Can a New York lawyer hire a collection agency to collect an unpaid legal fee from a client?

Plain-English summary

The committee revisited N.Y. State 400, which had held in 1975 that using a collection agency to recover attorneys' fees was inconsistent with the dignity and honor of the legal profession and therefore improper. Working within EC 2-23, which directs a lawyer to avoid fee controversies, try to resolve fee differences amicably, and not sue a client for fees except to prevent fraud or gross imposition, the committee took up whether a collection agent could be used as a last step before suit, after those efforts had been exhausted. It surveyed other jurisdictions, noting that some still restricted or barred the practice while many (Arizona, Florida, Illinois, Maryland, Missouri, North Carolina, Oregon, Utah, Virginia, and the District of Columbia) permitted it under conditions designed to protect client confidences, confine the agent to lawful conduct, and avoid the unauthorized practice of law and fee-splitting.

The committee concluded that conditions had changed since 1975, with the collection process now subject to public scrutiny and regulation such as the Fair Debt Collection Practices Act, so that using a collection agent no longer appears inconsistent with the dignity of the profession, provided safeguards are met. It required that all other reasonable efforts short of litigation first be exhausted, that referrals go only to responsible agents, that the lawyer remain legally and ethically responsible for the agent's conduct at all times, that the fees referred already be fully earned to avoid fee-splitting problems, and that the lawyer terminate the process if it threatens to erode public confidence in the profession. On confidentiality, the committee noted that DR 4-101(C)(4) permits a lawyer to reveal client confidences and secrets necessary to establish or collect a fee, but stressed that any disclosure must be strictly limited to what is necessary and that the lawyer must take reasonable steps to ensure the agent preserves those confidences. To the extent it was inconsistent, N.Y. State 400 was overruled.

Currency note

This opinion was issued in 1990, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. 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 Treat this page as historical context, not current guidance.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 New York lawyer use a collection agency to collect an unpaid fee?

A: Yes, within limits. The committee overruled its earlier prohibition and held that a lawyer may use a collection agent for a fully earned fee after all reasonable efforts short of litigation have been undertaken without success.

Q: What conditions apply?

A: The fee must already be fully earned (to avoid fee-splitting), the agent must be responsible and adhere strictly to law and the Code, the lawyer remains responsible for the agent's conduct, and the lawyer must end the process if it threatens public confidence in the profession.

Q: What about the client's confidential information?

A: Under DR 4-101(C)(4), the lawyer may reveal only the confidences and secrets necessary to establish or collect the fee, and must make reasonable efforts to ensure the collection agent also preserves them.

Background and rules framework

The opinion interpreted EC 2-23 (avoiding fee controversies and limiting fee suits) and DR 4-101(C)(4) (a lawyer may reveal confidences and secrets necessary to collect a fee). The closest Model Rule analogues are Rule 1.5 (fees) and Rule 1.6 (confidentiality, including the exception permitting disclosure to establish or collect a fee).

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees)
• MR 1.6 (confidentiality; disclosure to collect a fee)
• NY EC 2-23; DR 4-101(C)(4)

Statutes:

• Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. (cited as context for increased regulation of collection activity)

Other opinions cited:

• N.Y. State 400 (1975): the prior flat prohibition, overruled by this opinion
• N.Y. State 591 (1988); N.Y. State 567 (1984); N.Y. State 87 (1968): amicable resolution and consideration of the client's ability to pay

See also

• NY State Bar Op. 1118: Disclosing confidences to collect a fee
• NY State Bar Op. 1097: A lawyer working as a debt collector disclosing that status
• NY State Bar Op. 684: Reporting an unpaid client account to a credit bureau

Source

• Landing page: https://nysba.org/opinion-608/