Why California must reject AB 931

OPINION – Imagine you are on your way to work when a delivery driver runs a red light and slams into your car. You are left with a crushed leg, months of recovery, a family to feed, and no paycheck in sight. A lawsuit seems like the only path to justice, but justice takes time. Bills pile up, rent is due, and now you are desperate to stay afloat. Then you hear about a company offering fast cash to help while your case is pending. It sounds like a lifeline.

But hidden in the fine print are sky-high interest rates and fees. By the time your case finally settles, the lender takes the lion’s share. You win, but walk away with little more than medical debt and frustration.

This isn’t a one-off; it’s the business model. Predatory lawsuit lenders exploit financial vulnerability, charging triple-digit interest while operating in the shadows of our civil justice system. These puppeteers pull the strings and call it “third-party litigation funding.” Victims call it a trap.

Lawmakers in Sacramento are now debating Assembly Bill 931, billed as “consumer-legal-funding reform” legislation. In truth, the measure is a half-hearted attempt to rein in lawsuit lenders. AB 931 requires basic paperwork and outlaws kickbacks, but it keeps the most abusive tactics intact: no cap on interest (which can hit 100 percent or higher), no requirement to tell judges or juries who is bankrolling a case, and no guarantee that an injured Californian, not an investor, gets paid first.

This tactic reaches beyond individual cases. Hidden funding agreements encourage scorched-earth litigation, prolonged disputes, and jam already crowded court dockets. The costs echo across the economy: every California household pays a $5,429 “tort tax” each year due to unnecessary lawsuits. At a time when the cost of living is increasing, this is money that could cover groceries, rent, or other necessities. Legal system abuse is a significant factor driving up the cost of living for everyone, particularly insurance costs. Third party litigation funding contributes to the growth in lawsuits and increases litigation costs, both of which increase the cost of insurance for every California family, individual, and business who purchases it.

Because these deals aren’t disclosed, no one knows who’s really in charge. Investors operating behind the scenes can quietly influence litigation without accountability. They are the hidden puppeteers.

Plus, some funds trace back to foreign investors, raising national-security questions alongside consumer-protection ones. Meanwhile, legitimate lenders, that play by the rules, continue to endure unfair competition from bad-faith actors.

Californians are not asking lawmakers to ban lawsuit lending outright. We only ask that any attempt to reform the current abusive tactics include accountability measures, including:

• Cap annual rates and fees at levels comparable to other consumer-credit products.
• Require full disclosure of funding agreements to the court and all parties, ending secret puppeteering.
• Protect injured Californians first: medical bills, child-support obligations, and attorney liens must take priority over investor returns.
• License and audit lenders, the same way California oversees payday and auto-title loans.

These measures are not unrealistic, as states from Colorado to Indiana have enacted similar laws in the last few years. By contrast, AB 931 does not include enough provisions to protect Californians or bring real transparency, leaving the puppet masters free to keep distorting justice for profit.

California leads the world in technology and innovation. It should also lead in consumer protection. Passing AB 931 as it is written would hand a victory to Wall Street speculators while doing little for Californians.

Lawmakers should vote no, send the bill back to the drawing board, and craft real safeguards that put Californians at the center of our justice system.

Until then, the strings remain. And the puppet masters keep winning.

Mark Sektnan is Vice President for State Government Relations for the American Property Insurance Association (APCIA).