Ethically You Can Retain a Collection Agency
A new opinion by the New Jersey State Bar's Advisory Committee on Professional Ethics raises a major alarm bell for any lawyer who has trouble collecting money from a current client. The Committee's Opinion 723, issued on March 7, affirmed a position that I have long held, namely that it is ethically permissible to retain a collection agency to secure payment from former clients who have not paid their bills. The caveat the Committee made, namely that only such information as "is reasonably necessary for the agency ... to collect the debt" should be revealed, is simply common sense; confidentiality of files is a fundamental lawyer responsibility.
A Non-paying Client Cannot Be Left High and Dry
The troubling part of the opinion is a flat statement by the Committee: "Lawyers may not initiate collection action against current clients." This flies in the face of everything embodied by "The Business of Law®" and is, I believe, not required by the Rules of Professional Conduct. It is true that lawyers cannot leave a non-paying client high and dry. Rule 1.16 ("Declining or Terminating Representation") allows lawyers to withdraw from a representation if "the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled." An attempt to withdraw without adequate notice, for example right before a trial date, and without careful records of the client's billing and payment performance may bring a state bar disciplinary action.
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