Existing law, the State Bar Act, provides for the licensure and regulation of attorneys by the State Bar of California, a public corporation. The act prohibits an attorney from accepting a client from a referral service, unless it is a certified lawyer referral service or specified conditions are met, and makes a violation of that prohibition subject to a civil penalty. The act additionally imposes various restrictions on contracts for legal services and specified fee agreements, including that the contract or agreement be in writing and that the basis of compensation is expressly included.
This bill, for purposes of the State Bar Act, would define consumer legal funding to mean a transaction in which a consumer legal funding company, as defined, purchases and a consumer assigns to the company a contingent right to receive an amount of the potential proceeds of a settlement, judgment, award, or verdict obtained in the consumer's legal claim. The bill would require a consumer legal funding transaction to be in writing and contain specified provisions, including that the contract contain the amount to be paid to the consumer by the consumer legal funding company upon the completion of litigation and an itemization of any one-time charges. The bill would prohibit a consumer legal funding company from paying commissions, referral fees, or other forms of consideration to an attorney or law firm, or their employees, for referring a consumer to the company, among other things, and would impose various penalties, including statutory damages, for violation of those prohibitions. The bill would additionally state that the contingent right to receive an amount of the potential proceeds of a legal claim is assignable by a consumer, and that only attorney's liens related to the legal claim take priority over a lien of the consumer legal funding company.
This bill would additionally prohibit an attorney or other legal entity in the state from directly or indirectly sharing legal fees with an out-of-state entity that provides legal services while allowing nonlawyer ownership, management, or decisionmaking authority.

Statutes affected:
AB 931: 6068 BPC
02/19/25 - Introduced: 6068 BPC
03/26/25 - Amended Assembly: 6156 BPC, 6156 BPC, 6068 BPC
04/09/25 - Amended Assembly: 6156 BPC