In a class action lawsuit filed in West Virginia, the United States District Court for the Northern District of West Virginia recently held in Dijkstra v. Carenbauer et al(Civil Action No. 5:11-CV-152, Document Nos. 210 and 242) that the closing of real estate loans by non-lawyers constitutes the unauthorized practice of law. The Court held:
It is the opinion of this Court that the [West Virginia] Supreme Court of Appeals, acting through its Committee on Unlawful Practice has found that the closing of real estate loans by persons who are not licensed attorneys, who are not acting under the direct supervision of a licensed attorney, and who are not a bona fide full-time lay employee performing legal services for his or her regular employer constitutes the unlawful practice of law since at least 2003.
The Court also noted in an opinion that the lender’s “use of a notary foreclosed the opportunity to ask questions about the documents or the terms of the loan for these class members, matters which have the potential to affect what is likely the largest investment of their lives.”
The Court further found under the facts of the case that the lender charged excessive fees (in essence notary fees above $2.00) for notary services which were not based upon the statutory fees permitted under West Virginia law.
Why should a lender care about this decision?
The Northern District found that each closing conducted by a notary or non-lawyer constitutes a violation of the West Virginia Consumer Credit Protection Act and awarded $2,000 for each closing pursuant to West Virginia Code 46A-5-101(1). While the Court did not award the maximum penalty of approximately $4,800, the penalty liability can become significant in light of the number of closings most lenders handle.
Next, the Court ordered that the excessive notary fees constitute a violation of the West Virginia Consumer Credit Protection Act. The Court awarded an additional $2,000 penalty to each class member who paid an excessive fee. The Court further ordered disgorgement of notary fees in excess of $2.00. At the present, it is difficult to estimate what the total statutory damage award will be for the class.
Finally, the Court noted that fact specific inquiry was needed to determine actual damages permitted under the West Virginia Consumer Credit Protection Act and ordered individual trials for damages for each class member who comes forward with evidence of actual damages within a specified time.