Rutgers School of Law, OAL case opin008

95 N.J.L.J. 105
February 10, 1972

COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW

Appointed by the New Jersey Supreme Court

OPINION 8

Collection Agencies

(1) Simulation of Process
(2) Communications to Debtors
Implying Attorney's Consideration of Claim
    This opinion concerns the question whether certain practices pursued with some frequency in New Jersey by collection agencies constitute the unlawful practice of law. The operation of a business for the collection of claims without resort to legal proceedings does not constitute the practice of law; Creditors' Service Corp. v. Cummings, 57 R.I. 291, 190 A 2 (1937); Public Service Traffic Bureau v. Haworth Marble Co., 40 Ohio App. 255, 35 Ohio L. Rev. 413, 178 N.E. 703 (1931); and Re Associated Lawyers' Co., 134 App. Div. 350, 119 N.Y.S. 77 (1909); but the right to pursue such business does not insulate from successful challenge certain practices of the agencies which in themselves do constitute the unlawful practice of law. These practices include principally, and this opinion is limited to the consideration of:
    (1)    communications to alleged debtors of customers of the agency which simulate legal process or court order; and

    (2)    communications, usually letters demanding payment of the debt allegedly owed by the addressee to the agency's customers and sent over the signature of an agency employee, which wrongfully imply that the document emanates from or is sent at the direction of an attorney and usually stating that legal consequences will flow from the nonpayment of the debt or from the institution of legal action to collect the debt.

    The courts in New Jersey have the exclusive right to determine whether specific action and conduct constitute the practice of law in this state. State v. Bander, 106 N.J. Super. 196 (1969), rev'd on other grounds, 56 N.J. 196 (1970); New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates, 32 N.J. 430 (1960); and N.J. State Bar Ass'n v. Northern N.J. Mortgage Associates, 22 N.J. 184 (1956).
    The practice of law does not lend itself to an all- encompassing precise definition, Auerbacher v. Wood, 139 N.J. Eq. 599 (Ch. 1947), aff'd, 142 N.J. Eq. 484 (E.& A. 1948); it is "not confined to litigation," New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates, 32 N.J. 430 (1960), and Unger v Landlords' Management Corp., 114 N.J. Eq. 68 (Ch. 1933), but includes diverse activities which require the possession of legal knowledge and skill, Stack v. P.G. Garage, Inc., 7 N.J. 118 (1971).
    The right to engage in such practice is limited to those persons learned in the law who meet the Supreme Court's requirements of prior education and training, character and integrity. Cape May Co. Bar Assn. v. Ludlam, 45 N.J. 121 (1965). Such persons are continuously responsible to the court for the propriety of their conduct and actions. New Jersey Constitution, Art. VII, Sec. II, par. 3; In re Baker, 8 N.J. 321 (1951).
    The privilege of practicing law is limited to persons licensed to do so by the Supreme Court to safeguard the public from the disastrous results that are "bound to flow from the activities of untrained and incompetent individuals" who are not "bound by the high standards of professional conduct and integrity which are imposed on members of the bar by the Canons of Professional Ethics, which are zealously enforced by the courts for the public good," In re Baker, supra, 8 N.J. at 334, and to protect "the unwary and the ignorant from injury at the hands of persons unskilled or unlearned in the law." N.J. State Bar Ass'n v. Northern N.J. Mortgage Associates, supra, 22 N.J. at 195.
    The collection agency practices referred to above are intended to and unquestionably frequently do cause a recipient of a document, such as one of those described, to believe either that some judicial proceeding has been commenced to collect the debt, that he is under some court direction to pay the money demanded by the agency from which the document came, or that there has been an evaluation by an attorney of the claim asserted with a determination by the attorney that proceedings to enforce the collection are warranted. Frequently there is an implication that an attorney is advising the alleged debtor of the consequences of nonpayment of the claim made. In each one of those situations, the intervention of a court or of an attorney is clearly implied.
    The simulation of legal process or court order and its transmittal to an alleged debtor of a collection agency's customer has been frequently judicially determined to constitute the unlawful practice of law. Bump v. Barnett, 235 Iowa 308, 16 N.W. 2d 579 (1944); State ex rel. Freebourn v. Merchants' Credit Service, 104 Mont. 76, 66 P.2d 337 (1937); and State Bar of Oklahoma v. Retail Credit Ass'n., 170 Okla. 246, 37 P.2d 954 (1934).
    The New Jersey Legislature subjects one who unlawfully practices law in New Jersey to a criminal penalty, N.J.S.A. 2A: 170-78, and specifically subjects to such penalty any person who "uses any notice, letter or advertisement in the form or in imitation of a court summons or any other formal court paper," N.J.S.A. 2A:170-87. See State v. Bander, 106 N.J. Super. 196 (1969), rev'd on other grounds, 56 N.J. 196 (1970).
    Threats of legal action by collection agencies constitute the unauthorized practice of law. In re Lyon, 301 Mass. 30, 16 N.E.2d 74 (1938); State ex rel. McKittrick V. C.S. Dudley & Co., 340 Mo. 852, 102 S.W. 2d 895 (1937), cert. denied, 302 U.S. 693, 58 S.Ct. 12, 82 L.Ed. 535 (1937); Berk v. State ex. rel. Thompson, 225 Ala. 324, 142 So. 832 (1932).
    The implied representation that a letter demanding the payment of an alleged indebtedness of a debtor of a collection agency's customer is the act or is sent at the direction of an attorney, who does not sign the letter, constitutes the unlawful practice of law. Bay County Bar Association v. Finance System, 345 Mich. 434, 76 N.W.2d 23 (1956); Bump v. Barnett, supra; and State Bar of Oklahoma v. Retail Credit Ass'n., supra.         When a collection agency resorts to any one of the practices first stated above, it is unlawfully engaging in the practice of law. These practices are particularly offensive because they tend to bring into disrepute the entire administration of justice. They are clearly impermissible.
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