Governor Gavin Newsom signed Assembly Bill 931, the California Consumer Legal Funding Act, into law last month.  AB 931 establishes comprehensive regulation of Consumer Legal Funding, providing important safeguards for consumers while preserving access to financial support during the resolution of legal claims.  The law takes effect January 1, 2026.

AB 931 requires Consumer Legal Funding companies to provide clear, written contracts detailing the amount of funding, all fees and charges, and a payment schedule.  Consumers are also granted a five-business-day right to cancel without penalty.  The Act strictly prohibits funding companies from influencing legal claims, paying referral fees to attorneys, or steering consumers toward specific legal representation.

By setting transparent rules and robust consumer protections, AB 931 ensures that litigants can access financial assistance while pursuing justice safely and responsibly.  This legislation aligns California with a growing number of states recognizing Consumer Legal Funding as a non-recourse, consumer-centered financial service—designed to support individuals’ essential needs, not influence litigation outcomes.