UPL Opinion 212

Whether a Non-Lawyer Settlement Agent Can Negotiate a Debt on Behalf of a Debtor

You have asked the Committee to opine as to whether the conduct in the following scenario is the unauthorized practice of law: Debtor owes Creditor $20,000.00. Creditor reduced his claim to judgment several years ago and filed a lien for this judgment in the real estate records against Debtor’s property. When Debtor tried to refinance a mortgage, his non-lawyer settlement agent discovered the judgment lien. Debtor does not want to pay the full amount of the lien. Can the lay settlement agent attempt to negotiate a lower payoff for Debtor under these facts? Assuming the same facts, does it make a difference if the claim had not been reduced to judgment? Again, assuming the same facts, what if Debtor does not live in one of the parcels being financed, i.e. the property is commercial property?

The controlling authority for this inquiry is found in Part 6 §I (B) Rules of the Supreme Court of Virginia, Definition of the Practice of Law in the Commonwealth of Virginia:

Generally, the relation of attorney and client exists, and one is deemed to be practicing law whenever he furnishes to another advice or service under circumstances which imply his possession and use of legal knowledge or skill.

Specifically, the relation of attorney and client exists, and one is deemed to be practicing law whenever

  1. One undertakes for compensation, direct or indirect, to advise another, not his regular employer, in any matter involving the application of legal principles to facts or purposes or desires.
  2. One, other than as a regular employee acting for his employer, undertakes, with or without compensation, to prepare for another legal instruments of any character, other than notices or contracts incident to the regular course of conducting a licensed business.
  3. One undertakes, with or without compensation, to represent the interest of another before any tribunal, judicial, administrative, or executive, otherwise than in the presentation of facts, figures, or factual conclusions, as distinguished from legal conclusions, by an employee regularly and bona fide employed on a salary basis, or by one specially employed as an expert in respect to such facts and figures when such representation by such employee or expert does not involve the examination of witnesses or preparation of pleadings.
  4. One holds himself or herself out to another as qualified or authorized to practice law in the Commonwealth of Virginia.

The Committee does not believe that “negotiation??? alone, is per se the unauthorized practice of law. The dispositive question, applying the definition of the practice of law, is whether there is an exercise of legal judgment within the context of the negotiation by a non-lawyer on behalf of another. So long as the settlement agent is only negotiating “numbers??? and not offering the customer legal advice nor making a legal argument on the person’s behalf to the creditor, or holding out as qualified to practice law or attempting to represent the debtor within the context of a matter before a tribunal it is not unauthorized practice. The requestor set out three possible contexts in which this negotiation would take place: 1) when a claim had been reduced to judgment and was a lien against the property; 2) when a claim had not yet been reduced to judgment but was an outstanding debt; and 3) when there was a debt or a judgment and the property being refinanced was commercial property (i.e. debtor does not live on the property). The Committee’s opinion and analysis do not change with the change of context or circumstances. The dispositive issue still will be whether there is an exercise of legal judgment or skill and will depend on the specific facts and circumstances of each case. The information presented in the inquiry does not include details as to the substance of the non-lawyer settlement agent’s communication with the creditor, only that there was negotiation for a lower payment. There are no other facts upon which to make a determination as to whether there was any exercise of legal judgment or skill or holding out as authorized to practice law. Consequently the Committee’s finding, that negotiation with a creditor for payment of a debt, in and of itself, does not constitute the practice of law, applies to each scenario of this inquiry.

Committee Opinion October 16, 2007

Updated: Nov 28, 2007