VIRGINIA UPL OPINION 203


Collection Agencies Obtaining Assignments of Judgments From Creditors and Proceeding Pro Se to Docket And Collect on the Judgments and Preparing All Necessary Pleadings Without Representation of Counsel

This will respond to several inquiries requesting an Unauthorized Practice of Law Advisory Opinion regarding whether a collection agent or agency or other type of “judgment recovery??? agent or agency, acting pro se, can docket judgments which creditors have assigned to them and proceed, also pro se, to execute and collect on those judgments as the original creditor could do. Three specific situations in this context were presented.

In the first situation, an individual, holding himself out as owner of a judgment recovery service, wrote to the court requesting that the clerk docket several assignments of judgment which he had obtained from judgment creditors. In his correspondence to the court, this individual advised that he had acquired the assignments of judgment by offering the creditor a “small purchase price ($1.00-$5.00) as due consideration plus a percentage of whatever money [he was] ultimately able to collect from the debtor.??? He also included copies of the assignment contracts which he and the creditor had signed. It was this individual’s position that as “owner of the judgment,??? he/his company had “the authority to file the proper forms to seize, garnish and/or lien assets-ultimately recovering funds for the benefit of both parties.???

In the second situation, another individual approached the clerk of court requesting information as to the procedure for docketing assignments of judgment; he did not present the same to the clerk for actual filing. In this instance, the clerk of the court provided the individual with information regarding Unauthorized Practice Rule 3 and statutory provisions addressing practice and procedure for assignment and execution of judgments. The individual responded in writing to the clerk addressing how the Rules and statutes did or did not apply to him. Unlike the first case, the information the individual provided to the clerk suggested that the assignments that he obtained were complete assignments, with the creditors having no further interest in the judgment. Nor did there appear initially that there was there any “contingency??? fee contemplated as in the first scenario wherein the creditor would share in a portion of any recovery. However, in a later written response from this individual, he suggested that this may not be the case, stating “I believe it is within the law for me to compensate an assignor based on a percentage of the recovery as long as I, as the judgment creditor, enforce the judgment myself.???

In the third situation, a collection agent/agency sent correspondence to a creditor and a creditor’s attorney offering the agent/agency’s services to collect outstanding judgments. The agent offered to:

. . . do all investigations, asset searches, filing, garnishment processes, service and liens. All with the ultimate goal of collecting your judgment. Upon successfully [sic] collection your judgment, our company will return a substantial percentage to you. Again, THERE IS NO UP FRONT COST TO YOU. (Emphasis added).

The controlling Unauthorized Practice Rules are UPR 3-103 (C) and (D), Preparation of Documents:

(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.

Also, UPR1-101 (A), Representation Before Tribunals:

(A) A non-lawyer, with or without compensation, shall not represent the interest of another before a tribunal, otherwise than in the presentation of facts, figures, or factual conclusions, as distinguished from legal conclusions.

The Rules also recognize and affirm the right of a non-lawyer to represent himself:

The right of individuals to represent themselves is an inalienable right common to all natural persons. But no one has the right to represent another; it is a privilege to be granted and regulated by law for the protection of the public.

Va. S. Ct. R., Pt. 6, §I. Unauthorized Practice Consideration 1-2 reflects this same principle: “A non-lawyer may represent himself, but not the interest of another, before any tribunal.???

There are also statutory provisions which effect the situation you have presented, in particular, §8.01-452 Entry of assignment of judgment on judgment lien docket:

“Whenever there shall be an assignment of a judgment, there may be a notation of the assignment made upon the judgment docket, where the same is recorded, by the clerk. An assignment, in order to be so noted, must be in writing, showing the date thereof, the name of the assignor and assignee, the amount of the judgment, and when and by what court granted, and either acknowledged as are deeds for recordation in the clerks’ offices of circuit courts in this Commonwealth, or signed by the assignor, attested by two witnesses; or such judgment may be assigned by notation on the margin of the judgment lien docket on the page of the book where same is docketed, by the judgment creditor or his attorney of record, and attested by the clerk. The assignment, after the same is noted upon the judgment docket as is herein provided, shall be filed by the clerk with the other papers in the case in his office. When such assignment is made and noted as herein provided further executions shall be issued in the name of the assignee as the plaintiff in the case.???

Sections 8.01-466 (issuance of fieri facias on judgment for money) and 8.01-511 (institution of garnishment proceedings) both reference an assignee of a creditor as being able to pursue these actions.

On a judgment for money, it shall be the duty of the clerk of the court in which such judgment was rendered, upon request of the judgment creditor, his assignee or his attorney, to issue a writ of fieri facias at the expiration of twenty-one days from the date of the entry of the judgment and place the same in the hands of a proper person to be executed and take his receipts therefore.

Va. Code Ann. § 8.01-466.(Emphasis added.)

“No summons shall be issued pursuant to this section at the suggestion of the judgment creditor or his assignee against the wages of a judgment debtor unless the judgment creditor, his agent or attorney, shall allege in his suggestion that . . . a good faith effort has been made by the judgment creditor, his agent or attorney, to secure the social security number of the judgment debtor.???

Va. Code Ann. § 8.01-511 (Emphasis added).

In Unauthorized Practice of Law Opinions 120, 150, 151 and 194, the Committee addressed the general issues of what services a collection agency can provide to a creditor to assist in collection of a debt or judgment and what actions non-attorneys can take before a court on behalf of another. UPL 120 reviewed the assignment of claims to a collection agency and the agency's engagement of counsel to pursue these claims. In this opinion, the Committee found that it was not unauthorized practice of law for the agency to hire counsel to collect the claim on the agency's behalf, if the creditor had assigned the claim to the agency for a “fixed consideration??? and retained no interest in the claim. On the other hand, if the creditor assigned the claim to the agency on a contingency basis, wherein the creditor would be paid a percentage of any recovery which the agency was able to obtain on the claim, then the Committee found that the agency's engagement of counsel to pursue the claim in the name of the agency was unauthorized practice of law if the agency did not comply with Unauthorized Practice Rule 3.

In UPL opinions 150 and 151, the Committee found that it was unauthorized practice of law for a collection agency or its lay employees to: 1. refer claims to the agency's own counsel without allowing the client to choose his own attorney; 2. collect and disburse monies, including attorneys’ fees, and initiate decisions to continue cases; 3. interfere with the relationship between the attorney and the creditor and act as the only conduit of information between the two; 4. to prepare warrants in debt, either under specific instructions from an attorney selected by the creditor or on their own, using information obtained from the creditor and filled in on pre-printed forms and sent to an attorney for review and filing with the court. In UPL opinion 150, the Committee specifically found that a warrant in debt could be prepared only by the creditor himself, by an attorney licensed to practice law in Virginia or by the licensed attorney's bona fide employee under his direct supervision.

Finally, in UPL Opinion 194 the Committee addressed the authority of a power of attorney to file a Motion for Judgment on behalf of another. The Committee found that the authority granted in a power of attorney does not extend to allowing a non-attorney to prepare, sign, file pleadings and appear in court on behalf of another. A general power of attorney does not confer the legal authority to practice law on behalf of another.

After reviewing the cases presented in the inquiries and applying the authority cited herein to the cases, the Committee opines as follows:

1. In all three cases presented, the Committee finds that actions by the agent/agency to docket and collect on the judgment through available enforcement proceedings, are the unauthorized practice of law. In all cases the original creditor still has an interest in the collection of the judgment since he/she will share in any recovery. The agent/agency is not representing itself alone, but also the interests of the original creditor. Under UPR 3-103(C)and(D), UPR 1-101(A) and the decisions in UPL opinions 120, 150 and 151, such action by the agent/agency is the unauthorized practice of law. The agent/agency is a non-lawyer attempting to prepare, sign and file pleadings and appear before a court on behalf, not only of him/itself, but also on behalf of the original creditor. This is improper. The distinction between assignment of a cause of action and an assignment of a judgment makes no difference. In pursuing a recovery of a judgment, the methods available, i.e., debtors’ interrogatories, garnishments, writ of fieri facias, all require the preparing, filing and signing of pleadings or petitions which constitute the practice of law, and when done on behalf of another, can only be done by a lawyer.

In all three situations, the judgment recovery agency procures what it describes as an assignment from the original creditor for the purpose of filing enforcement actions in the agency’s own name. However, in each situation, the contingent fee relationship remains the same. The collection agency cannot carry on the business of practicing law by the device of taking assignments from judgment creditors and proceeding in its own name. See, e.g., State ex rel. Norvell v. Credit Bureau of Albuquerque, 85 N.M. 521, 529, 514 P.2d 40, 48 (1973) (assignments taken by collection agency were not in truth assignments acquiring title and ownership but rather to facilitate furnishing legal services for consideration); J.H. Marshall & Assoc. v. Burleson, 313 A.2d 587, 596 (1974) (taking of assignment from creditor does not change the basis fact that collection agency is providing legal advice and services to another for profit on a contingent fee basis).

2. With regard to a situation where the collection agent actually has the judgment assigned to him completely, with no further involvement by the creditor, and no sharing of any funds recovered, the Committee finds that actions brought before the court by such an agent to docket and collect on the judgment are not the unauthorized practice of law.

Section 8.01-452 allows for the assignment of a judgment and the docketing of that judgment. The assignment and the docketing, in and of themselves, are not the unauthorized practice of law as the statute itself allows that the judgment creditor can make the assignment and docket such assignment him/herself, with no requirement that an attorney perform this task. As to execution on the judgment, the statute provides that “further executions shall be issued in the name of the assignee as the plaintiff in the case.??? If the assignee has a complete assignment, he/she is now “the??? creditor and can proceed to collect on the judgment in the same manner as the original creditor could proceed, including filing necessary pleadings and appearing before the court pro se. This is supported by the language in the fieri facias and garnishment statutes. There is no unauthorized practice of law because, with a complete assignment, the assignee is not preparing legal documents for, or appearing before a court on behalf of, another; the assignee is performing these tasks for him/herself only. The original creditor no longer has any interest in the judgment, nor is he/she going to share in any recovery which the assignee obtains.

The decisions in UPL opinions 120, 150, 151 and 194 do not dictate a contrary conclusion than that which the Committee has reached herein. These opinions found unauthorized practice of law to exist when a non-attorney or non-legal entity was attempting to assert an action, file legal documents and appear in court on behalf of another. In the case of a collection agent/agency which has a complete assignment of a judgment, it is not proceeding on behalf of anyone; it is proceeding to enforce its own claim to a judgment. As assignee, they have a right to pursue collection as if they were the original creditor, with or without counsel.

This opinion is based only on the facts presented and is subject to review by the Supreme Court of Virginia pursuant to Part Six: Section I: ¶l0(f)(iii) of the Rules of the Virginia Supreme Court.

A Copy,
Teste:

Clerk

 

Updated: Aug 28, 2006