Missouri banks and lenders have been under assault for the alleged unauthorized practice of law. Since June 2012, at least five banks or lenders that have made residential mortgage loans in the State of Missouri have been sued for alleged violations of Missouri statutes for the unauthorized practice of law and Merchandising Practices Act (“MMPA”). In each instance, the plaintiffs have asserted a class action. Most of the banks and lenders have removed the lawsuits to federal court based in part on the application of the Class Action Fairness Doctrine, which provides that the Federal Court has jurisdiction upon the satisfaction of certain requirements.
In each case, the plaintiffs allege that the bank or lender charged an origination charge, which included a fee for legal document preparation. The legal documents allegedly prepared were deeds of trust and/or promissory notes. The plaintiffs contend that non-lawyers, or lawyers that were not licensed in Missouri, prepared the documents and charged the borrowers a fee. A form of the documents at issue was prepared by non-Missouri document preparation companies.
The unauthorized practice of law is codified in § 484.010 R.S.Mo., et seq. The statute provides that “No person shall engage in the practice of law or do law business, as defined in section 484.101, or both, unless he shall have been duly licensed therefor and while his license therefor is in full force and effect, nor shall any association, partnership, limited liability company or corporation …engage in the practice of law or do law business …” § 484.020.1 R.S.Mo.
The primary distinction between the “practice of law” and “law business” is the former requires an appearance before “any court of record, commissioner, referee, or any body, board, committee or commission constituted by law or having authority to settle controversies” as an advocate in a representative capacity, or the drawing of papers, pleadings or documents in a representative capacity. § 484.010.1 R.S.Mo. “Law business” is the “advising or counseling for valuable consideration as to any secular law” or the “drawing or procuring of or assisting in the drawing for a valuable consideration in a representative capacity….” § 484.010.2 R.S.Mo.
The MMPA is “the act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce …is declared to be an unlawful practice.”
The banks and lenders undoubtedly deny that an origination charge amounts to a fee for the preparation of legal documents. Because the lawsuits are in their early stages, there is no indication whether the Federal Courts and any other court will agree with the plaintiffs’ contentions that the banks and lenders’ actions were improper. However, banks and lenders should consult legal counsel as to whether they are susceptible to such attacks by zealous plaintiffs.