There is both California state law as well as a federal law from the Federal Trade Commission (FTC), governing firms helping consumers who require foreclosure prevention assistance. LA Legal Law Firm is a private California law firm in good standing with the California State Bar, and is not affiliated with any Government Agency, Lender, Servicer, or Debt Collector. For consumers who cannot afford to hire an attorney, there are free services such as HUD counselors who can assist you. Do not hesitate to ask us for more information on free assistance.
On January 31st, 2010, the Federal Trade Commission began enforcement of the FTC “Final Rule” covering rules of foreclosure in all 50 states. The FTC announced the new rule here: FTC ISSUES FINAL RULE .
This new rule impacts providers of mortgage foreclosure rescue and loan modification services (MARS Providers) in all 50 states. The Final Rule prevents any non-attorney from charging fees for any foreclosure prevention related services, including Forensic Loan Audits, until a loan modification is obtained. To quote the FTC website: “Attorney exemption: Attorneys are generally exempt from the rule if they meet three conditions: they are engaged in the practice of law, they are licensed in the state where the consumer or the dwelling is located, and they are complying with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must meet a fourth requirement – they must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.
If you are being contacted by a non-attorney or if you live in California and are speaking to an out-of-state firm who is trying to collect fees for foreclosure prevention after January 31, 2011, please report them to the FTC.
LA Legal Law Firm works diligently to adhere to every state and federal law governing the services we provide, and we are on the forefront of this in providing input to lawmakers in this field of practice.
WE FOLLOW ALL FTC COMPLIANCE RULES, FIND BELOW FROM FTC WEB SITE
Mortgage Assistance Relief Services Rule: A Compliance Guide for Lawyers [PDF]
Many people who have trouble paying their mortgages seek legal assistance to save their homes or avoid foreclosure. Services consumers ask lawyers to perform run the gamut: representing clients who are in legal proceedings related to foreclosure; advising them on the legal and tax implications of foreclosure, short sales, or bankruptcy; or negotiating a modification of a client’s loan.
Lawyers who offer mortgage assistance relief services need to know that the Federal Trade Commission (FTC), the nation’s consumer protection agency, has issued a regulation affecting how these services can be marketed and provided: the Mortgage Assistance Relief Services (MARS) Rule. Because attorneys are subject to state requirements that duplicate much of what the Rule requires, the Rule has provisions that specifically address the practices of attorneys who provide these services.
Are Attorneys Covered By The MARS Rule?
In general, attorneys are not covered by the MARS Rule if:
- They provide mortgage assistance relief services as part of the practice of law;
- They are licensed to practice law in the state where their client or their client’s home is located; and
- They comply with all relevant state laws and regulations concerning attorney conduct.
Attorneys who don’t comply with these requirements are subject to the Rule’s provisions. Examples of activities that likely could cause attorneys to lose their exemption include:
- Allowing their name to be used in solicitations to clients without actively providing legal services in connection with mortgage assistance relief services;
- Misrepresenting any material aspect of their legal services, including the likelihood they’ll get a favorable result, an affiliation with a government agency, or the cost of their services;
- Sharing legal fees for MARS-related services with non-attorneys;
- Helping non-attorneys engage in the unauthorized practice of law;
- Failing to keep clients reasonably informed about their matters, including the potential for adverse outcomes;
- Failing to work diligently and competently on behalf of their clients – that is, not making reasonable efforts to get mortgage assistance relief; and
- Engaging in a widespread telemarketing operation staffed by non-attorneys.
What About Collecting Legal Fees?
Lawyers can charge clients fees in advance if: 1) they’re providing mortgage assistance relief services as part of practice of law; 2) they’re licensed in the state in which their client or their client’s home is located; 3) they’re complying with state laws and regulations concerning attorney conduct; and 4) before they perform any services, they place the fees in a client trust account that complies with state laws and regulations. Non-attorneys who offer mortgage assistance relief services can’t collect fees until their customer has accepted a written offer of mortgage relief from their lender or servicer.
Under the Rule, attorneys can’t withdraw fees in the client trust account before earning the fee or incurring the expense. To maintain their exemption from the Rule’s ban on upfront fees, attorneys must comply with all state requirements related to use of client trust accounts. Laws and regulations for attorneys vary by state, but examples of activities that likely could cause attorneys to lose their exemption include:
- Withdrawing money from a client trust account before the attorney earns fees or incurs expenses;
- “Front-loading” fees for mortgage relief assistance services to expedite the withdrawal of funds from a client trust account;
- Failing to keep complete records of transactions associated with a client trust account;
- Failing to notify a client of a withdrawal so that he or she has an opportunity to review the transaction and, if necessary, contest it; or
- If a client contests a withdrawal, failing to keep those funds separate from other clients’ and attorneys’ funds.
The Rule doesn’t restrict the type of fees attorneys may charge their clients. Attorneys may charge any kind of fee, including flat fees, contingency fees, hourly fees, or some combination. However, before performing promised services, attorneys must deposit any fee in a client trust account. Regardless of the type of fee an attorney charges, he or she can’t withdraw money from the account until fees are earned or expenses incurred.