Tennessee and Washington Consider Regulations Restricting the Operations of Online Legal Document Preparers
by Madison Swanson
State bar associations continue to threaten the operations of online legal document providers under the guise of consumer protection through restrictive and unnecessary rules. The states of Washington and Tennessee have both considered resolutions that would impose expensive obligations and strict regulations on OLPs operating in their states.
Tennessee House Bill 1411, proposed in February 2019, states that online document providers are not considered to be practicing law so long as they follow the regulations laid out in the resolution. The regulations, however, were incredibly strict, expensive, and unnecessary. They would greatly raise the price the consumer pays for the same products and services. Thanks to pressure from Responsive Law and our allies, HB 1411 was withdrawn from consideration.
Amendments to General Rule 24 proposed by the Washington State Practice of Law Board (POLB), however, still stands and is open for comment until the end of August. The General Rules of the Washington State Bar dictate the general conduct of courts and lawyers, and Rule 24 defines the practice of law. This amendment, unlike HB 1411, doesauthorize the activities of online legal document preparers as the practice of law so long as they follow the regulations laid out in the potential new rule. The regulations the Washington POLB proposes are again unnecessary and would threaten the growth, profitability, and usefulness to the consumer of these document providers.
Read HB 1411 here and the GR 24 amendment here.
The regulations are incompatible with how online document preparation works
Tennessee’s HB 1411 and Washington’s amendment to GR 24 amendment are incompatible with the software behind online legal document generation. Online legal document creators offer their consumers interactive documents: consumers answer a series of questions which lead to the creation of a unique document fitting specific needs. There are often no “blank templates” that the software starts with; instead it may build the document as it receives information. The software can create thousands of variations of a single document based on consumer-provided information. And yet, the two resolutions have provisions demanding online document preparers provide their consumers with blank templates to review before making a purchase. This requirement is virtually impossible for online legal providers to comply with because of the interactive nature of the software.
HB 1411 and GR 24 also demand that all legal documents made available online be reviewed and approved by local attorneys. This demand is preposterous. Not only would it incur huge costs that would be pushed onto the consumer, but it provides little benefit to the consumer and will not improve the documents that are produced. Responsive Law and many others believe this regulation would create very high costs with very little benefit, as state lawyers are most likely ill-suited to review the documents created by complex and nuanced computer software.
The potential expenses included in these proposals could spell the end of online document preparation
The compulsory review of online legal documents by in-state lawyers would be prohibitively expensive, but that is not the only provision that would increase the operating costs of online document preparers in Washington and Tennessee. Both proposals would also prohibit them from disclaiming any liability or limiting recovery of damages. This is incredibly unreasonable and cripples smaller providers who are required to pay damages that far surpass the value of their original services. Furthermore, the Washington amendment would require that customers be able to view their completed form before purchase, inviting people to screenshot and use documents without making any purchase. This is a pointless and potentially hurtful regulation.
The proposals also require online document providers to register with the state bar associations, with fees associated with registration and annual renewal. The fees may not be so expensive that most providers couldn’t afford them, the idea that they should be required to submit to the surveillance of bar associations at all is outrageous. The Washington GR 24 amendment states that the Washington State Bar Association will have the authority to recommend revocation or denial of registration and registration renewal, which we believe is an improper extension of authority for an organization intended to regulate lawyers.
Online document preparation as a substitute for formal legal service
In a city, most people have several options for how they got to work. Someone may prefer to bike to work, but on a rainy day, they would substitute their bike ride for a car. This does not mean that bikes and cars are the same thing, but instead that one can be substituted for the other when the circumstances favor it.
Similarly, in less complex legal situations, online document preparers can suit consumer needs just as well as a lawyer at a fraction of the price. However, HB 1411 and GR 24 both require providers to advertise that they are not a substitute for a lawyer and that consumers may want to seek legal advice in conjunction with the use of their documents. This is not only untrue but an unfair double standard, since lawyers are not required to warn their customers that online legal document preparers could serve their legal needs with a much smaller price tag.
Overall, the two proposals would create incredibly hostile environments in Tennessee and Washington for online legal document preparers to operate in. We are pleased that Tennessee has pulled HB 1411. Thanks to the input of Responsive Law and others at a May public meeting of the Practice of Law Board, GR 24 is being reconsidered and may be amended or withdrawn. Regardless of the regulations encased in these resolutions, Responsive Law rejects the idea that a state bar – a trade organization – should be permitted to regulate a direct competitor. We believe that state bars should work to improve how lawyers meet people’s legal needs rather than restricting the operations of affordable alternatives to lawyers.
Madison Swanson is a Responsive Law intern.