Federal Trade Commission and Department of Justice Urge North Carolina State Bar to Allow Non-Lawyers to Compete for Closing Real Estate Deals

The Federal Trade Commission and the U.S. Department of Justice today issued a joint letter urging the Council of the North Carolina State Bar to approve a proposed opinion that would explicitly permit non-lawyers to compete with lawyers to perform real estate closings. The agencies said the proposal would allow consumers to pay lower prices and have more choices for real estate closing services. If the opinion is adopted by the Council when it meets on July 15, it will effectively repeal previous North Carolina State Bar opinions that had declared closings to be the practice of law and foreclosed lay competition.

The new opinion would declare that non-lawyers could oversee executing the documents and disbursing the proceeds necessary to close North Carolina residential real estate transactions, as long as the non-lawyer did not provide any legal advice or opinion.

"The Ad Hoc Committee's two recommendations would let consumers choose non-lawyer settlement services to close real estate transactions and would permit closings to occur by fax, mail, or Internet. Together, these changes would remove significant barriers to electronic commerce in North Carolina," said FTC Chairman Timothy J. Muris.

"The proposed opinion would enable North Carolina consumers to enjoy the benefits of competition - lower prices and more choices in how and when closing services are provided," said Charles A. James, Assistant Attorney General in charge of the Justice Department's Antitrust Division. "We urge the State Bar Council to adopt it and join the many other states that permit lay closings."

The joint FTC-Justice Department letter notes that the opinion likely would enable consumers to save money in three ways. First, those who hire lay closers will pay less money than those who hire lawyers. Second, those who hire lawyers will pay less than otherwise because competition between lawyers and non-lawyers will keep legal fees down. Third, consumers would be able to close transactions by mail or over the Internet, thus likely saving on their closing costs.

The opinion, "Authorized Practice Advisory Opinion on Real Estate Transactions," was proposed on June 24, 2002 by the Special Committee on Real Estate Closings of the North Carolina State Bar.

The State Bar Council will also consider an ethics opinion that would permit lawyers to use employees under their supervision to conduct closings. According to the joint letter, actions short of allowing lay persons to compete with lawyers for the closing business will be insufficient to protect consumers.

On December 14, 2001, the FTC and the Justice Department had issued a joint letter urging the North Carolina State Bar to permit lay closers to compete with lawyers. After receiving that letter, the State Bar appointed the Special Committee. Chaired by Dudley Humphrey, the Committee proposed the two new Opinions on June 24, 2002.

The Commission vote authorizing staff to send the letter to the Council was 5-0.

NOTE: The joint FTC-DOJ letter signed by Chairman Muris represents the views of the Federal Trade Commission.

Copies of the joint FTC-DOJ letter are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form athttp://www.ftc.gov . The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.