Can a lawyer sell or assign unpaid client fee accounts to a collection agency, and what client information can the agency be given?

Plain-English summary

Opinion 298 (May 2000) responded to a law firm approached by a collection agency that proposed to buy and collect the firm's receivables (open and closed accounts, notes, and judgments) in the agency's own name, removing the firm "completely" from the collection process, with the agency deciding whether to sue. The committee distinguished two questions: whether such a sale or assignment was permissible, and what client information could be shared.

On the sale or assignment, the committee reaffirmed Opinion 60's holding that using a collection agency to recover unpaid fees is permissible and that paying the agency a percentage is not prohibited fee-sharing under Rule 5.4. But a lawyer cannot transfer more than he owns, so a debt for legal services carries the same ethical constraints the lawyer would face collecting it himself. Those constraints include the duty to attempt amicable resolution first, the duty to arbitrate fee disputes on a client's request under D.C. Court of Appeals Rule XIII, and the Rule 1.6(d)(5) limit on disclosing confidences in fee litigation. Because the proposed sale stripped the lawyer of any say over suit, settlement, arbitration, or disclosure, the committee concluded it ran afoul of the Rules. An assignment, by contrast, could be permissible if the lawyer retains sufficient control: at a minimum staying informed about collection efforts and able to veto activities inconsistent with ethical duties, with disclosure of the assignment made to the client.

On client information, the committee concluded that transmitting the client's name, contact information, and debt amount, plus signed retainer agreements, fee schedules, and promissory notes, does not require client consent, treating the agency like a bookkeeping or accounting function under Comment [11] to Rule 1.6 and Rule 5.3, provided the lawyer ensures confidentiality. Detailed billing records describing the legal work are "substantive," are normally not necessary to collect, and generally require client consent; the committee drew on its Opinion 290 (insurer-auditor disclosure) for that line.

Currency note

This opinion was issued in 2000, before the District of Columbia's adoption of the 2007 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 lawyer sell client fee accounts outright to a collection agency?

A: The opinion concluded no. The proposed sale removed the lawyer entirely from the collection process, leaving no control over suit, settlement, fee arbitration, or disclosure of confidences, which is inconsistent with the D.C. Rules and Court of Appeals Rule XIII.

Q: Could a lawyer instead assign receivables to an agency?

A: The opinion held an assignment could be permissible on a case-by-case basis, but only if the lawyer retained sufficient control to satisfy ethical duties, including staying informed and being able to veto activities that violate the rules, with the assignment disclosed to the client.

Q: What client information could be given to the collection agency without consent?

A: The opinion concluded the client's name, contact information, debt amount, and signed retainer agreements, fee schedules, and promissory notes could be shared without consent, treated like information given to a bookkeeper, as long as the agency kept it confidential under Rule 5.3.

Q: When was client consent required to share information?

A: The opinion held that detailed billing records describing the legal work are substantive, are generally not necessary to collect the debt, and so generally require the client's informed consent before disclosure to the agency.

Background and rules framework

The opinion interpreted D.C. Rule 1.5 (fees, including Comment [15] on fee-dispute arbitration), Rule 1.6 (confidentiality, including the (d)(5) fee-litigation exception, the (d)(3) response-to-allegations exception, and Comments [11], [23], [24], and [25]), Rule 5.3 (responsibilities for non-lawyer assistants), and Rule 5.4 (professional independence and the bar on sharing fees with non-lawyers). It also relied on D.C. Court of Appeals Rule XIII (mandatory fee-dispute arbitration on a client's request) and noted that debt collection is separately regulated by the federal Fair Debt Collection Practices Act.

Citations and references

Rules of Professional Conduct:

• D.C. RPC 1.6 / Model Rule 1.6 (confidentiality; fee-litigation and bookkeeping-disclosure provisions)
• D.C. RPC 5.4 / Model Rule 5.4 (professional independence; fee-sharing with non-lawyers)
• D.C. RPC 5.3, 1.5 / Model Rules 5.3, 1.5 (non-lawyer assistants; reasonable fees and fee-dispute resolution)

Statutes:

• Fair Debt Collection Practices Act, 15 U.S.C. § 1692 (noted; collection practices separately regulated)

Other opinions cited:

• D.C. Ethics Opinions 23 (1976), 60, 289 (1999), 290 (1999)
• ABA Formal Op. 338; Ohio Bd. of Comm'rs Op. 91-16 (1991); N.Y. State Bar Op. 608 (1990); ABCNY Op. 1993-1 (1993); Fla. Op. 81-3 (1981)

See also

• ABA Formal Op. 476: Withdrawal for Unpaid Fees
• DC Ethics Op. 379: Charging Liens and Confidentiality
• ABA Formal Op. 484: Client Fee-Financing Companies

Source

• Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-298