Sometimes a balance stays open after months of courteous follow-up, and the firm starts asking about a legal fees collection agency. This page sums up what published ethics opinions say, and the steps to take before any referral.
State rules note. This page is general information, not legal advice. Each state has its own rules of professional conduct and ethics opinions, and some are stricter than others. Several opinions cited here are decades old, and rules have been revised since. Check your own state’s current rules and opinions, or ask ethics counsel, before referring any account.
Can a lawyer send a client to collections?
In many states, yes. Most bar ethics opinions that have addressed the question allow lawyers to use a collection agency for unpaid fees, usually on conditions: the fee is reasonable, the firm has tried to resolve the balance first, and the firm shares only what the agency needs. A few jurisdictions have restricted the practice, so check your state’s rules first.
What ethics opinions say about collection agencies
Most published ethics opinions on the question allow collection agencies, with conditions. A 2000 District of Columbia Bar opinion noted that lawyers’ use of collection agencies “has been deemed consistent with ethical requirements in the vast majority of jurisdictions to consider the question.” The same opinion said an outright sale of client receivables to an agency was not permitted under the D.C. rules, because the lawyer would lose control over how the debt is collected (D.C. Bar Opinion 298).
A 1990 New York State Bar Association opinion said a lawyer may use a collection agent only after all other reasonable efforts short of litigation have failed. (NYSBA Opinion 608).
Conditions that come up again and again
Across these opinions, five conditions repeat.
- Try first. Make reasonable, courteous attempts to resolve the balance before any referral.
- Check the fee. The fee should be reasonable and the balance correct. The D.C. opinion cites an Ohio opinion requiring the lawyer to confirm the fee is reasonable before using an agency.
- Share the minimum. Client name, contact details, the amount owed and the fee agreement are usually enough. D.C. Opinion 298 said detailed billing records describing the legal work generally should not go to the agency without client consent.
- Stay responsible. When a lawyer uses nonlawyer services outside the firm, ABA Model Rule 5.3 comment 3 says the lawyer must make reasonable efforts to ensure those services are compatible with the lawyer’s professional obligations (ABA).
- Respect fee arbitration. ABA Model Rule 1.5 comment 9 says a lawyer must comply with a mandatory bar fee dispute procedure, and should conscientiously consider a voluntary one (ABA).
What a collection agency can be told
Tell the agency only what it needs to collect the debt. ABA Model Rule 1.6(b)(5) lets a lawyer reveal information to establish a claim in a controversy with the client, and comment 11 says it lets a lawyer prove the services rendered in an action to collect a fee (ABA). A referral is not a lawsuit, so opinions such as D.C. 298 limit what the agency receives.
Federal debt collection law
An outside agency collecting an individual client’s legal bill is often a “debt collector” under the federal Fair Debt Collection Practices Act. The FDCPA defines a debt collector as anyone who regularly collects debts owed to another, and limits “debt” to obligations of a consumer for personal, family or household purposes (15 U.S.C. § 1692a). A bill owed by a business falls outside that definition. The firm should choose an agency that follows it.
Steps to take before referring an account
Before any referral, the firm should be able to show that it tried to resolve the balance and that the referral follows its own engagement letter.
- Confirm the balance and fee are correct.
- Check that the record shows reminders, calls and a final notice. Our final notice collections letter template covers that last letter.
- Confirm no dispute is open. If one is, see what to do when a client disputes attorney fees.
- Check the engagement letter. The ABA GPSolo article on unpaid fees suggests that a firm planning to use a collection firm name it in the fee agreement, along with the timing (ABA, 2022).
- Weigh the relationship. The same article warns lawyers who refer a client to collections to “prepare yourself for a bar complaint as a response.”
- Check your state’s rules and ethics opinions, or ask ethics counsel.
- Have the billing attorney approve the referral in writing.
- Send the client written notice before the referral.
Template: Notice before referral (send only if approved)
Subject: Your account with [Firm name] Dear [Client name], We wrote to you on [dates] and called on [dates] about your balance of [amount], and we have not been able to resolve it. As described in our engagement agreement dated [date], if the balance is not paid or a payment plan agreed by [date], we plan to refer the account to [agency name] for collection. We would much rather settle this with you directly. You can pay at [payment link], or call [name] at [phone] to set up a plan. If you believe any part of the bill is wrong, tell us by [date] and we will review it before taking any further step. Sincerely, [Attorney name] [Firm name]
Collection agency checklist
If the firm decides to refer, the agency arrangement should meet these points.
- Licensed or registered wherever state law requires it.
- A written agreement to keep client information confidential.
- The firm approves letters and scripts before use.
- The firm can stop collection on any account at any time.
- No sale of the firm’s receivables unless your state clearly allows it.
- Only the minimum client information is shared.
- Fee terms reviewed against your state’s rules.
Alternatives to a collection agency
Referral is one option for an account that stays open. Others include keeping a payment plan going, writing off a small balance, or using a bar fee arbitration program. ARCounsel is not a collection agency. ARCounsel is a done-for-you accounts receivable follow-up service for law firms that connects read-only to QuickBooks Online, LeanLaw and Clio. Its AR specialists handle the courteous follow-up that comes before any referral decision, for about 90 days, in the firm’s name. Accounts still open after that go back to the firm with a full activity log, and referral to a collection agency happens only if the firm chooses.
Frequently asked questions
Is it unethical for a lawyer to use a collection agency?
Not in most jurisdictions that have addressed it, if the firm meets conditions such as trying to resolve the balance first and limiting what it shares. A few jurisdictions have restricted the practice, so check your state’s current rules and ethics opinions.
Can a law firm sell its receivables to a collection agency?
Be cautious. D.C. Bar Opinion 298 said an outright sale was not permitted under the D.C. rules, because the firm would lose control over how the debt is collected. Rules vary by state.
Can sending a client to collections lead to a bar complaint?
It can. The ABA GPSolo article on unpaid fees warns lawyers to expect a bar complaint in response to a collection referral. A reasonable fee and a documented, courteous follow-up record put the firm on firmer ground.
A note on ethics rules. Rules on fee collection vary by state, including when a firm may charge interest on a late bill or refer an account to a collection agency. Check your state’s rules of professional conduct and ethics opinions, or ask your ethics counsel, before setting a collection policy. This article is general information, not legal advice.
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