Feb. 19, 2010 – As Wisconsin families struggle to emerge from the Great Recession of the last two years, businesses are emerging to exploit the financial difficulty many people have encountered as a result of the economic downturn.

For example, one Wisconsin business not associated with an attorney is offering to prepare petitions and orders under Wis. Stat. section 128.21 for clients for a $250 fee, in apparent violation of a 1955 Attorney General’s opinion that doing so is the unauthorized practice of law. (Section 128.21 is a state law alternative to bankruptcy for certain debts.)

This business is the latest example of the possible unauthorized practice of law that members of the State Bar of Wisconsin have identified in recent months.

However, because Wisconsin Supreme Court rules currently lack both a workable definition of the practice of law and an effective enforcement mechanism, it is unlikely anything can be done about this and other probable instances of UPL in Wisconsin – unless and until the Wisconsin Supreme Court adopts the State Bar of Wisconsin’s 2007 petition regarding the unauthorized practice of law.

The Supreme Court has ordered a public hearing and open administrative conference on the petition at 9:45 a.m. on Monday, March 8, 2010, in the Supreme Court’s hearing room in the Capitol. It is the second public hearing and third administrative conference to be held on the petition in the two and a half years since the State Bar filed the petition with the court.

A series of weekly articles being published on Wisbar.org in January and February is detailing recent examples of UPL in Wisconsin and giving State Bar members the opportunity to contact the Wisconsin Supreme Court directly and voice their support for the State Bar’s UPL petition. It is imperative that State Bar members communicate to the court their concern about the adverse impact of UPL on the public - today.

Attorney General:  Lay preparation of 128.21 petitions and orders is UPL

Section 128.21 is an old and generally little-known alternative to bankruptcy available to individuals who have larger financial obligations than they can handle, wish to repay, and need a structured plan to return to a sound financial footing.

Under section 128.21, wage or salary earners may file a petition with the circuit court stating they are unable to meet their current debt obligations but are able to make regular payments sufficient to amortize the debt over a period of not more than three years. After the filing of a properly-prepared petition and order, and the appointment of a disinterested trustee, the circuit court can stay action on the scheduled debt pending the three-year repayment plan.

While state law does not require that a section 128.21 trustee be an attorney, the attorney general held in 44 O.A.G. 236 (1955) that the preparation and filing of the amortization petition and order, as well as the accompanying legal advice, does constitute the practice of law and must be done by a licensed attorney.

Further, the attorney general concluded “Such services may be rendered only by a licensed attorney, and the relationship of attorney and clients must exist between him and the person for whom the services are rendered. In other words, no lay agency may perform such services either directly, or indirectly, by peddling the services of a licensed attorney. . . . we nevertheless have no hesitancy concluding that the preparation and presentation of petitions and orders in circuit court proceedings for the voluntary amortization of debts of wage earners under section 128.21, Stats., constitutes the practice of law . . . “

“We’ll get you out of debt!”

As another example, an unlicensed debt-negotiation operation is soliciting clients in Wisconsin, offering to negotiate settlements of lawsuits, judgments and other matters, including auto repossession and consumer debt.

The website for the operation is linked to businesses based in another state with names that foster the image of legitimate law firms but which, in reality, are not law firms.

According to an online database maintained by the Wisconsin Department of Financial Institutions, the businesses are also not licensed as adjustment service companies under Wis. Stat. section 218.02. That statute limits debt adjustment services to “prorating the income of a debtor to the debtor's creditor or creditors, or of assuming the obligations of any debtor by purchasing the accounts the debtor may have with the debtor's several creditors.”

Instead of prorating or purchasing a consumer’s debt as a licensee under section 218.02, it appears the business negotiates a debtor’s legal obligations, including pre-judgment, directly with the creditor. Subject to specified exceptions, the State Bar’s UPL petition includes in its proposed definition of the practice of law any activity involving the “[n]egotiation of legal rights or responsibilities on behalf of another entity or person(s).”

The operation came to the State Bar’s attention when a Richland County attorney forwarded a fax solicitation he had received at his office promising prospective clients, “We’ll get you out of debt!”

“Don’t be bullied into bankruptcy!” the solicitation exhorts. “We deal directly with creditors to achieve very favorable settlements that will save you 60-80% of what you owe! Our fee is based on a small percentage of the amount we save you.”

The website listed on the solicitation for the operation links back to a page for a company whose name sounds like a law firm but also dispenses advice to discourage clients from considering bankruptcy and also steers customers away from considering other legitimate options, such as consumer credit counseling or debt consolidation.

The business even offers to negotiate pre-judgment settlements: “We can help you by negotiating out-of-court settlements before additional legal fees and costs compound your problem. Call us now for a free telephone consultation.”

Ironically, the business is also listed on the Internet as a purveyor of payday loans in Michigan.

State Bar UPL petition would protect consumers

In Wisconsin, the State Bar’s initiative, called the Legal Services Consumer Protection Act, responds to a directive issued by the court in 2004 asking the State Bar to document the consumer impact of unqualified individuals practicing law and to recommend changes. Wisconsin residents seeking legal services will gain additional consumer safeguards against businesses engage in UPL if the court approves the petition.

The State Bar’s petition asks the court, which has exclusive jurisdiction over the practice of law in the state, to take two actions: 1) Adopt a new rule to clearly define what constitutes the “practice of law” for consumer protection purposes; and, 2) Create an administrative system to enforce the new rule.

The court previously held a public hearing and open administrative conference on the petition in December 2007, as well as two additional open conferences in March and October of 2008. The court deferred the petition last session without acting to approve it.

The original State Bar petition offers dozens of examples of instances where Wisconsin consumers have been hurt when people without proper training or oversight attempt to practice law. In 2008, based on feedback from other interested parties, the State Bar filed an amended version of the petition and supporting comments.

In December, the State Bar’s Board of Governors unanimously approved a resolution urging the court to adopt the State Bar’s petition in order to protect the public from harm by those who engage in the unauthorized practice of law.

In addition, the State Bar’s UPL Policy Committee published a strongly-worded editorial in the October 2009 issue of Wisconsin Lawyer urging the court to approve the petition. State Bar President Doug Kammer reappointed the committee in July and added several new members, including former Supreme Court Justice Jon Wilcox, who issued a call last year for State Bar members to write to the court and urge justices to support the State Bar’s petition.

• Retired Justice Wilcox on the unauthorized practice of law: 'Let the court know your concerns'
• Learn more about the State Bar’s petition and the UPL Policy Committee
• History of the State Bar's UPL petition

By Adam Korbitz, Government Relations Coordinator, State Bar of Wisconsin

Related articles:

Local governments around Wisconsin targeted by possible UPL operations  - Feb. 10, 2010
Despite notario law, UPL operations targeting immigrants persist in Wisconsin - February 1, 2010
Divorce makes easy target for UPL operators, Wisconsin-based website proves - January 25, 2010
Business guilty of UPL in Ohio now soliciting clients in Wisconsin with impunity - Jan. 20, 2010
Case of independent paralegal raises UPL questions - Jan. 13, 2010
Supreme Court must approve UPL petition to protect public, State Bar members say - Jan. 6, 2010
Board of Governors calls on Supreme Court to approve UPL petition - December 4, 2009
Retired Justice Wilcox on the unauthorized practice of law: 'Let the court know your concerns' – Inside Track, Dec. 2, 2009
Only Lawyers Need a License to Practice Law in Wisconsin – Wisconsin Lawyer, October 2009
Legal Services Consumer Protection Act, State Bar president statement – June 19, 2007
The Unauthorized Practice of Law: Court Tells Profession, Show Us the Harm – Wisconsin Lawyer, October 2005

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