California's legal funding law, in plain English.

Most pages you will find about "California lawsuit loan laws" were written before this statute existed and still describe the old, unregulated situation. Some of the largest funders operating in Los Angeles do not mention it anywhere on their sites. It is worth ten minutes of your time, because it is the difference between a contract you can hold someone to and one you cannot.

This page is general information, not legal advice. We are a funding company, not your lawyer. For how any of this applies to your claim, ask the attorney handling it.

Who the Act covers

Section 6250 defines a "consumer" as a natural person with a pending legal claim who resides or is domiciled in California. That wording matters more than people expect: the Act keys to where you live, not to where the accident happened. A California resident hurt in Nevada is still a California consumer for these purposes. Whether that is true of your particular claim is a question for your attorney.

The Act describes the transaction itself as a non-recourse purchase of a contingent right to receive some of the potential proceeds of a settlement, judgment, award or verdict. That is the structure we described everywhere else on this site, and California has now written it into the code.

What has to be on the first page of your contract

Section 6252 requires clear and conspicuous language on the first page of the contract, setting out four things:

1. The funded amount to be paid to you.
2. An itemization of any one-time charges.
3. The maximum total amount you are assigning, including the funded amount and all charges.
4. A repayment schedule, including the dates on which all payments are due.

If you are handed a California agreement and cannot find those four items on page one, that is not a stylistic difference. Section 6252 also requires a statement that the funding company has no role in deciding whether, when, or for how much your claim settles.

Your five-business-day cancellation right

Section 6251 requires a right of rescission, and section 6252 mandates the disclosure in near-verbatim form. The clock is worth reading twice:

Two practical consequences. If you sign on a Monday and the money lands on Thursday, your window opens Thursday. And "business days" excludes weekends, so a Thursday funding gives you until roughly the following Thursday rather than five calendar days.

The 36-month stop, and what it is not

Section 6250 defines charges broadly: administrative, origination, underwriting or other fees, including interest, no matter how denominated. Then it stops them. Those charges shall not exceed 36 months from the funding date.

Be precise about what that is. It is an accrual stop, not a rate cap. After three years the meter stops running; what accrued before then is still owed. The Act contains no percentage ceiling, no APR ceiling, no APR disclosure requirement and no dollar cap. Anyone telling you California capped the rate has not read it.

Section 6253 is the provision most likely to change what a funder can offer you. The amount you owe must be a predetermined amount based on intervals of time from the funding date through the resolution date, and it may not be calculated as a percentage of your recovery. In practice a compliant California agreement is a fixed payoff grid by time elapsed. A "we take twenty percent of your settlement" structure does not comply.

Your attorney's signature is a validity condition

Section 6251 requires a written acknowledgment from the attorney handling your claim, covering several points: that they reviewed the required disclosures with you, that they are working on a written contingency fee, that proceeds will route through the client trust account or a separate settlement fund, that they will disburse according to the contract, and that they have received and will receive no referral fee from the funding company.

If the deal was negotiated in another language

Section 6251 requires that where a funding contract was negotiated in a language other than English, you must be given the contract in both English and that language. Note how broad that is: it says any language, not a fixed list. It is a meaningful protection in Los Angeles, where a great many of these conversations happen in Spanish, Armenian, Korean, Tagalog or Farsi.

We take applications in English and Spanish. If you negotiate with us in Spanish, you should expect the agreement in Spanish as well as English.

What a funding company may not do

Section 6254 lists conduct that is off limits. The ones most worth knowing:

• No referral fees, paid or accepted, between funder and attorney.
• No referring you to a specific attorney or firm. The only carve-out is pointing you at a publicly available lawyer referral service run by a local bar association of the State Bar of California. It is why, on our eligibility page and in the FAQ, we point at bar association services and never name a firm.
• No materially false or misleading statements about the product.
• No decision rights over your claim — the funder cannot control whether, when, or for how much you settle.
• No funding on top of an undisclosed prior assignment. If you have taken an advance already, say so. See buying out an existing advance.
• No asking you to waive rights or remedies.

The Act provides for private civil enforcement with statutory damages, so these are not advisory.

What the Act does not do

This is where most write-ups go wrong, so it is worth stating plainly:

• It does not cap the rate or require an APR disclosure.
• It does not make funding available where liability or coverage do not support it. Nothing in the statute obliges anyone to fund you.
• It does not change how your underlying injury claim works — comparative fault, deadlines to file, and liens are all governed elsewhere, and they are questions for your attorney.
• Article 17 carries no sunset. You may see summaries claiming California's legal funding law is repealed on January 1, 2030. That repeal date belongs to a different, unrelated section of the same bill dealing with attorney fee arrangements. It does not apply to sections 6250 through 6256.

What to actually do with this

When a California funding agreement is put in front of you, four checks take about two minutes:

1. Turn to page one. Are the funded amount, the itemized charges, the maximum total and the repayment schedule all there?
2. Find the cancellation language. Does it say five business days from the funding date?
3. Look at how the payoff is expressed. Is it a fixed amount by time interval, or a percentage of your recovery?
4. Confirm your attorney is signing an acknowledgment. Without one the contract is void.

If any of those are missing, ask why before you sign — of us or of anyone else. And take the agreement to your attorney; the Act assumes they will read it with you.