Reply by MikeC/NY on 9/20/09 5:05pm
Msg #304410
Re: Crackdown on Loan Modification Companies
It's already illegal to collect upfront fees for this here in NY, unless you're an attorney - in which case it's considered a retainer (which figures, because most of the legislators here are attorneys and they protect their own...).
I'm just curious whether the states that are now passing these laws are also making that same exemption for attorneys, because it's a loophole you could drive a truck through...
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Reply by PAW on 9/21/09 7:25am
Msg #304427
Re: Crackdown on Loan Modification Companies
Like NY, FL has cracked down on the loan mod scams, but allow for attorneys to obtain retainers. It's not really an exception or loophole, because the retainer is for legal services by a member of the FL Bar, and it is monitored by the Florida Bar. No monies can be collected specifically for obtaining a loan modification or providing pre-payment on terms that never reach fruition. It will be interesting to see how the courts interpret "legal services" in respect to real attorneys that use the retainer to "investigate the possibility of" obtaining a loan modification. (Foreclosure Fraud Rescue Prevention Act, Florida Statutes 501.1377) The FL Bar has established some strict rules pertaining to the Act as a result of the increased occurrence of non-lawyers contacting lawyers.
Florida Bar members:
* Cannot pay a referral fee or give anything of value to a non-lawyer for referring distressed homeowners to the lawyer. [Rule 4-7.2(c)(14)]
* Cannot be paid by a non-lawyer to provide services to distressed homeowners. [Rule 4-5.4(a)]
* Cannot directly or indirectly divide fees with a non-lawyer. [Rule 4-5.5(a)]
* Cannot assist in the unauthorized practice of law by: providing legal services for a distressed homeowner while employed as in-house counsel for a non-lawyer company; forming a company with a non-lawyer to perform foreclosure related services if any of the services are the practice of law; or assisting a non-lawyer individual or company in providing services that the individual or company is not authorized to provide or are otherwise illegal.[Rule 4-5.5(a)]
* Cannot assist a non-lawyer in violating the provisions of the Foreclosure Rescue Act, Section 501.1377, Florida Statutes. [Rule 4-8.4(d)]
* Cannot directly contact distressed homeowners to offer representation (including by telephone or facsimile) and cannot allow someone else to directly contact distressed homeowners on the lawyer’s behalf. [Rules 4-7.4(a) and 4-8.4(a)]
* Cannot accept referrals from non-lawyers acting in the guise of a “lawyer referral service” (legitimate lawyer referral services must comply with a rule which requires all advertisements and contact with prospective clients to be in compliance with the attorney advertising rules, in addition to other requirements) [Rule 4-7.10]
* Must have a direct relationship with distressed homeowners who hire the lawyer for representation. [Rules 4-1.1, 4-1.2 and 4-1.4]
* Cannot allow a non-lawyer to choose a lawyer for a distressed homeowner or direct a lawyer’s representation of a distressed homeowner. [Rules 4-1.1, 4-1.2, 4-1.4, and 4-5.5(a)]
* Several ethics opinions, Opinions 92-3 and 95-1 in particular, discuss similar proposals and the ethics problems that arise when lawyers enter business arrangements with non-attorneys. These opinions can be accessed on the Florida Bar’s website by selecting “ethics opinions” then “list of Florida Ethics Opinions by number.”
* This alert does not address every potential problem or concern. Lawyers should not assume that conduct is permissible merely because it is not listed above. If you are a Florida Bar member with specific questions about your own conduct related to this type of situation, you should contact The Florida Bar Ethics Hotline at (800) 235-8619.
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