In a collection case, can I deduct the collection agency's disputed fee from the creditor's proceeds, and how should I handle the money?

Plain-English summary

The inquiring attorney asked about the proper course of action in a collection case in which a conflict exists between the guidelines of the Commercial Law League of America (CLLA) and a written agreement between the collection agency and the creditor. The collection agency stated that it is entitled to have its fee deducted from the proceeds, but the CLLA indicates that where a fee dispute exists, the agency's fee should be put in escrow.

The panel took the position that the attorney cannot deduct the collection agency's fee from the amount the creditor is entitled to receive. It further stated that the total amount collected and due the creditor should be remitted to the creditor each month, notwithstanding the guidelines of the CLLA, until the fee dispute is resolved, perhaps by an interpleader action.

Currency note

This opinion was issued in 1991, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, which renumbered and amended several provisions. 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 Treat this page as historical context, not current guidance.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 mentioned here.

Common questions

Q: Can I deduct the collection agency's fee from the creditor's proceeds?

A: Per the opinion, no. The attorney cannot deduct the collection agency's fee from the amount the creditor is entitled to receive.

Q: What should I do with the collected funds while the fee is disputed?

A: Per the opinion, remit the total amount collected and due the creditor to the creditor each month, notwithstanding the CLLA guidelines, until the fee dispute is resolved.

Q: How might the fee dispute be resolved?

A: Per the opinion, perhaps by an interpleader action.

Background and rules framework

The opinion cites no numbered Rule of Professional Conduct. The panel resolved the inquiry on the attorney's duty to the party entitled to the funds: the creditor's money must be paid over to the creditor and cannot be reduced by the collection agency's disputed fee, and the disputed fee is left for separate resolution, potentially through interpleader. The panel treated the CLLA's private guidelines as unable to override that duty.

Citations and references

Rules of Professional Conduct:

• None cited. The panel resolved the inquiry on the attorney's duty to remit the creditor's funds and not deduct the collection agency's disputed fee.

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 91-66: A Minor's Settlement After Placement in Foster Care
• RI EAP Op. 91-53: Holding Disputed Fee Funds in Escrow
• RI EAP Op. 97-17: Protecting Disputed Medical-Lien Funds in Trust

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2091-81.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

Digest of Ethics Advisory Panel
Opinion #91-81, Request #297
Issued December 5, 1991

An attorney seeks Panel advice as to the proper course of action in a collection case in which a conflict exists between the guidelines of the Commercial Law League of America (CLLA) and a written agreement between the collection agency and the creditor. The collection agency states that it is entitled to have its fee deducted from the proceeds but the CLLA indicates that where a fee dispute exists, the agency's fee should be put in escrow.

With respect to the issues raised, the Panel takes the position that: 1) the attorney cannot deduct the collection agency's fee from the amount which the creditor is entitled to receive and 2) the total amount collected and due the creditor should be remitted to it each month, notwithstanding the guidelines of the CLLA, until the fee dispute is resolved, perhaps by an interpleader action.