Ezel / Ethics Opinions / NYSBA
NYSBA November 29, 2006

Can a New York law firm run debt-collection services for clients in other states as a non-legal service where its lawyers are not licensed?

Short answer: Yes, with conditions. The committee concludes a New York firm may provide out-of-state collection as a non-legal service if the other state's rules (including its unauthorized-practice law) permit it, the firm tells the client in writing the work is not legal services, and the firm does not use law-firm letterhead or otherwise mislead debtors.

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This page answers the general question as of 2006. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2006
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A law firm whose lawyers are admitted in New York represents creditors and wants to provide debt collection outside New York without engaging in the practice of law, in states where its lawyers are not licensed. The committee addresses when the firm may do so as a non-legal service.

The threshold question is the other jurisdiction's law: if the collection activities would constitute the unauthorized practice of law there, the firm may not undertake them, and doing so would subject the firm to discipline in New York under DR 3-101(B) and DR 1-104(A). Assuming the activities are permissible non-legal services in the other state, the committee turns to DR 1-106, which lets a law firm provide non-legal services independently of its legal work. Because such services are presumptively treated as subject to an attorney-client relationship, a firm seeking to avoid those obligations must advise the client in writing that the services are not legal services and that the protections of an attorney-client relationship do not apply, and must otherwise avoid misleading the client about that.

The committee also requires the firm to avoid misleading the debtors it contacts. It states the firm may not use its law-firm letterhead in communicating with debtors and must otherwise avoid suggesting that it or its representatives are functioning as lawyers for the creditor or might take legal action. Finally, the committee notes that while conflicts can arise when a firm provides legal and non-legal services concurrently, out-of-state collection for a creditor ordinarily would not be reasonably likely to impair the firm's judgment on related New York collection matters.

In practice

The opinion holds, under the former Code as it stood at the time, that a New York firm may run out-of-state debt collection as a non-legal service only if (1) the other jurisdiction's rules, including its unauthorized-practice law, permit it; (2) the firm advises the client in writing that the work is not legal services and carries no attorney-client protection; and (3) the firm does not use law-firm letterhead with debtors and otherwise avoids misleading them. The committee grounds the cross-border limit in DR 3-101(B) and DR 1-104(A), the written-notice requirement in DR 1-106, and the no-misleading-debtors rule in DR 1-102(A)(4).

Common questions

Q: Can a New York firm collect debts in a state where its lawyers are not admitted?

A: Only if the other state's rules, including its unauthorized-practice law, permit the collection activity as a non-legal service. The committee concludes that if the activity is unauthorized practice there, the firm may not do it and could face New York discipline under DR 3-101(B).

Q: Does the firm have to tell the client the collection work is not legal services?

A: Yes. Under DR 1-106 the services are presumed subject to an attorney-client relationship, so to avoid those obligations the firm must advise the client in writing that the work is not legal services and carries no attorney-client protection.

Q: Can the firm use its letterhead when contacting debtors?

A: No. The committee concludes the firm may not use law-firm letterhead with debtors and must avoid suggesting it is acting as the creditor's lawyer or might take legal action, to avoid misleading debtors under DR 1-102(A)(4).

Background and rules framework

The opinion interprets the former Code's non-legal-services rule, DR 1-106 (an analogue of ABA Model Rule 5.7), together with DR 3-101(B) on practicing where it would violate another jurisdiction's regulation (Model Rule 5.5), DR 1-104(A) on firm responsibility, and DR 1-102(A)(4) barring dishonesty, fraud, deceit, or misrepresentation (Model Rule 8.4(c)).

Citations and references

Rules of Professional Conduct:

  • MR 5.7 (responsibilities regarding law-related/non-legal services)
  • MR 5.5 (unauthorized practice; multijurisdictional practice)
  • MR 8.4(c) (dishonesty, fraud, deceit, misrepresentation)
  • Former Code DR 1-106; DR 3-101(B); DR 1-104(A); DR 1-102(A)(4)

Other opinions cited:

  • N.Y. State 753 (2002): lawyer may not also act as mortgage broker or title abstractor in the same transaction
  • N.Y. State 752 (2002): lawyer may not act as lawyer and real estate broker in the same transaction

See also

Source

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