FTC and Department of Justice Comment Before the South Carolina Supreme Court Concerning Proposed Guidelines for Residential and Commercial Real Estate Closings

The notice and proposed guidelines are available at
1 http://www.sccourts.org/whatsnew/displayW hatsNew.
cfm?indexId=436. The proposed guidelines delineate seven tasks related to residential and commercial real estate
transactions that must be performed by an attorney licensed to practice in South Carolina, including performing all
title work, preparing deeds, overseeing the drafting of documents pertinent to the loan closing, supervising the
closing, and disbursing all funds related to the transaction. In the case of a home equity line of credit, the proposed
guidelines still would require consumers to hire an attorney to perform title work and to prepare deeds. The
guidelines appear to reiterate the current state of South Carolina law in this area. See, e.g., Doe v. McMaster, 355
S.C. 306 (2003); State v. Buyers Service Company, Inc., 292 S.C. 426 (1987).
See Doe, 355 S.C. at 311 n.3 (2003) (“this Court grounds it unauthorized practice rules in the State’s
2
ability to protect consumers in the state and not as a method to enhance the business opportunities of lawyers”).
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION DEPARTMENT OF JUSTICE
Washington, DC 20580 Washington, DC 20530
April 15, 2008
By email and first class mail
The Honorable Daniel E. Shearouse
Clerk of Court
Supreme Court of South Carolina
P.O. Box 11330
Columbia, SC 29211
Re: Proposed Guidelines for Residential and Commercial Real Estate Closings
Dear Mr. Shearouse:
The Federal Trade Commission (FTC) and the Department of Justice are pleased to
respond to the South Carolina Supreme Court’s request for comments on the Proposed
Guidelines for Residential and Commercial Real Estate Closings that delineate the scope of the
practice of law as it relates to the transfer of real property. This Court has observed that1
defining what constitutes the practice of law should be guided by consumers’ interests. The2
Justice Department and the FTC agree: we believe that consumers receive the greatest benefit
when non-attorneys compete with attorneys except in circumstances where specialized legal
knowledge and training has been demonstrated to be necessary to protect the interests of

Accordingly, through advocacy letters and amicus curiae briefs, the Justice Department and the FTC have
3
urged several state supreme courts and legislatures, the American Bar Association, and many state bar associations
to reject or narrow undue restrictions on competition between attorneys and non-attorneys. See letter from the
Department of Justice and FTC to the Hawaii Supreme Court (January 25, 2008) available at
http://www.ftc.gov/os/2008/01/V080004letter.pdf; two letters from the Justice Department and the FTC to the
Committee on the Judiciary of the New York State Assembly (June 21, 2006 and April 27, 2007) available at
http://www.ftc.gov/os/2006/06/V060016 NYUplFinal.pdf and http://www.ftc.gov/be/V070004.pdf; letter from the
Justice Department and the FTC to Executive Director of the Kansas Bar Ass’n (Feb. 4, 2005) available at
http://www.ftc.gov/be/v050002.pdf; letter from the Justice Department and the FTC to Task Force to Define the
Practice of Law in Massachusetts, Massachusetts Bar Ass’n ( Dec. 16, 2004) available at
http://www.ftc.gov/os/2004/12/ 041216massuplltr.pdf; letter from the Justice Department and the FTC to
Unauthorized Practice of Law Committee, Indiana State Bar Ass’n (Oct. 1, 2003) available at
http://www.ftc.gov/os/2003/10/uplindiana.htm; letter from the Justice Department and the FTC to Standing
Committee on the Unlicensed Practice of Law, State Bar of Georgia (Mar. 20, 2003) available at
http://www.ftc.gov/be/v030007.htm; letter from the Justice Department to Speaker of the Rhode Island House of
Representatives (Mar. 28, 2003) available at http://www.ftc.gov/be/v020013.htm; letter from the Justice Department
and the FTC to Task Force on the Model Definition of the Practice of Law, American Bar Ass’n (Dec. 20, 2002)
available at http://www.ftc.gov/opa/2002/12/lettertoaba.htm; letter from the Justice Department and the FTC to
Speaker of the Rhode Island House of Representatives, et al. (Mar. 29, 2002) available at
http://www.ftc.gov/be/v020013.pdf; letter from the Justice Department and the FTC to President of the North
Carolina State Bar (July 11, 2002) available at http://www.ftc.gov/os/2002/07/non-attorneyinvolvment.pdf; letter
from the Justice Department and the FTC to Ethics Committee of the North Carolina State Bar (Dec. 14, 2001)
available at http://www.ftc.gov/be/V020006.htm; letters from the Justice Department to Board of Governors of the
Kentucky Bar Ass’n (June 10, 1999 and Sept. 10, 1997); letter from the Justice Department and the FTC to Supreme
Court of Virginia (Jan. 3, 1997); letter from the Justice Department and the FTC to Virginia State Bar (Sept. 20,
1996). Brief Amicus Curiae of the United States of America and the FTC in Lorrie McMahon v. Advanced Title
Servs. Co. of W. Va., No. 31706 (May 25, 2004) available at http://www.usdoj.gov/atr/cases/f203700/203790. htm;
Brief Amicus Curiae of the United States of America and the FTC in On Review of ULP Advisory Opinion 2003-2
(July 28, 2003) available at http://www.usdoj.gov/atr/cases/f201100/201197.htm; Brief Amicus Curiae of the United
States of America in Support of Movants Kentucky Land Title Ass’n et al. in Ky. Land Title Ass’n v. Ky. Bar Ass’n,
No. 2000-SC-000207-KB (Feb. 29, 2000) available at http://www.usdoj.gov/atr/ cases/f4400/4491.htm.
W e understand that relaxing restrictions on non-lawyers relative to those set forth in the proposed
4
Guidelines also may require changes in the law as articulated in South Carolina judicial decisions.
In a majority of states, non-lawyers compete with lawyers to provide services related to the real estate	5
transaction, including preparation and execution of a deed, title searching and issuing title reports, the answering of
non-legal questions during the closing process, witnessing the signatures at closing, and the disbursement of funds.
See, e.g., Joyce Palomar, The War Between Attorneys & Lay Conveyancers – Empirical Evidence Says “Cease
2
consumers. As this Court grapples with the important issue of what should constitute the3
practice of law in the context of commercial and residential real estate transactions, we
respectfully suggest that it may wish to take note of the benefits consumers in other states have
received from competition and consider relaxing current restraints on competition between
attorneys and non-attorneys in this area, which likely will benefit South Carolina consumers.4
A small minority of states (including South Carolina) restrict non-attorneys from
providing services related to real estate transactions, such as title searching, title abstracting, title
opinions, preparing deeds and mortgages, supervising closings, and disbursing funds. The5

Fire!,” 31 CO N N. L. REV. 423, 487-88 (1999) (noting that there are more states in which non-attorneys perform the
majority of real estate transactions than in which attorneys perform them); Michael Braunstein, Structural Change &
Inter-Professional Competitive Advantage: An Example Drawn from Residential Real Estate Conveyancing, 62 MO .
L. REV. 241, 264-65 (1997) (reporting that in only eight states is it customary for an attorney to be involved in
settlement).
See notes 12-15, infra, and accompanying text.
6
See Doe, 355 S.C. at 311 n.3 (2003).
7
See, e.g., Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 689 (1978); Goldfarb v. Virginia
8
State Bar, 421 U.S. 773, 787 (1975); see also United States v. Am. Bar Ass’n, 934 F. Supp. 435 (D.D.C. 1996),
modified, 135 F. Supp. 2d 28 (D.D.C. 2001).
3
available empirical evidence shows that consumers in these states pay higher prices to settle their
real estate transactions than do consumers in states that allow non-attorney competition. At the6
same time, because there is no evidence that non-attorneys provide lower quality services related
to real estate transactions than do attorneys, such restrictions on competition do not appear to
provide consumers with any countervailing benefits.
Concern for the Public Interest Should Guide the Imposition of
Restrictions on Competition between Attorneys and Non-Attorneys
This Court has observed that it is guided by consumers’ interests when delineating those
tasks that require an attorney from those that a non-attorney can perform. The Justice7
Department and the FTC recognize that there are some services requiring the specialized
knowledge and skill of a person trained in the law that should be provided only by attorneys.
For example, only an individual with legal knowledge and requisite understanding of law and
litigation procedures should represent clients in open court in matters involving their legal rights.
Such a limitation protects consumers as well as the court and provides for an efficient process
without significant risk to consumers.
Like all consumers, however, consumers of professional services benefit from
competition, and if competition to provide such services is restrained, consumers may be forced8
to pay higher prices or accept lower quality services. Allowing non-attorneys to compete in the
provision of certain types of services permits consumers to select from a broader range of
options, considering for themselves such factors as cost, convenience, and their confidence in the
competence and quality of the services provided. As the United States Supreme Court stated:
The assumption that competition is the best method of allocating resources in a free
market recognizes that all elements of a bargain - quality, service, safety, and

9 Prof’l Eng’rs, 435 U.S. at 695 (emphasis added); accord, FTC v Superior Court Trial Lawyers Ass’n, 493
U.S. 411, 423 (1990).
Cf. FTC. v. Ind. Fed’n of Dentists, 476 U.S. 447, 459 (1986) (“Absent some countervailing
10
procompetitive virtue,” an impediment to “the ordinary give and take of the market place . . . cannot be sustained
under the Rule of Reason.”) (internal quotations and citations omitted).
See Prof’l Eng’rs, 435 U.S. at 689; Goldfarb, 421 U.S. at 787. See also In re Opinion No. 26 of the
11
Comm. on Unauthorized Practice of Law, 654 A.2d 1344, 1345-46 (N.J. 1995) (lawyer/non-lawyer competition
benefits the public interest).
MEDIA GENERAL, RESID ENTIAL REAL ESTATE CLO SING CO ST SU RVEY, 5 (Sept. 1996).	1 2
See Perkins v. CTX Mortgage Co., 969 P.2d 93, 100 (W ash. 1999) (“permitting mortgage lenders to	1 3
prepare loan documents in the way the CTX does relieves borrowers of the cost and inconvenience of having
attorneys prepare their loan documents”); State Bar v. Guardian Abstract & Title Co., 575 P.2d 943, 949 (N.M.
1978) (“The uncontroverted evidence was that using lawyers for this simple operation considerably slowed the loan
closings and cost the persons involved a great deal more money.”).
4
durability - and not just the immediate cost, are favorably affected by the free
opportunity to select among alternative offers.9
In general, sound competition policy calls for competition to be restricted only when
necessary to protect the public from significant harm, and for the restriction to be narrowly
drawn to minimize its anticompetitive impact. In some instances, although competence is10
required to provide the services in question, a license to practice law may not equate to such
competence, nor may legal training be necessary skillfully to perform the services. The inquiry
into the public interest involves not only an assessment of the harm that consumers may suffer
from allowing non-attorneys to perform certain tasks, but also consideration of the benefits that
accrue to consumers when attorneys and non-attorneys compete to provide services that need not
be reserved exclusively for attorneys.11
Consumers Required to Hire Lawyers to Settle Real Estate Transactions
Pay Higher Prices Than Consumers Who are Permitted to Hire Non-Attorneys
Evidence suggests that preventing non-attorneys from competing with attorneys to
provide services like title abstracting, drafting deeds, supervising closings, and disbursing funds
likely causes consumers to pay higher prices to close their real estate transactions than they
otherwise would. First, those examining the issue have found that non-attorneys charge less
than attorneys to provide these services. For example, a survey conducted in Virginia found that
consumers paid on average almost $200 less when a non-attorney settled their real estate
transaction compared to fees charged by an attorney. In addition to charging lower prices,12
some lay service providers compete with attorneys on the basis of timeliness and convenience.13

Countrywide Home Loans, Inc. v. Ky. Bar Ass’n, 113 S.W .3d 105, 120 (Ky. 2003). See also, In re
14
Opinion No. 26 of the Comm. on Unauthorized Practice of Law, 654 A.2d at 1349 (evidence gathered in that
proceeding indicated that buyers and sellers in areas of New Jersey where lay-assisted closings were prevalent paid
on average $350 and $450 less for closings, respectively, than did buyers and sellers in parts of the state where lay-
assisted closings were not prevalent).
Countrywide Home Loans, 113 S.W .3d at 120.	1 5
Ind. Fed’n of Dentists, 476 U.S. at 459.
16
5
Second, even those consumers who prefer to employ attorneys to handle their real estate
transaction likely pay higher prices in the absence of competition from non-attorney providers.
The availability of alternative, lower-cost lay service providers typically constrains the fees that
attorneys can charge to settle real estate transactions. Indeed, when it examined this issue, the
Kentucky Supreme Court found “before title companies emerged on the scene, [the Kentucky
Bar Association’s] members’ rates for such services were significantly higher – in some areas as
much as 1% of the loan amount plus additional fees.” The court in Countrywide also noted that14
“the presence of title companies encourages attorneys to work more cost-effectively.”15
There Is No Indication that the Existing Restrictions Are
Necessary to Prevent Consumer Harm
Restrictions on competition generally are considered harmful to consumers.
Accordingly, such restrictions are justified only by a showing that they are necessary to prevent
significant countervailing consumer harm and are narrowly drawn to minimize their
anticompetitive impact. Without a showing that allowing non-attorneys to perform certain16
tasks related to the real estate transaction has a negative impact on consumers, the current
restraints on competition likely harm consumers by raising prices and eliminating their ability to
choose among competing providers, without providing any countervailing benefits.
The trend in states that have opened real estate settlement services to non-attorney
competition has been to achieve consumer benefits without an increase in consumer injury
attributable or unique to non-attorney services. As the Restatement (Third) of Law Governing
Lawyers has explained:
Several jurisdictions recognize that many such [law-related] services
can be provided by nonlawyers without significant risk of
incompetent service, that actual experience in several states with
extensive nonlawyer provision of traditional legal services indicates
no significant risk of harm to consumers of such services, that
persons in need of legal services may be significantly aided in
obtaining assistance at a much lower price than would be entailed by

RESTATEM ENT (THIRD ) O F LAW GOVERNING LAW Y ERS § 4 cmt. c (2000).
17
Palomar, supra n. 5 at 520.
18
Deborah Rhode, Access to Justice: Connecting Principles to Practice, 17 GEO. J. LEGAL ETHICS 369,
19
407-08 (2004).
In re Op. No. 26, 654 A.2d. at 1363.
20
See VA. CO D E § 6.1-2.21(A).
21
6
segregating out a portion of a transaction to be handled by a lawyer
for a fee, and that many persons can ill afford, and most persons are
at least inconvenienced by, the typically higher cost of lawyer
services. In addition, traditional common-law and statutory
consumer-protection measures offer significant protection to
consumers of such nonlawyer services.17
In addition, an empirical study compared five states where lay providers examined title
evidence, drafted instruments, and facilitated the closing of real estate transactions with five
states that prohibited lay provision of these settlement services. The author found “[t]he only
clear conclusion” to be “that the evidence does not substantiate the claim that the public bears a
sufficient risk from lay provision of real estate settlement services to warrant blanket prohibition
of those services under the auspices of preventing the unauthorized practice of law.” Perhaps18
most significantly, a 1999 survey found that in most states complaints about the unauthorized
practice of law did not come from consumers, the potential victims of such conduct, but from
attorneys, who did not allege any claims of specific injury.19
Other Jurisdictions Have Fostered Competition While Protecting
Consumers Through Less Restrictive Alternatives
To the extent other states have been concerned about reducing the risk of harm to
consumers of real estate settlement services, some have chosen alternatives that better preserve
competition. For example, the New Jersey Supreme Court has required written notice to
consumers of the risks involved in proceeding with a real estate transaction without an
attorney, which permits consumers to make an informed choice about whether to use lay20
closing services. Another example is Virginia’s Consumer Real Estate Settlement Protection
Act (CRESPA), which allows licensed attorneys, title insurance companies, title insurance21
agents, or any licensed financial institution to provide settlement services. Also, CRESPA
defines “settlement services” to include title searches; all aspects of arranging for title insurance;
receiving and issuing receipts of money; ordering loan checks, payoffs, surveys, and inspections;
preparing settlement statements; determining that all closing documents conform to the parties’

Id. See also “Unauthorized Practice of Law (UPL) Guidelines for Real Estate Settlement Agents,”
22
Virginia State Bar, § III, available at http://www.vsb.org/crespa/13guidelines.html.
CRESPA also requires that settlement agents obtain insurance with minimum coverage limits of
23
$250,000, have employee fidelity bonds in the amount of $100,000, and maintain a surety bond not less than
$100,000. Virginia does not require attorneys to have malpractice insurance but requires an insurance disclosure.
Va. Code § 6.1-2.21(D).
7
contract requirements; and making all logistical arrangements for closings. CRESPA requires22
anyone (including lawyers) providing settlement services to be registered with the state. By23
adopting an expansive definition of settlement services and allowing more people to provide
such services, and by requiring that settlement agents register with the state and be insured,
CRESPA preserves competition while also providing safeguards for consumers. Though more
regulatory than the New Jersey approach, the Virginia approach is clearly a more competitive
approach than an outright ban on non-attorney closings.
Conclusion
The assistance of an attorney during a real estate-related transaction may be desirable,
and consumers may decide to retain an attorney in certain situations. Nonetheless, the choice of
hiring an attorney or a non-attorney settlement service provider should rest with the consumer,
particularly when there is no evidence that consumers are harmed by using non-attorneys to
provide certain types of real estate settlement services. We therefore encourage this Court to
delineate the scope of the practice of law in a way that fosters competition in service areas for
which the knowledge and skill of a lawyer is not required while protecting consumers of real
estate settlement services.

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Sincerely yours,
Thomas O. Barnett
Assistant Attorney General
David L.Meyer
Deputy Assistant Attorney General
United States Department of Justice
Antitrust Division
By direction of the
Federal Trade Commission,
William E. Kovacic
Chairman
Maureen K. Ohlhausen
Director
Office of Policy Planning