Can a West Virginia lawyer refer a former client's overdue legal-fee account to a collection agency?

Plain-English summary

The Committee on Legal Ethics was asked whether an attorney could refer a delinquent account to a collection agency to recover money owed for legal services. The Committee approved the use of collection agencies under certain prescribed guidelines, and in doing so overruled L.E.I. 80-1, which had held that a lawyer could not refer overdue client accounts to a collection agency.

The Committee explained that the earlier ban was written when there were few restrictions on collection agencies and reflected a concern that using them eroded the attorney-client relationship by placing the lawyer's personal financial interests over the duties of loyalty and zealous representation. The Committee found that conditions had changed substantially: the collection process had become subject to increasing public scrutiny and government regulation (it cited the Fair Debt Collection Act, 15 U.S.C. 1692 et seq.), so the use of collection agents no longer appeared inconsistent with the dignity and honor of the profession, provided reasonable efforts short of litigation had first been exhausted and appropriate measures assured the agent's adherence to law. The Committee noted this majority view, citing New York State Ethics Opinion 608 (1990) and opinions from numerous other states, all of which placed restrictions on a lawyer's use of collection agencies.

Adopting the majority view, the Committee set eight guidelines: the fee must be legally and ethically valid; the lawyer did not believe at the time of the fee agreement that the client could not afford it; the lawyer is no longer responsible for the client's case; there is no genuine dispute over the debt; the lawyer has exhausted all other reasonable efforts short of litigation to collect; the lawyer has first informed the client in writing of the plan to refer the matter to a collection agency; the lawyer exercises caution in selecting the agency (not using one known or reasonably believed to act illegally or to engage in the unauthorized practice of law); and the lawyer may provide the agency with former-client information such as names, addresses, and fee, but shall not disclose confidential information unrelated to collection of the debt. The Committee stated that without these guidelines a lawyer risks violating Rules 1.5, 1.6, 1.7, 1.8(b), 5.5(b), and 8.4(a) through (d).

Currency note

This opinion was issued in 1994, before the West Virginia Supreme Court of Appeals' comprehensive 2015 revision of the West Virginia Rules of Professional Conduct (effective January 1, 2015). 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: Did West Virginia ever prohibit lawyers from using collection agencies for unpaid fees?

A: Yes. The opinion noted that L.E.I. 80-1 had held a lawyer could not refer overdue client accounts to a collection agency. This opinion overruled that holding to the extent the two were inconsistent.

Q: What had to happen before a lawyer could turn an account over to a collection agency?

A: Among the eight guidelines, the lawyer had to be no longer responsible for the client's case, have exhausted all other reasonable collection efforts short of litigation, and have first informed the client in writing of the plan to refer the matter, with no genuine dispute over the debt.

Q: What could the lawyer tell the collection agency about the client?

A: The opinion permitted disclosure of former-client information such as names, addresses, and the fee, but stated the lawyer shall not disclose any confidential information unrelated to collection of the debt.

Q: Could the lawyer use any collection agency?

A: No. The opinion directed the lawyer to exercise caution in selecting an agency: not using one the lawyer knows or has reason to believe acts illegally, and not employing an agency that engages in the unauthorized practice of law.

Background and rules framework

The opinion interpreted West Virginia's Rules of Professional Conduct as they stood in 1994. It tied the eight guidelines to the rules a lawyer could otherwise violate when collecting fees through an agency: Rule 1.5 (fees), Rule 1.6 (confidentiality of information), Rule 1.7 (conflicts of interest), Rule 1.8(b) (use of client information to the client's disadvantage), Rule 5.5(b) (assisting the unauthorized practice of law), and Rule 8.4(a) through (d) (misconduct). The Committee grounded the change in the increasing regulation of collection agencies, including the federal Fair Debt Collection Act, 15 U.S.C. 1692 et seq.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / WV Rule 1.5 (fees)
• Model Rule 1.6 / WV Rule 1.6 (confidentiality of information)
• Model Rule 1.7 / WV Rule 1.7 (conflicts of interest)
• Model Rule 1.8 / WV Rule 1.8(b) (use of client information to the client's disadvantage)
• Model Rule 5.5 / WV Rule 5.5(b) (unauthorized practice of law)
• Model Rule 8.4 / WV Rule 8.4 (misconduct)

Statutes:

• Fair Debt Collection Act, 15 U.S.C. 1692 et seq.

Other opinions cited:

• New York State Ethics Opinion 608 (1990) and New York State Ethics Opinion 400 (1975): permissibility of referring overdue accounts to collection agencies
• Arizona Op. 82-2; Colorado Op. 548; D.C. Op. 60; Florida Op. 90-2; Georgia Op. 49; Illinois Op. 632; Iowa Op. 83-21; Maryland Op. 82-24; Massachusetts Op. 89-3; Missouri Informal Op. 4; New Mexico Op. 1988-7; North Carolina Op. 7; Ohio Op. 91-16; Oregon Op. 225; Utah (unnumbered); Virginia Op. 946: majority view permitting use of collection agencies

See also

• AL Ethics Op. 1990-85: Selling Collection Files
• WV Ethics Op. 99-02: Bills to Outside Auditors

Source

• Landing page: https://wvodc.org/Legal-Ethics-Opinion
• Original PDF: https://storage.googleapis.com/msgsndr/Rgd68xOkcVdteTsBkf6O/media/66a7ea7d1b325d512797afef.pdf

Original opinion text

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

THE COMMITTEE ON LEGAL ETHICS OF
THE WEST VIRGINIA STATE BAR

L.E.I. 94-01

COLLECTION OF OVERDUE ACCOUNTS

The Committee on Legal Ethics (hereinafter Committee) has been asked to render an opinion on the following issue: Whether an attorney can refer a delinquent account to a collection agency to recover money owed for legal services. For the reasons stated below, the Committee approves the use of collection agencies under certain prescribed guidelines.

This decision overrules L.E.I. 80-1, Propriety of Law Firm Referral of Its Overdue Client Accounts to Collection Agency, in which the Committee held that a lawyer cannot refer overdue client accounts to a collection agency. The decision was written at a time when there were few restrictions on collection agencies and was prompted by concern that the usage of such eroded the attorney-client relationship by causing a lawyer to place his personal financial interests over his duties of loyalty and zealous representation on behalf of a client.

However, as is often the case, change has come with the passage of time.

The conditions involving the use of collection agents have changed substantially since [1975]. The collection process has been subjected to increasing public scrutiny and government regulation over the years (e.g. the Fair Debt Collection Act, 15 U.S.C. 1692 et seq.) and the use of collection agents no longer appears to us to be inconsistent with the dignity and honor of legal professionals, provided that all other reasonable efforts short of litigation have first been exhausted, and provided also that appropriate measures to assure the collection agent's strict adherence to law and regulations and to the highest ethical standards in the process of collection are taken by the attorneys retaining them.

New York State Ethics Opinion 608 (1990). Today, this view is espoused by a majority of states that have addressed the issue. However, all of these states have placed restrictions on a lawyer's use of collection agencies in order to fall within the framework of the Rules of Professional Conduct or Code of Professional Responsibility.

In adopting the majority view that a lawyer may refer an overdue client account to a collection agency, the Committee on Legal Ethics of the West Virginia State Bar likewise employs the following guidelines:

1. The fee must be legally and ethically valid;

2. The lawyer did not believe when the fee agreement was made that the client would not be able to afford it;

3. The lawyer is no longer responsible for the client's case;

4. There is no genuine dispute over the debt;

5. The lawyer has exhausted all other reasonable efforts short of litigation in attempting to collect the debt;

6. The lawyer has first informed the client in writing that he plans to refer the matter to a collection agency;

7. The lawyer must also exercise caution in his selection of a collection agency:

a. The lawyer should not use a collection agency that he knows or has reason to believe is and/or has acted illegally.

b. The lawyer must not employ an agency that engages in the unauthorized practice of law;

8. The lawyer may provide the collection agency with information regarding former clients, such as names, addresses and fee. However, the lawyer shall not disclose any confidential information that is unrelated to the collection of the debt; and

Without the implementation of these guidelines, a lawyer places himself in jeopardy of violating Rules 1.5, 1.6, 1.7, 1.8(b), 5.5(b), and/or 8.4(a) through (d) of the Rules of Professional Conduct.

To the extent that this opinion is inconsistent with L.E.I. 80-1, it is overruled.

Dated:

STEPHEN JORY, CHAIRMAN,
Committee on Legal Ethics of
The West Virginia State Bar

[Footnotes:]
1. Interestingly, the Committee in originally rejecting the use of collection agencies in L.E.I. 80-1 relied on New York State Ethics Opinion 400 (1975). That decision has been overruled by New York State Ethics Opinion 608 (1990).
2. See Arizona Ethics Opinion 82-2 (1982); Colorado Ethics Opinion 548 (1961); District of Columbia Ethics Opinion 60; Florida Ethics Opinion 90-2 (1991); Georgia Ethics Opinion 49 (1985); Illinois Ethics Opinion 632 (1978); Iowa Ethics Opinion 83-21 (1983); Maryland Ethics Opinion 82-24 (1981); Massachusetts Ethics Opinion 89-3 (1989); Missouri Informal Ethics Opinion 4 (1982); New Mexico Ethics Opinion 1988-7; North Carolina Ethics Opinion 7 (1986); Ohio Supreme Court Ethics Opinion 91-16 (1991); Oregon Ethics Opinion 225 (1972); Utah Ethics Opinion (unnumbered); and Virginia Ethics Opinion 946 (1987).