Can a lawyer report a client or former client to a credit bureau to collect an unpaid legal fee?

Plain-English summary

The Committee was asked to reconsider Ethics Opinion 86-3, which, relying on former DR 4-101(C)(1), had held that referral of any client information to a credit bureau should not be permitted in Alaska except with the client's knowing consent. The Committee concluded that the underlying rule remained valid: attorneys in Alaska may not refer information about present or former clients to a credit bureau without the client's knowing consent.

The opinion walked through the intervening change in Alaska law. Alaska had adopted the Model Rules, which are silent on fee-collection methods, and Rule 1.6(b)(2) permitted a lawyer to reveal information necessary to establish a claim or defense in a controversy between the lawyer and the client. The Committee discussed the Restatement (Third) of the Law Governing Lawyers Sections 53 and 117 and noted that a majority of states allowed lawyers to use collection agencies under strict guidelines. It distinguished employing a collection agency, which seeks unpaid fees directly and through legal process with procedural safeguards, from reporting a delinquent client to a credit bureau, which it described as at best an indirect collection method whose pressure derived from the in terrorem effect of a bad credit rating rather than the merit of the claim.

The Committee surveyed the split in authority. New York and South Carolina prohibited referring a delinquent client to a credit bureau, while Florida and Kansas permitted it under conditions. The Committee found that listing a client with a credit bureau revealed confidential information for a purpose not permitted by Rule 1.6(b)(2), noted that a credit-bureau report could carry negative information for up to seven years, longer than the roughly three-year limitations period for a collection action, and concluded that the probability of collection by such indirect means was too small to justify it. It reaffirmed Opinion 86-3 and added that counsel must ensure any collection agency it uses is instructed not to refer a matter to a credit bureau.

Currency note

This opinion was issued in 2000, before Alaska's adoption of the 2009 revisions to the Alaska Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could an Alaska lawyer report a non-paying client to a credit bureau?

A: The opinion concluded a lawyer may not refer information about a present or former client to a credit bureau without the client's knowing consent.

Q: Why was a credit-bureau referral treated differently from using a collection agency?

A: Per the opinion, a collection agency pursues the fee directly through legal process with procedural safeguards, while a credit-bureau listing was an indirect method whose force came from damaging the client's credit rating, and it revealed confidential information for a purpose Rule 1.6(b)(2) did not permit.

Q: Did other states agree?

A: The opinion noted a split: New York and South Carolina prohibited such referrals, while Florida and Kansas permitted them under conditions; the Committee followed the prohibitory view.

Q: What did the opinion say about using a collection agency?

A: The opinion observed that counsel must ensure any collection agency it retains is instructed not to refer the matter to a credit bureau.

Background and rules framework

The opinion interpreted Alaska Rule of Professional Conduct 1.6 (confidentiality of information; Model Rule 1.6), in particular Rule 1.6(b)(2) on disclosure to establish a claim or defense between lawyer and client. It discussed the former DR 4-101(C) standard underlying Opinion 86-3, the Restatement (Third) of the Law Governing Lawyers Sections 53 and 117, and out-of-state authorities from New York, South Carolina, Florida, and Kansas.

Citations and references

Rules of Professional Conduct:

• Alaska RPC 1.6(b)(2) (confidentiality; disclosure in a lawyer-client controversy)

Other authorities:

• Restatement (Third) of the Law Governing Lawyers Sections 53, 117
• Fair Debt Collection Practices Act, 15 U.S.C. Section 1692 et seq.

Other opinions cited:

• Alaska Ethics Opinion 86-3 (reaffirmed)
• NYSBA Op. 684; South Carolina Op. 94-11; Florida Op. 90-2; Kansas Op. 94-5

See also

• NY State Bar Op. 1118: Disclosing Secrets for a Fee
• AK Bar Ethics Op. 2003-3: Documents in the Client File on Termination

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/2000-03.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ALASKA BAR ASSOCIATION
ETHICS OPINION 2000-3
Reaffirmation of Ethics Opinion 86-3,
Referral of Client Identity to Credit Bureau
The Alaska Bar Association Ethics Committee (“Committee”) received a
request to reconsider Ethics Opinion No. 86-3. Relying on former
DR 4-101(C)(1), that opinion held that “the referral of any client information to
a credit bureau should not be permitted in Alaska, except with the knowing
consent of the client.” The Committee concludes that the underlying rule of
this opinion remains valid. Attorneys in Alaska may not refer information
about present or former clients to a credit bureau without the knowing consent
of the client.
In opinion number 86-3 the Committee was concerned that the
dissemination of client information to third parties might constitute a breach of
an attorney’s duty to keep information about a client confidential. Although
DR 4-101(C)(4) permitted an attorney to reveal “confidences or secrets
necessary to collect his fee,” the Committee concluded that reporting a client to
a credit bureau did not fall under this exception “(s)ince the credit bureau will
not be collecting the fee for the attorney.”
Since then, Alaska has adopted the Model Rules of Professional Conduct,
which are silent as to the method an attorney or law firm may employ to collect
legal fees. ARPC 1.6(b)(2), which addresses confidentiality of information,
provides: “A lawyer may reveal such information to the extent the lawyer
reasonably believes necessary . . . to establish a claim or defense on behalf of
the lawyer in a controversy between the lawyer and the client.” Similarly,
RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 117 (Proposed Final Draft
No. 1, March 29, 1996), which concerns “Using or Disclosing Information in
Compensation Dispute,” states:
A lawyer may use or disclose confidential client information when
and to the extent that the lawyer reasonably believes necessary in
order to permit the lawyer to resolve a dispute with the client
concerning compensation or reimbursements that the lawyer
reasonably claims to be due.
Section 53 of the Restatement, which concerns “Fee Collection Methods,”
states:

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In seeking compensation claimed from a client or former client , a
lawyer may not employ collection methods forbidden by law, use
confidential information (as defined by Chapter 5) when not
permitted under § 117, or harass the client.
Neither Section 53 nor Section 117 explicitly addresses whether a lawyer may
disclose confidential information to a credit bureau. But comment d to § 53
states, “In collecting a fee a lawyer may use collection agencies or retain
counsel.” (emphasis added). The majority of states that have addressed the
issue allow a lawyer to use a collection agency to collect delinquent accounts
provided that strict guidelines are followed:1
Failure to adhere to these guidelines places a lawyer in jeopardy of
violating Rules of Professional Conduct 1.5, 1.6, 1.7, 1.8(b), 5.5(b), and/or
8.4(a-d).2
It is important to note the difference between employing a collection
agent and reporting a delinquent client to a credit bureau. A collection agency
seeks the unpaid fees directly from the delinquent client. The client is assured
of procedural safeguards because legal proceedings must be commenced in
order to collect the unpaid sum. By comparison, listing a delinquent client
with a credit bureau is at best an indirect method of collecting an unpaid fee
whereby notice is provided to other businesses that the client is a potential
credit risk. In theory, listing an unpaid fee with a credit bureau will prompt a
delinquent client to pay his or her bill. However, the pressure to pay an unpaid

1

W. Virginia State Bar, Comm. on Legal Ethics, Op. 94-01, at 2-3, & fn. 2 (citing other states allowing attorney to
employ collection agents); see NYSBA Op. # 608 (“The conditions involving the use of collection agents have
changed substantially since [1975]. The collection process has been subjected to increasing public scrutiny and
government regulations over the years (e.g. the Fair Debt Collection Act, 15 U.S.C. § 1692 et seq.) and the use of
collection agents no longer appears to us to be inconsistent with the dignity and honor of legal professionals,
provided that all other reasonable efforts short of litigation have first been exhausted and provided also that
appropriate measures to assure the collection agents’ strict adherence to law and regulations and to the highest
ethical standards in the process of collection are taken by the attorneys retaining them.”)); Ohio Sup. Ct. Bd. of
Comm’rs on Grievances and Discipline, Op. 91-16 (6/14/91); Vt. Bar. Ass’n, Op. # 97-4; Tex. Comm. on Prof.
Ethics, Op. 495 (3/94) (Confidential information is broadly construed and includes both privileged and unprivileged
client information such as: “(1) Name, address, telephone number of the client; (2) The amount the law firm
contends the client owes; (3) Copies of actual billings that are outstanding; (4) Copies of the fee agreement and
previous correspondence with the client concerning billings; and (5) A copy of the entire file to which the account
receivable relates.”); Pa. Bar Ass’n, Op. # 96-09 (3/14/96).
2

Id.

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fee results more from the in terrorem affect of a bad credit rating than from any
merit to the claim.
The referral of a client’s debt to a credit bureau is fraught with questions
of procedural fairness. When a collection agency files an action to collect fees,
the requirements of the legal process must be followed. Similarly, the Alaska
Bar Rules provide for a procedure, including reasonable safeguards, to resolve
attorney fee disputes. If an attorney concludes that the matter should be
referred to a credit bureau however, it automatically becomes a stain on the
client’s credit record. A delinquent client may respond to a listing by filing an
exception to his or her credit report, which must be included in a credit
bureau’s file.3 Even so, the potential to damage a client’s credit rating remains
high because potential lenders have reason to be suspicious.
Further, while the statute of limitations for commencing a collection
action is likely to be only three years under present Alaska law, the credit
bureau report may include negative information for as long as seven years.
The Committee can see no rationale under the rules of professional conduct
that justifies a continuing penalty in the form of a bad credit rating long after
the attorney’s ability to collect the fee has been barred by the applicable statute
of limitations.
New York and South Carolina prohibit the referral of a delinquent client
to a credit agency. The New York State Bar Association concluded that “a
[l]awyer may not report [an] unpaid client account since status of [an] account
is a client secret that may not be disclosed except as necessary to collect [a]
fee.”4 The NYSBA premised its holding on three maxims: (1) a lawyer has a
duty to avoid public dispute over an unpaid fee whenever possible5; (2) a
lawyer’s right to compensation should be balanced against his or her duty to
avoid injury to the client6; and (3) a lawyer is obligated to keep client secrets
confidential even if a fee is past due, except to the extent necessary to utilize
the services of a collection agency. The NYSBA also favored the use of

3

Kansas Bar. Ass’n Ethics Op. # 94-5, at 4 (8/15/94).

4

NYSBA Op. # 684 (11/27/96), construing DR 2-110(C), 4-101(A)(B), (C)(4), EC 2-23, and EC 2-32.

5

The NYSBA cited EC-23, which provides: “a lawyer should be zealous in efforts to avoid controversies over fees
with clients and should attempt to resolve amicably any differences on the subject.”
6

“[A] lawyer should not sue a client for a fee unless necessary to prevent fraud or gross imposition by the client.”
EC-23.

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alternative dispute resolution methods such as negotiation, arbitration, and
mediation to resolve fee disputes.
Similarly, the South Carolina Bar Association ruled that a lawyer should
not refer a delinquent client to a credit bureau because: “(a) it is not necessary
for establishing the lawyer’s claim for compensation, (b) it risks disclosure of
confidential information, and (c) it smacks of punishment in trying to lower the
client’s credit rating.”7
Other jurisdictions reach the opposite conclusion. The Florida Bar
determined that referral of a delinquent client to a credit bureau to collect an
unpaid fee is permissible under the following circumstances: “(1) only former
clients, rather than current clients, may be reported to the credit bureau; (2)
confidential information unrelated to the collection of the debt must not be
disclosed; and (3) the debt must not be in dispute.”8 The Kansas Bar
Association reasoned that “modern debt collection law makes few distinctions
between collection agencies, collection attorneys or credit bureaus.”9
Accordingly, it adopted the Florida requirements and added several more:
(4)
the lawyer should first advise the former client that unless
the fee is resolved the firm intends to refer the matter to a credit
bureau;
(5)
the lawyer should set forth accurately what may happen to
client’s credit rating if such a referral is made;
(6)
the credit bureau should have had nothing to do with the fee
being earned;
(7)
the lawyer must reasonably believe the client would be able
to afford the fees when the fee agreement was made; and
(8)
the lawyer must be satisfied that the credit bureau will not
use illegal means to collect the amount owed.10

7

South Carolina Bar Ethics Op. # 94-11 construing RPC 1.6.

8

Florida Bar Ass’n Ethics Op. # 90-2 construing RPC 1.6.

9

Kansas Bar Ass’n Ethics Op. # 94-5, fn. 8 (“The Fair Debt Collection Practices Act defines all three entities as
“debt collectors” under the Act. Consumer remedies regarding any of these three entities are the same.”).
10

Kansas Op. # 94-5 construing RPC 1.6, 1.8.

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Despite the contrary authority, the Committee believes that the rationale
and reasoning of Opinion 86-3 remains valid. As the Committee concluded in
its earlier Opinion:
(R)eferral of the client’s delinquent status to a credit bureau is at
best an indirect method of collecting the unpaid fee. The only
direct effect is to sully the client’s credit rating. The Committee
concludes that the probability of collection by such indirect
methods as referral to a credit bureau is too small to justify its
use. Referral to the credit bureau may intimidate a client without
ever resulting in payment of the fee or even direct efforts to collect
the fee.
Although the law has advanced since the earlier opinion, and provides for some
protection against wrongful listings with credit bureaus, the underlying fact
remains that an attorney who lists a client with a credit agency has revealed
confidential information about the client for a purpose not permitted by ARPC
1.6(b)(2) since such a referral is at most an indirect attempt to pressure the
client to pay the fee. For these reasons the Committee reaffirms the
conclusions of Opinion 86-3.11
Approved by the Alaska Bar Association Ethics Committee on May 4, 2000.
Adopted by the Board of Governors on August 18, 2000.

G:\DS\COMM\Ethics\OPINIONS\2000-03.doc

11

Counsel has the responsibility under this opinion for insuring that there is no confusion when a matter is referred
to someone else for collection. If there is any possibility that a collection agency might also act to refer a matter to a
credit bureau, counsel must take steps to ensure that the collection agency has been instructed not to do so.

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