94-11: Client Confidences; Collection Agencies

An attorney must have the prior consent of a client before disclosing client confidences to a credit reporting agency or a collection agency that uses a credit reporting agency. An attorney is responsible for assuring that a collection agency exercises the same ethical integrity that the lawyers must.

An attorney has requested an opinion on whether the attorney may use the services of a credit reporting agency which sells reports on individuals' credit and financial history. The credit reporting agency does no collection work. Each month, the credit reporting agency collects a list of accounts receivable with the names and account standing of individual debtors from the businesses- subscribing to the service. This information is compiled to create a credit report for each debtor. For a fee, businesses may request these credit reports, which delineate the individual's financial obligations and credit history. Information that leads to an unfavorable credit rating can greatly affect an individual's ability to obtain credit, housing and even employment.

1. May a lawyer ethically distribute information about his clients' and former clients' indebtedness to his firm to a credit reporting agency?

2. May a lawyer use a collection agency that encourages payment by reporting delinquent clients to a credit reporting agency?

(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry Out the representation, and except as stated in paragraphs (b), (C), and (d), or E.R. 3.3(a)(2);

(d) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client,

(b) A lawyer shall not use information relating to the representation of the client to the disadvantage of the client unless the client consents after consultation.

(a) violate or attempt to violate the rules of professional conduct, knowingly assist or induce another to do so, or do so through the acts of another;

A. Disclosure of client billing information to a credit reporting agency by a lawyer.

Ethical Rule 1.6 allows disclosures related to representation on two grounds; disclosures impliedly authorized by the client in the furtherance of representation and disclosures that allow the lawyer to retain his legal rights in a dispute with the client. Disclosure of a client's account balance to a credit reporting agency is neither necessary for representation or to preserve or establish the lawyer's claim against his client, and thus is not ethically permissible.

When deciding if a disclosure impliedly is authorized the Committee has differentiated between the use and benefit derived from the disclosure of a client's account balance with the lawyer. In Opinion 89-10, the Ethics Committee found that when a client uses a credit card to pay his lawyer's fees it is not unethical for the lawyer to describe in the bill the general nature of the lawyer's service. Because the Committee found that the amount of the bill was not communicated in confidence and the disclosure was necessary to further representation, i.e. to pay the bill, it was permissible to give this information to the credit card issuer as an impliedly authorized disclosure under Rule 1.6. Moreover, this type of disclosure was for the benefit of the client, i.e., to permit the client to use a credit card to pay for legal fees.

More recently, in Opinion No. 92-4, the Ethics Committee found that a lawyer may not furnish to his own bank, in order to retain a line of credit, a list of accounts receivable that identify the name of the person owing on the account, the account balance, and the age of the account. The Committee reasoned that this information constitutes "information relating to representation," as discussed in Rules 1.6, 1.8 and the Comment to Rule 1.6. These Rules state that the confidentiality rules apply not only to information communicated in confidence but also to information related to the representation. It is unethical to disclose information relating to a representation if the disclosure does not further that representation. Disclosing the information to the lawyer's bank only benefits the lawyer, does not further representation of the client and, thus, is not impliedly authorized.

In deciding whether a disclosure impliedly is authorized one must consider whom the disclosure benefits. Disclosure for the client's benefit, such as the disclosure to the credit card company for the payment of legal fees, is permitted by Rule 1.6 as impliedly authorized in order to carry out the representation. Disclosing a client's account balance to the bank for the lawyer's benefit, however, is not within this exception because it does not serve the needs of the client. By analogy, revealing a client's financial information to a credit reporting agency is not for the benefit of the client but for the lawyer's benefit and, therefore, is not impliedly authorized.

Secondly, reporting a delinquent claim to a credit reporting agency does not meet the exception in subsection (d) of Rule 1.6, which pertains to protecting the lawyer's claim in a dispute with the client. The New Hampshire Bar Association's Ethics Committee found in Opinion 1987-8/8 (1/12/88) (ABA/BNA Lawyer's Manual on Professional Conduct p. 901:5704) that the use of a credit reporting agency is not necessary to establish a lawyer's claim for unpaid fees under Rule 1.6. Because reporting the delinquent account does not further the goal of preserving the lawyer's claim against the client, it is not permitted.

Moreover, reporting or threatening to report a delinquent account to a credit reporting agency is contrary to Rule 1.8, which prohibits disclosures that adversely affect a client's interest. This principle was clarified in our Opinion 93-11 (September 28, 1993), which held that it was unethical for a lawyer to bring a criminal complaint against a client who paid his bill with a check that did not clear. The opinion was based in part on the Comment to ER 1.6 which states in relevant part: "The lawyer must make every effort practicable to avoid unnecessary disclosure of information relating to a representation, to limit disclosure to those having the need to know it, and to obtain protective orders or make other arrangements minimizing the risk of disclosure." Disclosing this information to a credit reporting agency would be a breach of the client's confidences.

B. Use of a collection agency that discloses past due accounts to a credit reporting agency.

The same concerns that govern a lawyer's disclosure of information about a client's bill also apply to collection agencies hired by a lawyer. The use of such agencies is limited by ethical considerations. The New York State Bar Association, in Opinion 608 (5/10/90) (ABA/BNA Lawyer's Manual on Professional Conduct, pp. 901:6108 - 901:6109) determined that a lawyer is legally and ethically responsible for the conduct of the agents of a collection agency and may not "assist or induce" another to act unethically, if a lawyer does turn over delinquent accounts to a collection agency. The lawyer is responsible for assuring that the collection agency exercises the same ethical integrity that the lawyer must. Just as the lawyer ethically cannot turn over information about a client's account to a credit reporting agency, the lawyer also must insure that the collection agency maintains the confidentiality surrounding this information and not turn over the information to a credit reporting agency.

Under Rules 1.6 and 1.8, client confidences may be disclosed only after consultation and consent, thus a lawyer may only give information to a credit reporting agency or engage a collection agency that uses a credit reporting agency when the lawyer has the prior consent of the client.

Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.

[1] Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.