Michigan's highest court has considered whether a lender's fees for completing loan documents constituted the unauthorized practice of law. Click here to read a summary of the appellate court's decision in this case.
Paul and Theresa Dressel ("Customers") obtained a loan from Ameribank ("Lender") that was secured by a mortgage on the Customers' home. As part of the transaction, the Lender charged the Customers a "document preparation fee," which the Lender described as a fee to cover the "costs of preparation of final legal papers." The Customers filed a lawsuit alleging that the document preparation fee constituted the unauthorized practice of law; violated the state's banking laws; and violated Michigan's consumer protection statutes. The trial court certified the lawsuit as a class action and ruled in favor of the Lender, but the appellate court reversed the trial court and ruled in favor of the Customers. The Lender appealed.
The Michigan Supreme Court reversed the appellate court and affirmed the trial court's ruling in favor of the Lender. Michigan has a statute barring the unauthorized practice of law, but the statute does not define what constitutes the unauthorized practice of law. Courts in Michigan have also declined to create a firm definition for the unauthorized practice of law, finding that this issue needed to be considered by a court based on the facts of each individual case. Reviewing the history of unauthorized practice of law jurisprudence, the court found that a few principles could be drawn from these decisions and so decided to create a standard definition for the unauthorized practice of law in Michigan. The standard created by the court is that an individual engages in the unauthorized practice of law when counseling or assisting "another in matters that require the use of legal discretion and profound legal knowledge."
Applying this standard to this case, the court found that the Lender's employees completing mortgage forms did not constitute the unauthorized practice of law. The court found that
the Lender's employees did not draft the mortgage forms, and simply completed a form created by the federal government. There was no legal knowledge or discretion used in the completion of the mortgage documents. The court found that it was not important that a fee had been charged, as the charging of a fee does not change an otherwise legal activity into the unauthorized practice of law. Thus, the court reversed the appellate court and affirmed the decision of the trial court in favor of the Lender.
Dressel v. Ameribank, No. 119959, 2003 WL 21456614 (Mich. Jun. 24, 2003). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].