Attorneys who do not require the payment of up-front retainers are not “creditors” pursuant to The Truth in Lending Act, 15 U.S.C. § 1601 to 1667(f)

The defendant retained the plaintiff law firm to represent her in a divorce. The plaintiff law firm alleged that the defendant was not required to pay a retainer up front due to financial difficulties and that, instead, the retainer agreement set forth that the plaintiff law firm would apply to the court for pendente lite financial relief for the defendant and for an award of counsel fees to fund the retainer. The defendant reconciled with her husband after six months, at which time the divorce action was dismissed by stipulation. The plaintiff law firm ultimately filed suit for the balance of their unpaid fees. The defendant filed a counterclaim, arguing that, by not requiring the payment of an initial retainer, the plaintiff law firm had extended her credit pursuant to the Truth in Lending Act, 15 U.S.C. § 1601 to 1667(f) (TILA) and, therefore, the retainer agreement must be invalidated as an improper and open-ended credit agreement with finance charges. The defendant also sought to recover an award of counsel fees pursuant to TILA. Both parties moved for summary judgment on their respective pleadings.

Upon review of the relevant provisions of TILA, the court held that attorneys who do not require a client to pay an up-front retainer are not “creditors” within the purview of TILA. The court also held that attorneys who operate law practices as businesses “do not fall, in any imaginable sense, into the category of bank, credit card company, or a lender.” The court then granted summary judgment in favor of the plaintiff law firm, dismissing the defendant’s counter claim.

_{Case Law Alerts, 3rd Quarter, July 2015}

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