For Release: March 21, 2003 Federal
Trade Commission and Department of Justice Urge Georgia Bar Committee to Refrain from
Eliminating Nonlawyer Competition for Real Estate Closing-related Business
Proposed Opinion to Adversely
Affect Prices and Services for Georgia Consumers
The Federal Trade Commission and Department of Justice
(DOJ) today issued a letter urging the Georgia State Bar's Standing Committee on the
Unlicensed Practice of Law to reject a request for an opinion that would prevent
nonlawyers from competing with lawyers to perform certain real estate closing-related
functions. If the opinion is eventually approved by the committee, FTC and DOJ contend
that Georgia consumers and businesses could end up paying more for real estate
closing-related services and may be prevented from benefitting from competition from
out-of-state and Internet lenders, according to the letter signed by R. Hewitt Pate,
Acting Assistant Attorney General for the Antitrust Division, and Timothy J. Muris,
Chairman of the Commission.
On March 21, 2003, the Standing Committee will hold a
hearing about whether to declare the preparation of real estate deeds and the facilitation
of their execution to be part of the definition of the practice of law in the state of
Georgia.
"Such a ruling would likely deprive Georgians of
significant benefits of competition, such as lower real estate closing costs, more
convenient services, and the option to use inexpensive Internet-based loan services,"
said Muris.
"The requested opinion would subject Georgians to an
artificial restraint on competition that likely would cause them to pay more for their
real estate transactions," said Pate. "The opinion also may have an adverse
impact on prices, as it will deter nonlawyers from entering the Georgia market and
competing with the lawyers to provide these services." Pate and Muris explain in the
joint letter that laws that require only lawyers to prepare deeds and facilitate their
execution are less apt to protect purchasers because the lawyer performing the services
will likely have been hired by the lender, not the consumer. The lender's lawyer cannot
negotiate on behalf of or otherwise represent the consumer. Moreover, Pate and Muris point
out that a ban on nonlawyers facilitating the execution of deeds has the potential to be
overly broad, sweeping in a variety of activities regularly performed by nonlawyers.
The requested opinion covers both residential and
commercial deals and purchases, refinancings, second mortgages, as well as other
transactions. Opinions of the Standing Committee may be reviewed by the Georgia Supreme
Court, but are not subject to any mandatory review. Thus, an opinion from the Committee
may have broad impact that is not subject to any additional review.
The letter noted that consumers in much of the country can
choose between lawyer and nonlawyer real estate closing services. Since 1996, both
Virginia and New Jersey have considered and rejected bans on nonlawyer closing services.
The Standing Committee on the Unauthorized Practice of Law
will hold its hearing on March 21, 2003, at the State Bar of Georgia in Atlanta. The FTC
voted 5-0 to approve the letter for submission. The DOJ independently made its decision
about approving the letter. For more information on the letter at the DOJ, contact
Renata B. Hesse, Chief of the Networks and Technology Section, at 202-307-6200. For
more information on the letter at the FTC, contact Jerry Ellig, Acting Director of the
Commission's Office of Policy Planning, at 202-326-3528. |