87 N.J.L.J. 113
                                        February 20, 1964

OPINION 17

Collection Agencies

    Inquiry has been made as to whether it is improper for an attorney to be engaged by a commercial collection agency for the purpose of instituting suit against debtors of the customers of such agency.
    This inquiry closely parallels a question posed to the New York County Lawyers Association's Ethics Committee, whose opinion on said inquiry was published in the New Jersey Law Journal of March 7, 1963 (86 N.J.L.J. 136). This Committee approves of and herewith adopts the opinion of that Committee, modified merely to substitute appropriate New Jersey statutory citations in lieu of those of New York contained therein.
    This opinion as modified reads as follows:
     QUESTION:
        It would be appreciated if you would furnish me with your opinion concerning whether an attorney's association with a commercial collection agency constitutes professional and thus ethical practice.

        The principals of the collection agency will not advertise the fact that any particular attorney will represent them but will attempt to solicit business under a business name indicating the nature of the business and will attempt to collect sums due to their clients without legal aid.

        

        1.    May an attorney be so engaged as outlined above?

        2.     Would the arrangement as outlined above be ethical practice if the collection agency were operated by the wife of the attorney?
        3.     Would the arrangement as outlined above be considered ethical practice if the commercial collection agency were operated by the parent of the attorney?

        4.     Would the arrangement as outlined above be permissible if both the attorney's office and the collection agency's office were at the same address?

        5.     Would the arrangement as outlined above be permissible if the attorney's office and the collection agency's office were in different locations?

     ANSWER:

            In our opinion it would be improper for an attorney to be engaged by a commercial collection agency to institute suit against debtors of the customers of the agency. The engagement would necessarily involve the direction of the performance of the attorney's duties by or in the interests of an intermediary. As such it would clearly violate Canon 35 which provides that:

        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 interests of such intermediary. A lawyer's relation to his client should be personal and the responsibility should be direct to the client.

        The contemplated practice as outlined in the question would also violate Canon 27 which declares it improper for an attorney “to procure business by indirection through touters of any kind.

            We express no opinion with respect to the application of [N.J.S. 2A:170-78, 2A:170-83(b), and 2A:-170-84] to the contemplated activities of the collection agency. These sections prohibit activities of collection agencies which amount to the practice of law.

            However, to the extent that these sections may be violated, the attorney, in accepting the engagement as outlined, would be acting in violation of Canon 47, which provides that:

            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.

            The circumstances that the attorney here is closely related to the principals in the collection agency would seem to furnish a further instance of contemplated unprofessional conduct since it might operate to lessen the appearance of independence of the attorney from such principals.

            Our answer, therefore, to each of the five numbered questions is in the negative.

    Accordingly, this Committee is of the opinion that it would be improper for an attorney to be engaged by a commercial collection agency for the purpose of instituting suit against debtors of the customers of such agency.
    Note: As a result of this Committee's conferences with the Chairman of the New Jersey State Bar Association's Section on Commercial Law, the attention of the Bar is directed to:
        Exhibit B, Statement of Principles in Reference to Collection Agencies, issued May 4, 1937 by the American Bar Association's Standing Committee on Unauthorized Practice of the Law and representatives of collection agencies (62 American Bar Association Reports 786 (1937));
and to:
        A.B.A., Committee on Professional Ethics, Opinion 294 (1958).

    Proper ethical principles governing attorney and collection agency relations are set forth in the aforesaid Statement of Principles and Opinion.