Does Foreclosure Rescue Statute Prohibit Attorneys From Taking Upfront Fees In The Course Of Representing Florida Homeowners Facing Foreclosure?

A recent article by Central Florida attorney Michael Alex Wasylik, of the firm Ricardo & Wasylik, PL, points to an apparent flaw in the newly passed Florida state statute, The Foreclosure Rescue Fraud Prevention Act of 2008.

The flaw relates to the ability of attorneys, engaged in typical attorney-client arrangements with Florida homeowners facing foreclosure, to charge and collect upfront retainer fees from those clients. The law prohibits "foreclosure rescue consultants" from charging and collecting upfront fees for performing "foreclosure-related rescue services" to Florida homeowners facing foreclosure.

A reading of the plain language of the new statute appears to include (or ensnare) attorneys among those prohibited from charging upfront fees for their services. (See Section 501.1377(2)(b), Florida Statutes, for definition of the term "Foreclosure-rescue consultant.")

Further, the definition of the term "Foreclosure-related rescue services" in Section 501.1377(3) appears broad enough to include those services typically provided by attorneys in the course of defending clients in foreclosure actions, as well as those services in connection with Federal bankruptcy proceedings. In addition, Section 501.1377(2)(b) enumerates six persons or entities that are specifically excepted from the definition of the term "Foreclosure-rescue consultant"- attorneys are not included on the list.

Based on the reading of the plain language of the statute, it appears that a Technical Corrections Bill by the Florida legislature is in order to correct, what appears to be, an inadvertent but obvious flub in the drafting of the statute that ostensibly prohibits attorneys from charging upfont legal fees from homeowners that they represent in foreclosure-related legal proceedings.

For more, see New Florida Law May Hurt Homeowners in Foreclosure (New Section 501.1377 may make it impossible for homeowners to find lawyers to represent them in foreclosure or bankruptcy proceedings).

Postscript: The same issue was raised in Massachusetts in a January, 2008 article in connection with that state's Attorney General's foreclosure rescue regulations - see Massachusetts Lawyers Weekly: Lawyers: unclear foreclosure regs forcing them to turn down business (Claim that new rule bars acceptance of retainers in certain types of cases).