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OBA Ethics Counsel

Ethics Opinion No. 251

Adopted September 14, 1967

INQUIRY

This Committee has been requested to render an opinion as to the propriety of an attorney representing a credit bureau and filing suits on delinquent accounts where the credit bureau, and not the creditor, deals directly with the attorney, the credit bureau asks for suits to be filed by the attorney and advances all costs and where suit is filed, neither the creditor nor the credit bureau pays the attorney, but the attorney is paid out of the recovery, if any, and where the attorney has no direct contact with the creditor.

1. DIVISION OF FEES--Canon 34 provides as follows: "No division of fees for legal services is proper, except with another lawyer, based upon a division of service or responsibility."

2. INTERMEDIARIES--Canon 35 provides in part as follows: "The professional services of a lawyer should not be controlled or exploited by any lay agency, personal or corporate, which intervenes between client and lawyer. A lawyer's responsibilities and qualifications are individual. He should avoid all relations which direct the performance of his duties by or in the interest of such intermediary. A lawyer's relation to his client should be personal, and the responsibility should be direct to the client."

3. AIDING THE UNAUTHORIZED PRACTICE OF LAW--Canon 47 provides as follows: "No lawyer shall permit his professional services, or his name, to be used in aid of, or to make possible, the unauthorized practice of law by any lay agency, personal or corporate."

It must be assumed, for the purposes of this opinion, that inasmuch as the credit bureau involved handles collection of accounts for various retail merchants, that the credit bureau does so on a contingent fee basis. To that extent, the following statement found in Oklahoma Bar Association Ethics Committee Advisory Opinion No. 72, would be controlling:

"Where a collection agency has a claim on a contingent fee, it constitutes unprofessional conduct for a member of the bar to accept employment from the agency to bring a suit on the claim, his fee to be paid by the agency."

It is the opinion of this committee that when a relationship is created between a lawyer, a collection agency and a creditor, that certain minimal conditions must be met as a requisite to complying with Canons 34, 35 and 47 as follows: Pursuant to Canon 34, there must not, under any guise, be any division by the attorney and the lay agency of any of the amount charged to the creditor for legal services performed by the attorney, the agency being permitted to charge separately for whatever non-legal services it has performed. Pursuant to Canon 35, when a claim is forwarded to the attorney by the lay agency, there must, thereafter, exist the direct relationship of attorney and client between the attorney and the creditor and the lay agency must not be permitted to interpose itself as intermediary to control the activities of the attorney. Pursuant to Canon 47, if the employment and compensation are by the agency, in its own behalf, rather than on behalf of the creditors, and the agency is indebted to the attorney for his legal fees, whether or not it receives full reimbursement from the creditor, in that event, it would appear that the attorney's client is, in fact, the agency and not the creditor, and that the attorney would be permitting his professional services to be used in the aid of the unauthorized practice of law by an agency which is employed and compensated by the creditor to furnish legal services, as well as legitimate collection agency services.

It should also be pointed out that if the agency is compensated by the creditor on a fixed basis, either on a percentage of collection arrangement or in another amount agreed upon by the agency and the creditor, regardless of the amount paid by the agency to the attorney for his legal services, it would appear that the attorney is actually an employee of an agency which has contracted with the creditor to supply all services necessary to collect claims, including legal services which would constitute unauthorized practice of law by the agency and a clear violation of Canon 47 by the attorney.