Consumer Legal Funding Regulation

Coming to California

SB 581 which is authored by Senator Anna Caballero  is proposed to regulate the Consumer Legal Funding Industry for the first time in California.

ARC fully supports proper regulation of the industry with the following requirements:

Regulations of Consumer Legal Funding

  • Mandates Consumer Legal Funding companies must be registered with the state to offer the product.
    • Show financial stability of the company
    • Post a surety bond
  • Contracts
    • Written in clear plain language
    • Written acknowledgement by the attorney retained by the consumer
    • Clear definition of priority of liens
    • Clear disclosure of the terms and conditions of the fees and charges
    • Statement that the company has no influence over any aspect of the legal claim
    • Statement that if there is no recovery of money the consumer shall owe nothing
    • Statement that if the net proceeds of the claim are insufficient to meet the terms of the contract the company shall accept a reduced sum.
    • Five business day right of rescission
    • The consumers Attorney has gone over the terms of the contract with the consumer
    • A copy of the contract shall promptly be delivered to the attorney
  • Prohibited Acts
    • Pay or offer to pay court costs, filing fees or attorney fees
    • Accept a commission or referral fee
    • Make false or misleading statements in advertising
    • Make any decision in the consumers legal claim
    • Pay or offer a commission or referral fee
    • Provide legal advice to the consumer regarding the funding or underlying legal claim.
    • Report a consumer credit reporting agency
    • Attorney cannot have a financial interest in a Consumer Legal Funding Company
  • Strong Penalties and Enforcement

Click here to find out What is Consumer Legal Funding and how it works.

FAQs on Consumer Legal Funding

Learn what California residents have said about Consumer Legal Funding

What have other states done to regulate Consumer Legal Funding

ARCs members set a high standard for the industry. Check out our Best Practices

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