Can a law firm hand a collection agency the client's name, bills, fee agreement, and file to collect unpaid legal fees?

Plain-English summary

The question (PEC 92-15) asked how much information a law firm may give a collection agency: the client's name, address, and phone; the amount the firm contends is owed; copies of outstanding bills; copies of the fee agreement and prior correspondence; and a copy of the entire file. In the facts, the firm would retain ownership of the receivables, and the independent collection agency would pursue collection under the federal and Texas debt collection practices acts, communicating with the client in the agency's own name as the firm's representative.

The Committee explained that, except as the rules permit, a lawyer may not reveal a client's or former client's confidential information (Rule 1.05(b)), and confidential information includes both privileged and unprivileged client information (Rule 1.05(a)). While Rule 1.05(c)(5) lets a lawyer reveal confidential information to the extent reasonably necessary to enforce a claim in a controversy with the client, the fiduciary relationship requires any disclosure to be as protective of the client as possible. Most information about a firm's services for a client, including the amount due and the nature of the services, is almost always confidential and may be privileged.

The Committee relied on Opinion 464, which held a lawyer may not sell delinquent receivables to a factoring company without each client's prior consent, because disclosing client information as part of such a sale is not necessary to enforce the fee claim. It concluded the same reasoning applies to a collection agency: employing the agency and disclosing client information to it is not necessary to enforce the lawyer's claim. Although a lawyer may share confidential information with firm employees (Rule 1.05(c)(3)), the requirement that the lawyer retain control of the client's confidential information means the lawyer may not, without the client's effective consent, disclose privileged or confidential information to an agent who is not an employee, even one acting as the lawyer's collection agent.

Currency note

This opinion was issued in 1994, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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 send a collection agency the client's bills and file to collect a fee?

A: The Committee concluded a lawyer may not disclose confidential client information to an independent collection agency to collect fees unless the client consents after consultation.

Q: Doesn't the rule allow disclosure to collect a fee?

A: The Committee concluded Rule 1.05(c)(5) permits disclosure reasonably necessary to enforce a fee claim in a proceeding, but giving information to a collection agency is not necessary to enforce the claim.

Q: Does it matter that the collection agency is the lawyer's agent?

A: Yes. The Committee concluded that, unlike firm employees (Rule 1.05(c)(3)), a non-employee agent may not receive confidential or privileged client information without the client's effective consent, because the lawyer must retain control of the client's confidences.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.05 (confidentiality of information; ABA Model Rule 1.6), including 1.05(a) (defining confidential, privileged, and unprivileged information), 1.05(b), 1.05(c)(2), 1.05(c)(3), 1.05(c)(5), and 1.05(d)(2)(iv), and Comments 14 and 15. It applies the reasoning of Opinion 464 (sale of delinquent receivables to a factor).

Citations and references

Rules of Professional Conduct:

• MR 1.6 (confidentiality of information)
• Texas Disciplinary Rule 1.05 (incl. 1.05(a), (b), (c)(2), (c)(3), (c)(5), (d)(2)(iv); Comments 14, 15)

Other opinions cited:

• Tex. Ethics Op. 464 (Nov. 1989): a lawyer may not sell delinquent accounts receivable to a factoring company without each client's prior consent

See also

• TX Ethics Op. 556: Confidential Information and Borrowed Employees
• TX Ethics Op. 506: Disclosing Client Conferences to Obtain a Workers' Comp Fee
• TX Ethics Op. 559: Appointed Counsel's Detailed Fee Statement and Confidentiality

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-495/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_495.pdf

Original opinion text

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

QUESTION PRESENTED

[PEC 92-15]

To what extent is it permissible for a law firm to provide the following information to a collection agency:
(1) Name, address, telephone No. of the client;
(2) The amount the law firm contends the client owes;
(3) Copies of actual billings that are outstanding;
(4) Copies of the fee agreement and previous correspondence with the client concerning billings; and
(5) A copy of the entire file to which the account receivable relates.

STATEMENT OF FACTS

A Texas law firm is considering engaging the services of an independently owned and operated collection agency to assist the Texas law firm in collecting accounts receivable due the firm from clients for whom the firm had provided legal services or representation in legal matters. The law firm would retain ownership of the accounts receivable. The collection agency would handle collection in accordance with the Fair Debt Collection Practices Act, as well as the Texas Debt Collection Practices Act. The debt collection agency would communicate by telephone and letter to the client in the agency's own name stating that it is representing the law firm in collecting the account receivable.

DISCUSSION

Except as otherwise provided by the Texas Disciplinary Rules of Professional Conduct (the "Disciplinary Rules"), a lawyer may not reveal a client's or previous client's confidential information. Rule 1.05(b). "Confidential information" is broadly and specifically defined to include both "privileged information" and "unprivileged client information." Rule 1.05(a). A lawyer may reveal confidential information to the extent reasonably necessary to enforce a claim or establish a defense on behalf of the lawyer in a controversy between the lawyer and the client. Rule 1.05(c)(5) (emphasis added); see also Rule 1.05(d)(2)(iv). Because of the fiduciary relationship involved, any disclosure by the lawyer should be as protective of the client's interests as possible. Rule 1.05, Comments 14 and 15 (emphasis added). Under the Rules, "reasonable" denotes the conduct of a reasonably prudent and competent lawyer. Disciplinary Rules, Terminology. A lawyer also may reveal confidential information when the client consents after consultation. Rule 1.05(c)(2); see also Rules 1.05(b)(2) and (4).

Under Rule 1.05, most information concerning a law firm's legal services for a client, including the amount due from a client for legal services and information on the nature of these services, will in almost all cases be confidential and part of the information may also be privileged. (See Texas Professional Ethics Committee Opinion 464, Texas Bar Journal, November 1989).

In Opinion 464, the question was under what circumstances a lawyer could sell outright his delinquent accounts receivable to a third party factoring company. The committee concluded that such sale is impermissible unless each client involved had previously given consent, after consultation with the lawyer, to the disclosure of confidential information incident to such a sale. The committee recognized that although Rule 1.05(c)(5) permits a lawyer to disclose confidential information to the extent reasonably necessary in a legal proceeding that is brought by the lawyer to collect a fee, disclosure of confidential client information as part of the sale of a delinquent account receivable to a factor is not necessary for the enforcement of the claim for the lawyer's fee. This conclusion also applies in the case of information provided to a collection agency. The employment of a collection agency and the disclosure of client information to such an agency is not necessary for the enforcement of the lawyer's claim.

In certain circumstances, an attorney may properly disclose confidential and privileged information to the attorney's agent who is subject to the direct control of the attorney. For example, Rule 1.05(c)(3) authorizes an attorney to reveal confidential information to employees of the lawyer's firm (unless the client instructs otherwise). However, because of the requirement that an attorney retain control of a client's confidential information, an attorney may not, in the absence of effective consent by the client, disclose privileged or confidential information to an agent who is not an employee of the attorney. Accordingly, an attorney may not turn over to an independent collection agency confidential client information even though the collection agency would be acting as an agent of the attorney in the collection process.

A lawyer may not ethically disclose confidential information to a collection agency to enable the agency to collect the fees which might be due to the lawyer from such lawyer's client, unless the lawyer complies with the requirements of Opinion 464 and Rule 1.05 of the Texas Disciplinary Rules of Professional Conduct.

CONCLUSION

A lawyer may not ethically disclose confidential information to a collection agency to enable the agency to collect the fees which might be due to the lawyer from such lawyer's client, unless the lawyer complies with the requirements of Opinion 464 and Rule 1.05 of the Texas Disciplinary Rules of Professional Conduct.

Tex. Comm. On Professional Ethics, Op. 495 (1994)