May a lawyer represent a collection agency in suits to collect debts the agency is pursuing for creditors?

Plain-English summary

The committee was asked whether an attorney may represent collection agencies, the inquiry urging that the economy, recent reform of collection-agency practices, and the need for such services warranted it. The committee agreed that small businessmen are entitled to representation in collecting debts, but concluded it is unprofessional for an attorney to represent a collection agency unless the agency is itself a party to the suit. Where the agency acts in its own right, or defends itself, representation is acceptable, and where the agency has taken a bona fide assignment of an account without recourse it becomes the owner and may be represented in enforcing its rights.

The committee held that representing an agency that is acting on behalf of a creditor other than itself is unprofessional and reaffirmed its Advisory Opinion No. 251 (adopted September 14, 1967). It reasoned that such representation violates Canons 3 and 5 of the Code of Professional Responsibility. It quoted Ethical Consideration 3-8 (a lawyer should not share legal fees with a layman) and Ethical Considerations 5-21 and 5-23 (a lawyer must exercise independent judgment free of third-party pressure, and one who pays or furnishes lawyers to represent others holds power to pressure their independent judgment).

The committee explained that collection agencies generally operate on a contingent fee and must profit on services for which they engage an attorney, so paying the attorney out of that arrangement is a division of fees with the agency that the Code forbids. Even if the creditor paid the lawyer directly, the representation would still violate Canon 5 because the lawyer may not work through intermediaries; the attorney must represent the creditor directly and take direction solely from the creditor, with no agency intervening. The committee observed that if the lawyer were paid directly by the creditor with no agency profit and a direct, exclusive relationship, there would be little commercial reason for the agency to be involved, and the arrangement would really be representation of the creditor rather than of the agency. It reaffirmed Opinion No. 251.

Currency note

This opinion was issued in 1973, under the Code of Professional Responsibility, before Oklahoma adopted the Oklahoma Rules of Professional Conduct (1988) and the later Ethics 2000 revisions. 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: When may a lawyer represent a collection agency?

A: When the agency is itself the party, for example suing in its own right as owner of a bona fide assigned account taken without recourse, or defending itself; the committee said that representation is acceptable.

Q: Why is representing an agency collecting for a creditor improper?

A: The committee held it violates Canons 3 and 5: the agency's contingent-fee operation makes paying the attorney a forbidden division of fees with a layman, and it lets the agency act as an intermediary between the lawyer and the actual client.

Q: Could direct payment by the creditor cure the problem?

A: No. The committee said even with direct payment the representation would violate Canon 5, because the lawyer may not work through intermediaries and must take direction solely from the creditor.

Background and rules framework

The opinion applied Canon 3 of the Code of Professional Responsibility with Ethical Consideration 3-8 (no sharing of legal fees with a layman) and Canon 5 with Ethical Considerations 5-21 and 5-23 (independent professional judgment free of third-party pressure). It reaffirmed the committee's Advisory Opinion No. 251 (1967). The opinion predates the Model Rules and made no Model Rule citation.

Citations and references

Rules of Professional Conduct:

• Canon 3 (Code of Professional Responsibility): a lawyer should assist in preventing the unauthorized practice of law and should not share legal fees with a layman.
• EC 3-8 (Code of Professional Responsibility): a lawyer should not practice law in association with a layman or share legal fees with a layman.
• Canon 5 (Code of Professional Responsibility): a lawyer should exercise independent professional judgment on behalf of a client.
• EC 5-21 and EC 5-23 (Code of Professional Responsibility): a lawyer must guard his independent judgment against pressure from third persons who pay for or furnish representation.

Other opinions cited:

• Oklahoma Bar Association Advisory Opinion No. 251 (adopted September 14, 1967).

See also

• Okla. Bar Ethics Op. 251: Representing a credit bureau on delinquent accounts
• Okla. Bar Ethics Op. 107: Sharing collection fees with a nonlawyer forwarder
• Okla. Bar Ethics Op. 10: Sharing a collection fee with a lay forwarder

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-269/

Original opinion text

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

Adopted January 23, 1973

INQUIRY

The committee has received an inquiry asking an opinion as to the propriety of an attorney representing collection agencies. It is asserted in the inquiry that given the complex state of our economy, the recent reform of collection agency practices, and the need for such services, the profession should undertake such representation.

OPINION

The committee fully agrees that small businessmen are entitled to representation in the collection of debts; however, the committee must conclude that it is unprofessional for an attorney to represent a collection agency unless the agency is itself a party to the suit. Of course, if the agency is acting in its own right or is defending itself against a suit, it is perfectly acceptable to provide such representation.

When a collection agency takes a bona fide assignment of an account, without recourse, it then becomes the owner of the account. In such circumstances the agency, of course, may then be represented by counsel in the enforcement of its rights.

In cases in which the attorney represents the agency when the agency is acting in behalf of a creditor other than the agency itself, the committee holds such representation to be unprofessional. We reaffirm the position taken in Advisory Opinion No. 251, adopted by the Board of Governors on September 14, 1967.

Representation of a collection agency under such circumstances violates the provisions of both Canons 3 and 5 of the Code of Professional Responsibility.

Ethical Consideration 3_8 provides: "Since a lawyer should not aid or encourage a layman to practice law, he should not practice law in association with a layman or otherwise share legal fees with a layman. …"

Ethical Consideration 5_21 provides: "The obligation of a lawyer to exercise professional judgment fully on behalf of his client requires that he disregard the desires of others that might impair his free judgment. The desires of a third person will seldom adversely affect a lawyer unless that person is in a position to exert strong economic, political or social pressures on the lawyer. These influences are often subtle, and a lawyer must be alert to their existence. A lawyer subjected to outside pressures should make full disclosure of them to his client; and if he or his client believes that the effectiveness of his representation has been or will be impaired thereby, the lawyer should take proper steps to withdraw from representation of his client."

Further, Ethical Consideration 5_23 states: "A person or organization that pays or furnishes lawyers to represent others possesses a potential power to exert strong pressures against the independent judgment of those lawyers. Some employers may be interested in furthering their own economic, political or social goals without regard to the professional responsibility of the lawyer to the individual client. Others may be far more concerned with establishment or extension of legal principles than in the immediate protection of the rights of the lawyer's individual client. On some occasions, decisions on priority work may be made by the employer rather than the lawyer with the result that prosecution of work already undertaken for clients is postponed to their detriment. Similarly, an employer may seek, consciously or unconsciously, to further its own economic interests through the actions of the lawyers employed by it. Since a lawyer must always be free to exercise his professional judgment without regard to the interests or motives of a third person, the lawyer who is employed by one to represent another must constantly guard against erosion of his professional freedom."

In general, collection agencies operate on the basis of a contingent fee collected by the agency. An attorney representing the agency rather than the creditor directly, is paid by the agency. The agency, to continue its operations, must make a profit on its services, including those for which it engages an attorney. This arrangement clearly constitutes a division of fees between the attorney and the collection agency in violation of the Code which expressly forbids a division of fees with non-attorneys. It is conceivable that the attorney might bill the client directly and that the client-creditor would pay nothing to the agency, but this situation is highly unlikely because it would severely reduce the profits of the agency.

Even if direct payment of fees were arranged, the representation of the agency would still violate Canon 5. An attorney may not work through intermediaries. The legal profession derives the respect which it enjoys and deserves in large part from the nature of the close relationship of trust and understanding which exists in the lawyer-client relationship. An attorney must represent the creditor directly and receive his directions solely from the creditor. No agency can be allowed to intervene between the lawyer and the client. The sole responsibility for representing and serving the creditor must be that of the attorney alone and it cannot be shared with any third party.

If the lawyer were paid for his services directly by the creditor with no profit on the transaction for the collection agency and if the relationship between the attorney and the creditor were direct and exclusive, there would be little or no commercial reason for the collection agency to become involved. The likelihood that such an arrangement could exist is highly remote and would actually constitute representation of a creditor by an attorney and not representation of a collection agency.

After reconsideration of the matter, the Committee holds that the Code of Professional Responsibility requires our reaffirmance of Opinion No. 251.