The Florida Bar has launched a new investigation into for-profit lawyer referral services.
The committee studying this was informed that the Attorney General’s Economic Crimes Office is investigating several lawyer referral services, both those registered and not registered with the Bar.
Some of the services do “cold call” or direct solicitation, which is prohibited in Bar rules. According to information from the AG’s office, Board of Governors member Grier Wells, chair of the special committee said, “An attorney is usually connected to the agency and gives his/her name to the agency for use in ‘referring’ the consumer to the attorney. Once a consumer ‘retains’ the attorney, the attorney takes an up-front fee and bills on a monthly basis for supposed legal work. Whatever work is done in trying to eliminate the consumer’s debt is usually done by supposed paralegals. From what we have heard, little work is actually done by an attorney.” – Source
Does that scenario sound familiar to anyone beside me?
The Florida Bar says the money that the consumer pays to the attorney is called a legal fee to circumvent the fee restrictions of [F.S.] sec. 501.1377 and secs. 817.802 and 817.803 that exempt attorneys in the practice of law.
Grier said, “Moreover, we are finding that a substantial portion of the legal fee (perhaps up to 80-90%) is remitted by the attorney to the referral agency in contravention of fee splitting ethics and the terms of sec. 877.02.”
Section 817.802 specifically refers to the section:
817.802 Unlawful fees and costs.
(1) It is unlawful for any person, while engaging in debt management services or credit counseling services, to charge or accept from a debtor residing in this state, directly or indirectly, a fee or contribution greater than $50 for the initial setup or initial consultation. Subsequently, the person may not charge or accept a fee or contribution from a debtor residing in this state greater than $120 per year for additional consultations or, alternatively, if debt management services as defined in s. 817.801(4)(b) are provided, the person may charge the greater of 7.5 percent of the amount paid monthly by the debtor to the person or $35 per month.
(2) This section does not prohibit any person, while engaging in debt management or credit counseling services, from imposing upon and receiving from a debtor a reasonable and separate charge or fee for insufficient funds transactions.
Section 817.803 is in reference to the perceived attorney exemption from this section:
Nothing in this part applies to:
(1) Any debt management or credit counseling services provided in the practice of law in this state;
(2) Any person who engages in debt adjustment to adjust the indebtedness owed to such person; or
(3) The following entities or their subsidiaries:
(a) The Federal National Mortgage Association;
(b) The Federal Home Loan Mortgage Corporation;
(c) The Florida Housing Finance Corporation, a public corporation created in s. 420.504;
(d) A bank, bank holding company, trust company, savings and loan association, credit union, credit card bank, or savings bank that is regulated and supervised by the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of Financial Regulation of the Department of Financial Services, or any state banking regulator;
(e) A consumer reporting agency as defined in the Federal Fair Credit Reporting Act, 15 U.S.C. ss. 1681-1681y, as it existed on April 5, 2004; or
(f) Any subsidiary or affiliate of a bank holding company, its employees and its exclusive agents acting under written agreement.
Section 877.02 says:
877.02 Solicitation of legal services or retainers therefor; penalty.
(1) It shall be unlawful for any person or her or his agent, employee or any person acting on her or his behalf, to solicit or procure through solicitation either directly or indirectly legal business, or to solicit or procure through solicitation a retainer, written or oral, or any agreement authorizing an attorney to perform or render legal service, or to make it a business to solicit or procure such business, retainers or agreements; provided, however, that nothing herein shall prohibit or be applicable to banks, trust companies, lawyer reference services, legal aid associations, lay collection agencies, railroad companies, insurance companies and agencies, and real estate companies and agencies, in the conduct of their lawful businesses, and in connection therewith and incidental thereto forwarding legal matters to attorneys at law when such forwarding is authorized by the customers or clients of said businesses and is done pursuant to the canons of legal ethics as pronounced by the Supreme Court of Florida.
(2) It shall be unlawful for any person in the employ of or in any capacity attached to any hospital, sanitarium, police department, wrecker service or garage, prison or court, for a person authorized to furnish bail bonds, investigators, photographers, insurance or public adjusters, or for a general or other contractor as defined in s. 489.105 or other business providing sinkhole remediation services, to communicate directly or indirectly with any attorney or person acting on said attorney’s behalf for the purpose of aiding, assisting, or abetting such attorney in the solicitation of legal business or the procurement through solicitation of a retainer, written or oral, or any agreement authorizing the attorney to perform or render legal services.
(3) Any person violating any provision of this section shall be guilty of a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083.
(4) This section shall be taken to be cumulative and shall not be construed to amend or repeal any other valid law, code, ordinance, rule, or penalty now in effect.
Reading 877.02 it seems darn near impossible in Florida for any agent, affiliate, company or marketer to accept funds for services to be performed by a lawyer. The part “It shall be unlawful for any person or her or his agent, employee or any person acting on her or his behalf, to solicit or procure through solicitation either directly or indirectly legal business, or to solicit or procure through solicitation a retainer, written or oral, or any agreement authorizing an attorney to perform or render legal service, or to make it a business to solicit or procure such business, retainers or agreements,” seems very clear and on face value appears to be directly applicable to attorney model debt settlement companies.
It seems the standard attorney model referral setup has drawn the attention of the Florida Bar. If you have information on this issue you’d like to share, contact [email protected]
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