AB 931 Means for Plaintiffs Seeking Legal Funding
For plaintiffs, AB 931 improves clarity and protection when using legal funding or plaintiff financing. The law ensures that plaintiffs understand how funding works and how repayment connects to case outcomes.
Important benefits for plaintiffs include the following points.
- Clear explanation of funding fees and repayment structure.
- Assurance that the attorney remains fully independent.
- Reduced risk of hidden costs or pressure to settle early.
For example, a personal injury plaintiff may use lawsuit funding to cover living expenses during recovery. Under AB 931, the plaintiff receives upfront disclosure of costs and retains full control over settlement decisions.
Attorney Funding Versus Plaintiff Financing After AB 931
AB 931 also clarifies distinctions between attorney funding and plaintiff financing. Attorney funding typically supports firm operations, while plaintiff financing helps individuals manage personal expenses during litigation.
The law reinforces boundaries.
- Plaintiff financing focuses on client needs, not attorney profit.
- Attorney funding must follow separate ethical guidelines.
- Legal funders may not blur these roles under California legal funding laws.
This separation protects plaintiffs from undue influence and helps attorneys maintain ethical standards.
Best Practices for Compliance Under AB 931
Attorneys and legal funders can adapt smoothly by following best practices that align with the law.
Recommended steps include the following actions.
- Work only with reputable legal funders that prioritize transparency.
- Document all funding related communications clearly.
- Educate clients about legal funding risks and benefits.
Firms that adopt these practices reduce regulatory risk and build stronger client trust.
What You Should Know
AB 931 reshapes how legal funders and attorneys work together in California. The law strengthens consumer protection, reinforces ethical funding standards, and preserves attorney independence.
By understanding these changes, attorneys and plaintiffs can use lawsuit funding responsibly and effectively.
Fund Capital America operates with these principles in mind and supports ethical legal funding practices that align with California law. Clear rules benefit everyone involved and help ensure that financial support never compromises justice.
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
- Policy Limits
- Doctor & Medical Facility Directory
- Doctor & Medical Facility Scheduling
- Language Services
- Investigation Services
- Medical Legal Finance
- Surgery Funding
- Medical Lien Funding
- Law Firm Funding & Law Firm Banking Services
- Law Firm Line of Credit
- Medical Receivables Financing
- Law Firm Services
Get the Legal Funding Support You Need in Just 5 Minutes!
Here’s how it works:
Fill out our application form: It takes just 5 minutes to provide the necessary details about your case.
Get prequalified: Our team will review your application and get back to you swiftly, often within hours.
Need assistance? Call us at the number provided for immediate support from our knowledgeable staff.
Don’t let financial stress prevent you from focusing on your recovery. Apply now to secure your lawsuit cash advance!
Frequently Asked Questions (FAQ)
1. What is the main purpose of AB 931 in California legal funding? AB 931 was introduced to clarify and regulate the relationship between attorneys and legal funders. Its primary goal is to ensure transparency and prevent conflicts of interest by banning referral fees to attorneys and ensuring that funders do not interfere with legal strategies or settlement decisions.
2. How does AB 931 protect plaintiffs seeking lawsuit loans? The law strengthens consumer protection by requiring clear, written disclosures regarding the total cost and repayment terms of the funding. It guarantees that the plaintiff’s attorney remains independent and focused solely on the client’s best interests rather than financial arrangements with third-party funders.
3. Can a legal funder force a settlement under the new AB 931 rules? No. AB 931 explicitly prohibits legal funders from influencing or controlling litigation strategy, including when to settle a case or for how much. The authority over legal decisions remains strictly between the attorney and the client.
