Unauthorized Practice Rule 3 - Collection Agencies
UPR 3-101. Attorney Client Relationship.
- (A)An agency shall not disrupt the relationship of confidence and trust which must exist between a lawyer and his client.
- (B)An agency shall not prevent a lawyer from exercising independent professional judgment on behalf of his client by attempting to fix the lawyer's compensation, or sharing in a percentage of his compensation, or prescribing the terms of his employment, or attempting in any way to control or direct his actions.
- (C)An agency shall not place itself between the lawyer and the creditor in an attempt to act as the only conduit of information between the two, since this would prevent the establishment of the fundamental relationship of trust and direct personal responsibility which ought to exist between a lawyer and his client.
UPR 3-102. Referral and Control of Claims.
- (A) An agency may refer claims to a lawyer on behalf of the creditor subject to the following:
- (1) The creditor shall first have the opportunity to select a lawyer of his own choosing.
- (2) If the creditor does not so select a lawyer, the agency shall submit a list of lawyers from which the creditor may make his selection, which list may include the customary fee of each attorney. The creditor may subsequently authorize the agency to refer his account to the lawyer so selected by the creditor.
- (3) The lawyer shall be free at all times to communicate directly with the creditor; and, upon receipt of the initial referral, as well as upon receipt of any subsequent referral unacceptable to the lawyer on the basis of the prior fee arrangement, the lawyer shall communicate with the creditor for the purpose of establishing the fee arrangement, in which arrangement the agency shall not participate.
- (4) The agency may thereafter, if authorized by the creditor, continue correspondence of a routine nature with the lawyer on behalf of the creditor.
- (B) An agency shall not exercise or attempt to exercise any control or imply that it has any right to control the actions of the lawyer in the handling of the creditor's claim. All decisions are to be those of the lawyer acting on behalf of his client, the creditor.
UPR 3-103. Preparation of Documents.
- (A)An agency may prepare statements of accounts and affidavits of facts relating to accounts and may file the same with personal representatives and trustees in bankruptcy.
- (B)An agency shall not prepare a proof of claim or file such a claim as agent for the creditor with the bankruptcy court except to the extent it is permitted to do so by the Bankruptcy Rules.
- (C)An agency shall not prepare for others any document which requires legal training or the application of legal principles to factual situations except as authorized under these Rules.
- (D)An agency shall not use any letters or forms which threaten the institution of legal proceedings or simulate judicial process or notice of judicial process.
Unauthorized Practice Considerations.
UPC 3-1. A collection agency (herein referred to as "an agency") is a business involved in the collection of past-due accounts for its customer (herein referred to as "the creditor"). The efforts of an agency to collect such a claim through correspondence or personal contacts, or both, are not the unauthorized practice of law. It is, however, improper for an agency to refer an account to a lawyer in a manner which disrupts the fundamental lawyer client relationship.
UPC 3-2. It is critical to the lawyer-client relationship that the lawyer remain in a position that will enable him to exercise independent judgment on behalf of his client, the creditor. A lawyer should not accept a claim from an agency under circumstances or pursuant to an arrangement that would render his judgment susceptible to control by the agency.
UPC 3-3. A referral by an agency which permits the agency to fix the lawyer's compensation, or share in a percentage of his compensation, or prescribe the terms of his employment, or control and direct his actions, is improper. The lawyer, while handling such a claim, would not be governed by his independent judgment of what would best benefit his client, the creditor, but would be influenced, if not controlled, by the provisions of the agreement by which the referral was made. Since an agency itself cannot directly provide the creditor with legal advice, it cannot be permitted to provide such advice indirectly by influencing the actions of the lawyer.
UPC 3-4. With regard to referrals by an agency to a lawyer, any arrangement or understanding requiring that communications between the lawyer and the creditor be handled only through the agency is improper. Such an arrangement could disrupt the relationship of trust and direct personal responsibility which ought to exist between a lawyer and his client. With direct communications, the lawyer can better perceive and analyze the individual needs of his client, and the creditor's direct contact with his lawyer lessens the possibility of misunderstanding and affords him the opportunity to determine for himself the quality of service that he is receiving. Furthermore, if the agency is the sole conduit of information, the lawyer is unable to preserve the confidences and secrets of his client. There can be no effective representation of a client if the client is reluctant to provide his lawyer with a complete and accurate statement of the facts because of his concern that this information might be divulged to some third party without his permission. It is the responsibility of both the lawyer and the agency to abide by these considerations and to avoid arrangements contrary thereto.
UPC 3-5. The decision to bring suit on a claim involves the application of legal principles to a factual situation. An agency threatening the institution of legal proceedings is engaged in the unauthorized practice of law, but the mere statement that the claim is being or will be referred to a lawyer, without more, is not deemed to be threatening the institution of legal proceedings as long as the lawyer remains free to exercise his independent professional judgment on behalf of the creditor. Likewise, the use by an agency of letters or forms that simulate or are intended to simulate judicial process or notice of judicial process is improper.
UPC 3-6. Statements of account and affidavits of facts relating to accounts and other matters are not legal instruments, and the preparation of the same by an agency is not the unauthorized practice of law. Such preparation does not require legal training or the application of legal principles; nor is the mere filing of such accounts or affidavits with personal representatives, trustees in bankruptcy and the like representing the interest of another before a tribunal.
UPC 3-7. A non-lawyer may properly act as a trustee in bankruptcy but may not prepare pleadings in the bankruptcy court except as authorized by the Bankruptcy Rules.
Updated: April 20, 2010