Senate Bill 94 – FAQS from the CSB

The California State Bar recently issued a FAQ on how to interpret SB 94 and what practices will be allowed under the new law. However, the FAQ is only 3 questions long and addresses only a few of the issues raised by SB 94. Nonetheless, it is helpful and gives attorneys insight on how the California State Bar and other institutions will read the statute.

CLICK HERE TO READ THE CALIFORNIA STATE BAR’S FAQS ON SB 94

The most interesting point in the FAQ is the State Bar’s interpretation of the word “receive”. One of the most confusing points of SB 94 was whether an attorney could collect money into their trust account until the end of the process. This protected the attorney because they had insurance that if they performed their services they would be paid. The client was still protected because the trust account is strictly regulated by the State Bar and any funds that are not earned must be returned to the client.

The State Bar FAQ makes it very clear that accepting funds into a trust fund is a violation of SB94. They also go on to discuss their reading of the term “received”. The State Bar looks at the plain meaning of the word received and determines that “the term is broad enough to encompass a lawyer’s receipt of advance fees into a trust account.”

The State Bar has basically refused to define what received means, but has clearly determines that accepting money into a trust account is receiving money, even though the attorney cannot actually use those funds. Following this logic, if any money is taken from client for any reason and held in anyway this will be considered “received”.

This is not the best news for attorneys doing loan modifications, but it is better to have a clear rule than an ambiguous one.

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Source: National Loan Auditors, Inc.
http://www.NLAudit.com