Saturday, April 4, 2009

Loan Modification And The Lawyers Who Don't "Get It."

Rule 4-5.4(a), Rules Regulating The Florida Bar, prohibits attorneys from sharing legal fees with nonlawyers.

I trust all 50 states have the same rule.

I could end this post right there, and assume that my brothers and sisters of the Bar understand that this means they cannot contract with a loan modification company to receive fees that are split with the company, but it appears that this is not the case.

Let me say it again, Rule 4-5.4(a), Rules Regulating The Florida Bar, prohibits attorneys from sharing legal fees with nonlawyers.

So why are all these lawyers calling me about arrangements with loan modification companies? Are you that broke and in need of work that you are willing to engage in set-ups that are illegal?

I know, you're not intending to do anything illegal.

So let me refer you to ethics opinion 92-3. "92" means, 1992, 17 years ago:

It is unethical for an attorney to enter into a working arrangement with a public adjuster. Ethical problems exist regarding solicitation, fee-splitting, and assisting the unlicensed practice of law.

Still don't get it?

Let's read on:

The inquiring attorney has been contacted by a public adjusting firm (the "Company") regarding participation in a proposed arrangement involving personal injury claims. The Company would employ a nonlawyer to pick up accident reports each week from local law enforcement agencies. Those persons with significant claims who have been injured by insured vehicles would then be solicited by the Company. The injured persons (the "claimants") would be given the opportunity to contract with the Company, which, for a fee of 20% of the claimant's recovery, would attempt to negotiate settlement of the claimant's personal injury claim within the tortfeasor's policy limits.

The Company has asked if the inquiring attorney would be interested in representing claimants who need the services of an attorney in the event that the Company is unable to effectuate a settlement. The Company would recommend the attorney to the claimant. The attorney would have contact with the client, would contract directly with the claimant, and would have total control over the handling of the case. In exchange for referring the claimant to the attorney, the attorney would agree to recognize the Company's "contract" with the claimant and agree to protect the Company's "lien."

Sound familiar?

Florida Bar is not cryptic in their opinion:

It would be unethical for the attorney to participate in the proposed arrangement.


Additionally, the proposed arrangement would result in violation of the rules governing advertising and solicitation.


See also 4-8.4(a), which provides:

A lawyer shall not:
(a) Violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another[.]

Should I continue?

Located in Miami, Florida, Brian Tannebaum practices Bar Admission and Discipline and Criminal Defense. Read his free ebook The Truth About Hiring A Criminal Defense Lawyer. Please visit



Anonymous said...

Very interesting. There are lots of people right now that are seeking Loan Modification Help to avoid home foreclosures. I think applying for a loan modification process is a great thing to do at this time.

Unknown said...

Brian - You said it! Just find myself wondering, 2 years, several new regulations and several more shady law-business partnerships later....

Short of filing a full-fledged complaint with the OFR or FL Bar, is there any way that interested consumers and/or attorneys can report loan mod businesses that are purposefully operating "under the radar" and have not applied for the mortgage brokerage license now req'd in the loan mod industry? (including those holding themselves out as "law firms"??)