Can a lawyer use a collection agency to pursue unpaid legal fees, and can the lawyer report the non-paying former client to a credit bureau?

Plain-English summary

A fee dispute arose after a lawyer performed work without a signed fee agreement; the client had promised to sign the written agreement but never did, and the lawyer claimed a verbal contract for an hourly fee plus costs. Monthly bills went unpaid both during and after the representation, and the client eventually made an offer of compromise. The committee was asked whether the lawyer could pursue the delinquent fees through a collection agency and whether the lawyer could report the unpaid fees to a credit bureau.

On the first question, the committee answered yes, subject to Rule 1.6(b)(2). A lawyer may use a collection agency for unpaid fees only after exhausting other reasonable efforts short of litigation, which the committee described as mailing regular billing statements and case status reports, considering alternatives such as fee arbitration, negotiation, and mediation, and sending at least one demand letter spelling out the consequences of continued non-payment. The absence of a written fee agreement did not bar use of a collection agency, though the committee called a written agreement, including the consequences of non-payment, the best practice, and pointed to the State Bar's free Fee Arbitration Program and sample agreements in the Lawyers' Deskbook. The committee added that a collection agency should be used only after the lawyer has withdrawn in writing, that the lawyer remains legally and ethically responsible for the agent's conduct, and that the lawyer may reveal only the client confidences necessary to collect the debt.

On the second question, the committee answered no. Reporting a non-paying client to a credit bureau is not necessary to collect a fee, because a delinquent fee can be collected without it; the effect of a negative report is primarily punitive; and it risks disclosing confidential information about the former client that Rule 1.6 does not permit the lawyer to reveal.

Currency note

This opinion was issued in 2000, before the State Bar of Montana's adoption of the 2004 revisions to the 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 Treat this page as historical context, not current guidance.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: Can a lawyer use a collection agency to recover unpaid legal fees?

A: The opinion says yes, but only after exhausting other reasonable efforts short of litigation (regular bills and status reports, consideration of fee arbitration, negotiation or mediation, and at least one demand letter), and only revealing the confidences necessary to collect under Rule 1.6(b)(2).

Q: Does the lawyer need a written fee agreement to use a collection agency?

A: The opinion says the lack of a written agreement does not preclude using a collection agency, while describing a written agreement that states the consequences of non-payment as the best practice.

Q: Can a lawyer report a non-paying former client to a credit bureau?

A: No. The opinion concluded reporting to a credit bureau is not necessary to collect a fee, is primarily punitive, and risks disclosing confidential information the lawyer may not reveal under Rule 1.6.

Q: Is the lawyer responsible for what the collection agency does?

A: The opinion states that a lawyer using a collection agency is legally and ethically responsible for the agent's conduct in the collection process, and must take care that no more client information is disclosed than is reasonably necessary for the agency to collect the debt.

Background and rules framework

The opinion interprets Montana Rule of Professional Conduct 1.6 (Confidentiality of Information; Model Rule 1.6), including the Rule 1.6(b)(2) exception permitting a lawyer to reveal information necessary to establish a claim in a controversy between the lawyer and client, such as collecting a fee. The committee read that exception narrowly, requiring disclosure of no more than is reasonably necessary, and cited its earlier Opinion 960828 on the lawyer's responsibility for a collection agent. It also referenced the State Bar's Fee Arbitration Program and sample fee agreements in the Lawyers' Deskbook and Directory.

Citations and references

Rules of Professional Conduct:

• Mont. R. Prof. Cond. 1.6 (confidentiality), including 1.6(b)(2) / Model Rule 1.6

Other opinions cited:

• Montana Ethics Opinion 960828 (lawyer's responsibility for a collection agent; confidentiality in billing)

See also

• State Bar of Montana Ethics Op. 960828: Confidentiality of Client Billing
• NYC Bar Op. 1986-8: Disclosing Confidences to Collect a Fee From a Former Client
• DC Bar Op. 339: Threat of Criminal Referral in Civil Debt Collection

Source

• Landing page: https://www.montanabar.org/For-Attorneys/State-Bar-Resources/Ethics-Opinions
• Original PDF: https://www.montanabar.org/Portals/MONTANA/Site Resources/Ethics Opinions/1.6 confidentiality/001027.pdf

Original opinion text

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

Ethics Opinion

Ethics opinions are provided by the State Bar of Montana's Ethics Committee upon a Bar member's request. The opinions are non-binding and advisory only.

FACTS:
A fee dispute arose between attorney and client after the attorney performed legal work without a signed fee agreement. The client had represented that she would sign the written fee agreement presented to her, but never did. The attorney claims the client entered into a verbal contract for a stated hourly fee plus costs.
As the work progressed monthly bills were sent to the client, but no payments were received. After the attorney-client relationship terminated, bills were still sent monthly. The bills have never been paid but the client has made an offer of compromise.

QUESTIONS PRESENTED:
1. May an attorney pursue delinquent payment from his former client through a collection agency?

2. May an attorney report and disclose the unpaid fees to a credit bureau?

SHORT ANSWERS:

1. Yes. However, a lawyer should abide by Rule 1.6(b)(2) to avoid revealing confidential information beyond that which is necessary.

2. No. A lawyer should not report non-paying clients to credit bureaus. It is not necessary for establishing the lawyer's claim for compensation, it risks disclosure of confidential information and its effect is primarily punitive.

DISCUSSION:
Rule 1.6 of the Montana Rules of Professional Conduct provides:

(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraph (b).

(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary:

(1) to prevent the client from committing a criminal act that the lawyer believes is likely to result in imminent death or substantial bodily harm; or
(2) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client.

A lawyer may use a collection agency to collect unpaid legal fees if all other reasonable efforts short of litigation have first been exhausted. Those efforts should include the mailing of regular billing statements and case status reports; the contemplation of alternatives including fee arbitration, negotiation and mediation; and at least one demand letter setting out the ramifications of continued non-payment.

In the instant case, the failure to accomplish a written fee agreement does not preclude use of a collection agency to pursue the delinquent account. However, it is best practice to always obtain a written fee agreement and it is best practice to specifically include in that agreement the consequences of non-payment.

Six sample written fee agreements are included in the Lawyers' Deskbook and Directory. The State Bar's Fee Arbitration Program, authorized by the Montana Supreme Court, provides an arbitration alternative that is free to all members of the Montana Bar. The rules of the process and forms to initiate an arbitration are also included in the Deskbook. Finally, it is appropriate to use the collection agency only after having withdrawn, in writing, as counsel. A lawyer using a collection agency should know that the lawyer is legally and ethically responsible for the conduct of the agent in the collection process. Montana Ethics Opinion 960828.

Also, a lawyer may reveal only such client confidences and secrets as are necessary to establish or collect fees or as required by the Court. The lawyer must take care to disclose no more information about the client and the client's legal affairs than is reasonably necessary for the agency to collect the debt. That said, a lawyer should not report non-paying clients to credit bureaus.

Reporting to a credit agency is not necessary to collect a fee because a delinquent fee can be collected without it.

The effect of a negative report is primarily punitive. Finally, it risks disclosure of confidential information about the former client which the lawyer is not permitted to reveal under Rule 1.6.

                        THIS OPINION IS ADVISORY ONLY