UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER鈥橲 CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 94-11
1. Can a lawyer ethically use a collection agency to collect past due accounts for legal services rendered?
2. Can a lawyer report past due accounts to a credit bureau?
3. Can a lawyer do credit checks of clients?
Summary:
1. Yes. However, a lawyer should abide by SCACR 407, Paragraph 1.6 (b) (2), so as not to reveal confidential information except that which is necessary.
2. No. A lawyer should not report non-paying clients to credit bureaus: a) it is not necessary for establishing the lawyer's claim for compensation, b) it risks disclosure of confidential information, and c) it smacks of punishment in trying to lower the client's credit rating. 3. Yes. There is no ethical prohibition against a lawyer requesting a credit check of a client provided that his status as a client is not revealed.
Opinion:
Rule 1.6 states that:
(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 paragraph (b).
(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary:
1.{Omitted} 2. To establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client." (Emphasis added).
This is amplified under a portion of the rule's comment "A lawyer entitled to a fee is permitted by paragraph (b) (2) to prove the services rendered in an action to collect it. This aspect of the rule expresses the principle that the beneficiary of a fiduciary relationship may not exploit it to the detriment of the fiduciary. As stated above, 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." The Committee does not detect a distinction between an actual suit and a claim for services given to a collection agency for purposes of collection in the language used in Rule 1.6 (b) (2) above. In either case only such information as may be necessary should be revealed.
For the following reasons, the committee advises against reporting non-paying clients to credit bureaus: a) it is not necessary for establishing the lawyer's claim for compensation, b) it risks disclosure of confidential information, and c) it smacks of punishment in trying to lower the client's credit rating. See ABA/BNA Lawyers Manual on Professional Conduct 41:2009 "Fees".
The Committee has not found a Rule of Professional Conduct prohibiting a lawyer having a credit check made of a client provided that the latter's status as a client is not disclosed in violation of Rule 1.6. The substantive law on this subject should, of course, be observed.