Can a lawyer pay an annual fee to a company so the lawyer is listed as an 'identified' service provider on a bank's loan-closing forms?

Plain-English summary

A borrower refinancing a loan received bank disclosure packages that identified a specific licensed attorney "We identified" as able to provide closing services, while noting the borrower could shop for her own providers. When the borrower chose a different lawyer (Lawyer A), the bank forms still listed another attorney. The bank explained that to appear as an "identified" provider, a lawyer could enroll with a third-party company the bank used, for an annual fee of $249. Lawyer A did not enroll but still closed the borrower's loan. The question was whether Lawyer A could pay the fee and be listed without violating Rule 7.2(c).

The Committee concluded Lawyer A may pay the fee and participate in the company's network of legal service providers. Rule 7.2(c) generally bars giving anything of value for recommending the lawyer's services, but allows a lawyer to pay the reasonable costs of advertisements or communications permitted by the rule (7.2(c)(1)).

The Committee analyzed whether the listing was a "recommendation." Under Comment 7 to Rule 7.2, a communication contains a recommendation if it endorses or vouches for a lawyer's credentials, abilities, competence, character, or other professional qualities. The bank and company forms only provided contact information and three statements ("this list identifies some providers for services you can shop for," "You can select these providers or shop for your own providers," and "Provider We Identified"), which said nothing substantive about the listed lawyer's qualities. The Committee found the service more like a directory listing (akin to a phone book) than a recommendation; if these statements were recommendations at all, they were "of the faintest quality." Without a recommendation, Rule 7.2's bar does not apply, and the payment fits the exception for paid advertising in the form of listings.

The Committee added that even assuming the listing were "recommending the lawyer's services," participation appeared open to any real-estate attorney willing to provide services, and the fee appeared reasonable in light of enrollment, onboarding, and maintenance charges. It cited its prior opinions 01-03 (lawyer may participate in an internet service charging reasonable monthly, yearly, or per-hit advertising fees) and 07-08 (lawyer may advertise in conjunction with a real estate company if the lawyer pays the reasonable costs). Paying the company's fee therefore does not violate Rule 7.2.

In practice

Under this opinion, a lawyer may pay a reasonable annual fee to be listed as an "identified" provider on bank loan-closing forms, because the listing supplies only contact information and qualifies as paid advertising under Rule 7.2(c)(1) rather than a prohibited recommendation. The opinion conditions this on the payment being the reasonable cost of the listing and not tied to particular referrals, and notes that even if the listing were treated as a recommendation, an open, reasonably priced network listing would still fit the advertising-cost exception.

Common questions

Q: Can a lawyer pay to be listed as a provider on a bank's loan-closing forms?

A: Yes. The opinion concludes a lawyer may pay the company's annual fee to be listed, because the listing fits Rule 7.2(c)(1)'s exception for the reasonable costs of advertising.

Q: Is a bank-form listing a prohibited "recommendation" under Rule 7.2(c)?

A: No. The opinion concludes the listing only provides contact information and does not vouch for the lawyer's qualities, so it is a directory-type listing rather than a recommendation.

Q: Does it matter how much the listing fee is?

A: Yes. The opinion treats the fee as permissible because it appeared reasonable in light of the company's enrollment, onboarding, and maintenance costs, citing prior opinions allowing reasonable advertising fees.

Q: What if the listing were considered a recommendation?

A: The opinion concludes that even then, an open network listing available to any qualified attorney at a reasonable fee would still fit the advertising-cost exception in Rule 7.2(c)(1).

Background and rules framework

The opinion interprets Rule 7.2 (advertising), focusing on the 7.2(c) prohibition on giving anything of value for a recommendation and the 7.2(c)(1) exception for the reasonable costs of advertisements, together with Comment 7's definition of a recommendation. South Carolina's Rule 7.2 corresponds to ABA Model Rule 7.2. The Committee relied on its prior opinions 01-03 and 07-08 on paying reasonable advertising fees.

Citations and references

Rules of Professional Conduct:

• MR 7.2 / SC RPC 7.2(c), 7.2(c)(1) (advertising; payment for recommendations; reasonable costs of advertising)

Other opinions cited:

• S.C. Bar EAC Op. 01-03: lawyer may participate in an internet service charging reasonable advertising fees.
• S.C. Bar EAC Op. 07-08: lawyer may advertise with a real estate company if paying the reasonable costs.

See also

• NY State Bar Op. 1131: Paying a For-Profit Lead-Generation Service
• NY State Bar Op. 1267: Paying for a Recommendation or Referral

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-21-01/
• Original PDF: https://www.scbar.org/media/onbddiec/eo_21-01.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Ethics Advisory Opinion

21-01

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER'S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY.

S.C.R. Prof. Conduct: Rule 7.2

Factual Background

Client A applied for a loan refinance with Bank. Bank issued a loan estimate package that provided the name of a specific licensed SC attorney that "We [the Bank] identified" as one who could provide legal services related to the loan closing. The package expressly stated that Client A could "shop for your own providers" for legal and other services related to the transaction. The package and disclosures are assumed to be compliant with federal and state requirements for loan applications and attorney-preference notices.

Client A then informed Bank that she intended to use a different lawyer, Lawyer A, to serve as her lawyer for the loan closing. Subsequently, bank-created loan estimate documents provided to borrower prior to closing again identified as a potential service provider a SC licensed lawyer other than Lawyer A, while again noting Client A could choose "your own provider."

Client A inquired of Bank why another lawyer's name, instead of Lawyer A who had previously been specifically elected, had appeared on the estimate form. Bank responded by offering information regarding how Lawyer A could sign up with a third-party company that Bank had contracted with to produce such loan forms, and Lawyer A learned that an annual fee of $249 was required to be included as an "identified" service provider on such forms.

Lawyer A, Client A's chosen provider, did not enroll in the offered program to become listed as a potential service provider on bank forms, but did close Client A's loan transaction as desired by Client A.

Question Presented

May Lawyer A participate in Company's service provider network for an annual fee of $249.00 and be listed as an "identified" service provider that a Bank customer may choose without violating S.C. Rule of Professional Conduct 7.2(c)?

Yes. Lawyer A may pay the fee and participate in Company's network of legal service providers and be "identified" as a possible service provider to customers of the Banks serviced by Company.

Rule 7.2(c) generally provides that a "lawyer shall not give anything of value to a person for recommending the lawyer's services …." It contains three exceptions, one of which is relevant here: "a lawyer may (1) pay the reasonable costs of advertisements or communications permitted by this Rule…." S.C. Rule of Prof. Responsibility 7.2(c)(1).

Comment 7 to Rule 7.2 states that "[a] communication contains a recommendation if it endorses or vouches for a lawyer's credentials, abilities, competence, character, or other professional qualities." The Bank's and Company's form only provides contact information for the participating lawyers and only makes three statements regarding the lawyers: (1) "this list identifies some providers for services you can shop for;" (2) "You can select these providers or shop for your owner providers;" and (3) "Provider We Identified." These limited statements hardly match up to the verbs and nouns used to describe a "recommendation" in the comment. The language of the forms says nothing substantive about the listed lawyer's credentials, abilities, competence, character, or professional quality beyond the fact that the lawyer might provide services should the customer "shop for" the lawyer and choose to use the listed lawyer. In this regard, the service is more like a directory listing of lawyers holding themselves out as able to provide services (like a phone book) as described in Comment 7 to Rule 7.2 rather than a third-party statement directing a potential client to a particular lawyer based on some credential or quality of the lawyer. If these statements are recommendations at all, they are of the faintest quality. In the absence of a recommendation, Rule 7.2 does not apply. Rather, the payment fits neatly within the stated exception for paid advertising in the form of listings.

Assuming the form generated for Bank by the Company and listing lawyers enrolled in the program is "recommending the lawyers services," based on the information provided, participation in the network appears to be open to any attorney practicing in the area of real estate law willing to provide services. The fee charged appears to be reasonable in light of the enrollment, onboarding, and maintenance charges of Company in including attorneys in its network. See S.C. Bar Ethics Adv. Op. # 01-03 (Lawyer may participate in internet service that charges based on a reasonable schedule of monthly or yearly advertising fees or on a "per hit" basis); S.C. Bar Ethics Adv. Op. # 07-08 (Lawyer may participate in advertisement in conjunction with real estate company "as long as Lawyer pays the reasonable costs of the advertisement ….") Thus, paying the Company's fee for participation in its network of services providers does not violate Rule 7.2.