Can a bank charge a borrower more for its in-house lawyer's closing work than that lawyer costs the bank?
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This page answers the general question as of 1984. Ezel answers yours: whether it's allowed on your facts, under the current Massachusetts Rules of Professional Conduct, with citations.
Plain-English summary
A bank's full-time staff attorney asked whether he could take part in a plan in which the bank, instead of hiring outside counsel for residential mortgage closings, would use him and charge the mortgagor a closing cost equal to or less than the usual outside-counsel fee but more than the bank's own cost for his services. The mortgagor would pay the bank directly, and the attorney's salary would not depend on those fees; the attorney would represent only the bank.
The committee said a charge exceeding the bank's costs raises the problem of DR 3-102(A), which (with exceptions not relevant here) bars a lawyer or firm from sharing legal fees with a non-lawyer; EC 3-8 explains that a lawyer should not share legal fees with a layperson. It relied on its Opinion 77-8 (a bank could not charge a debtor more for a staff lawyer's collection work than the actual cost, including overhead, allocable to that work, since a surplus used to reduce the lawyer's compensation would be fee-sharing) and Opinion 83-9 (an in-house lawyer's services billed to an affiliate may be charged only as a pro rata share of cost, not as separately charged fees paid to the corporation). By the same reasoning, the proposed arrangement would be unethical fee-splitting if the bank charged the mortgagor more for the staff attorney's services than the actual pro rata cost to the bank, including overhead.
The committee added that the plan also raised a Canon 1 problem of potentially misleading the mortgagor about the basis of the charge: charging the mortgagor for "legal fees" may imply the charge reflects the bank's cost, so the basis of the charge should be made clear to avoid conduct involving dishonesty, fraud, deceit, or misrepresentation under DR 1-102(A)(4) (it expressed no view on whether G.L. c. 93A or other substantive law required disclosure). Finally, whether the bank's conduct was the unauthorized practice of law (and so assistance in it under DR 3-101(A)) was a question the committee said it was not authorized to decide.
Currency note
This opinion was issued in 1984, before Massachusetts's adoption of the 2015 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.
Common questions
Q: Can a bank charge a borrower more for its in-house lawyer's work than the lawyer costs the bank?
A: Per the opinion, no. The committee said charging the mortgagor more than the actual pro rata cost (including overhead) of the staff attorney's services is fee-sharing with a non-lawyer, prohibited by DR 3-102(A).
Q: Can the bank recover the staff attorney's cost at all?
A: Yes. The committee's earlier opinions allow charging a third party the actual pro rata cost of an in-house lawyer's services, including overhead; it is the markup above cost that is improper.
Q: Does the bank have to disclose the basis of the charge?
A: The committee said the basis should be made clear so the charge does not mislead the mortgagor (a Canon 1 / DR 1-102(A)(4) concern). It did not decide whether G.L. c. 93A or other substantive law independently required disclosure.
Background and rules framework
The opinion applied DR 3-102(A) (no sharing legal fees with a non-lawyer; EC 3-8), DR 1-102(A)(4) (no dishonesty, fraud, deceit, or misrepresentation), and DR 3-101(A) (no aiding unauthorized practice). Those correspond today to Model Rule 5.4 (professional independence; sharing fees with non-lawyers), Model Rule 8.4(c) (dishonesty and misrepresentation), and Model Rule 5.5 (unauthorized practice). The committee built on its Opinions 77-8 and 83-9.
Citations and references
Rules of Professional Conduct:
- DR 3-102(A) / Model Rule 5.4 (sharing legal fees with a non-lawyer)
- DR 1-102(A)(4) / Model Rule 8.4(c) (dishonesty, fraud, deceit, misrepresentation)
- DR 3-101(A) / Model Rule 5.5 (aiding the unauthorized practice of law)
Statutes:
- G.L. c. 93A (consumer protection; disclosure question expressly not decided)
Other opinions cited:
- MBA Opinions 77-8, 83-9: an employer may charge a third party only the actual cost of its in-house lawyer's services
See also
- MA Bar Ethics Op. 85-4: Charging costs and a staff investigator in a contingent fee case
- MA Bar Ethics Op. 87-3: A third party soliciting clients for a law firm
Source
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