Can a South Carolina lawyer use a collection agency, report a client to a credit bureau, or run a credit check to handle unpaid legal fees?

Plain-English summary

A lawyer asked whether three fee-collection practices were proper: using a collection agency for past-due accounts, reporting non-paying clients to a credit bureau, and running credit checks on clients.

The committee concluded a lawyer may use a collection agency, but in doing so should abide by Rule 1.6(b)(2) and reveal only such information as is necessary. It read Rule 1.6(b)(2), which lets a lawyer reveal information to establish a claim in a controversy between the lawyer and the client, as drawing no distinction between an actual suit and a claim handed to a collection agency; in either case only necessary information should be revealed.

On credit bureaus, the committee advised against reporting non-paying clients, for three stated reasons: it is not necessary to establish the lawyer's claim for compensation, it risks disclosure of confidential information, and it "smacks of punishment in trying to lower the client's credit rating."

On credit checks, the committee found no Rule of Professional Conduct prohibiting a lawyer from having a credit check made of a client, provided the client's status as a client is not disclosed in violation of Rule 1.6.

Currency note

This opinion was issued in 1994, before the South Carolina Bar's adoption of the 2005 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 Treat this page as historical context, not current guidance.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: Could a South Carolina lawyer turn an unpaid fee over to a collection agency?

A: The committee concluded yes, treating it like a suit to collect the fee under Rule 1.6(b)(2), so long as only the information necessary to the claim is revealed.

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

A: The committee advised against it, reasoning that it is unnecessary to establish the fee claim, risks disclosing confidential information, and amounts to punishment aimed at lowering the client's credit rating.

Q: Could the lawyer run a credit check on a client?

A: The committee found no rule prohibiting it, provided the person's status as a client is not disclosed in violation of Rule 1.6.

Background and rules framework

The opinion turned on Rule 1.6 (confidentiality of information) and its self-protection exception in Rule 1.6(b)(2), which permits disclosure to establish a claim in a controversy between the lawyer and the client. The South Carolina rule corresponds to like-numbered Model Rule 1.6.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.6 / Model Rule 1.6: confidentiality of information, including the Rule 1.6(b)(2) exception for a fee controversy between lawyer and client.

Other opinions cited:

• ABA/BNA Lawyers' Manual on Professional Conduct 41:2009 ("Fees").

See also

• SC Bar Ethics Op. 94-23: Self-Defense Disclosure Before an Agency
• SC Bar Ethics Op. 94-30: Disclosing a Client's Whereabouts

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-94-11/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 94-11

1. Can a lawyer ethically use a collection agency to collect past due accounts for legal services rendered?
2. Can a lawyer report past due accounts to a credit bureau?
3. Can a lawyer do credit checks of clients?

Summary:
1. Yes. However, a lawyer should abide by SCACR 407, Paragraph 1.6 (b) (2), so as not to reveal confidential information except that which is necessary.
2. No. A lawyer should not report non-paying clients to credit bureaus: 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. 3. Yes. There is no ethical prohibition against a lawyer requesting a credit check of a client provided that his status as a client is not revealed.

Opinion:
Rule 1.6 states that:
(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.{Omitted} 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." (Emphasis added).

This is amplified under a portion of the rule's comment "A lawyer entitled to a fee is permitted by paragraph (b) (2) to prove the services rendered in an action to collect it. This aspect of the rule expresses the principle that the beneficiary of a fiduciary relationship may not exploit it to the detriment of the fiduciary. As stated above, the lawyer must make every effort practicable to avoid unnecessary disclosure of information relating to a representation, to limit disclosure to those having the need to know it, and to obtain protective orders or make other arrangements minimizing the risk of disclosure." The Committee does not detect a distinction between an actual suit and a claim for services given to a collection agency for purposes of collection in the language used in Rule 1.6 (b) (2) above. In either case only such information as may be necessary should be revealed.

For the following reasons, the committee advises against reporting non-paying clients to credit bureaus: 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. See ABA/BNA Lawyers Manual on Professional Conduct 41:2009 "Fees".

The Committee has not found a Rule of Professional Conduct prohibiting a lawyer having a credit check made of a client provided that the latter's status as a client is not disclosed in violation of Rule 1.6. The substantive law on this subject should, of course, be observed.