For Release:
April 2, 2002 Federal Trade
Commission and Department of Justice Urge Rhode Island Legislature to Allow Non-lawyers To
Perform Real Estate Closings
Proposed Bill Would Likely Cause
Consumers to Pay More
The Federal Trade Commission and U.S. Department of Justice
issued a letter on Friday, March 29, 2002, urging the Rhode Island House of
Representatives to reject a proposed bill that would prevent non-lawyers from competing
with lawyers to perform real estate closings. The agencies expressed concern that the bill
likely would cause Rhode Island consumers and businesses to pay more for real estate
closings and could also prevent them from benefitting from competition from out-of-state
and Internet lenders that could provide more convenient closing services.
"This bill would likely deprive Rhode Islanders of
significant benefits of competition, such as lower prices, more convenient services, and
the option to use inexpensive Internet-based loan services," said Timothy J. Muris,
Chairman of the Federal Trade Commission.
"The proposed bill would subject Rhode Islanders to an
artificial restriction on competition that likely would cause them to pay more to close
their real estate transactions," said Charles A. James, Assistant Attorney General in
charge of the Justice Department's Antitrust Division.
For many years, Rhode Islanders have had the choice to close
a refinancing loan with a lawyer or a lay closing service. The bill would eliminate this
competition by requiring consumers to use a lawyer to close almost all real estate deals.
The bill covers both residential and commercial deals and purchases, refinancings, second
mortgages, and other transactions.
The bill contains limited exceptions, and would allow
closings by lay employees of firms owned entirely by Rhode Island attorneys, Rhode
Island-chartered title companies, and title insurance firms. Lenders would be allowed to
close their own home equity lines of credit but not other loans. Even with such
exceptions, the bill would restrict the current choices available to Rhode Island
consumers and is likely to increase closing costs and inconvenience.
According to the letter, one industry source estimated that
Rhode Islanders could pay $200-$500 more, if buyers must pay for their own attorneys, as
well as the lender's closing lawyer. In addition, the letter explains that wider
competition in real estate closings can improve the quality of such services. Non-lawyers
may be more willing to travel to the homes of consumers or to meet consumers after work or
at other convenient hours. Limiting choice by barring lay competition likely would deprive
consumers of these benefits.
The letter notes that consumers in much of the country can
choose between lawyers and non-lawyer real estate closing services. Since 1996, both
Virginia and New Jersey have considered and rejected bans on non-lawyer closing services.
In both states, non-lawyer closing services were substantially less expensive than their
lawyer counterparts.
The bill being considered is H. 7462, "An Act
Relating To Criminal Offenses - Law Practice." It was introduced by Representative
R. Menard and referred to the Rhode Island House Judiciary Committee. |