ABA Standing Committee on Ethics and Professional Responsibility, Formal Opinion 469 (November 12, 2014)

Brief Summary:

The American Bar Association (ABA) has concluded that a prosecutor who allows a debt collection company to use the prosecutor's letterhead to demand payment from borrowers violates Model Rules 8.4(c) and 5.5(a) if the prosecutor has not reviewed the underlying facts or the contents of the letter. The opinion suggests that the same conclusion would also apply to lawyers other than prosecutors.

Complete Summary:

The ABA Standing Committee on Ethics and Professional Responsibility addressed the ethical issues that arise when a debt collection company contracts with a local prosecutor's office to use the prosecutor's letterhead in debt collection efforts. The committee concluded that prosecutors who participate in such a system violate Model Rules 8.4(c) (dishonesty, fraud, deceit or misrepresentation) and 5.5(a) (unauthorized practice of law).

Such participation violates Rule 8.4(c), according to the committee, because the use of such letterhead deceives the debtor into believing that the lawyer has evaluated the creditor's claim and is poised to institute proceedings to collect the alleged debt. The committee opined that letters on prosecutor letterhead are especially deceptive because they deploy the apparent authority of the criminal justice system to intimidate the recipient.

The committee also concluded that this practice would violate Rule 5.5(a) because the prosecutor would be assisting a nonlawyer (the debt collector) in the practice of law. The committee opined that although a nonlawyer may negotiate, adjust and settle a debt, a nonlawyer cannot give legal advice, institute litigation or threaten to sue on behalf of another. As with Rule 8.4(c), the committee suggested that the lack of oversight and review of the letters by the prosecutor was the key factor underlying the Rule 5.5(a) violation.

Significance of Opinion:

Although this opinion is based on relatively extreme facts (i.e., a prosecutor allowing a third party to send demand letters on his/her letterhead without reviewing or being involved in the underlying matter), it may serve to constrain all lawyers who participate in the debt collection industry. For example, even when lawyers are more directly involved in collection efforts, this opinion raises the question of how much lawyer involvement is necessary before law firm letterhead can be used and whether disclaimers might be effectively used to avoid these ethical issues.

This opinion follows on the heels of the decision in Bock v. Pressler & Pressler, 2014 WL 2937929 (D.N.J. 2014), where the court held that filing a debt collection complaint without meaningful review by an attorney amounts to false and misleading conduct under the Fair Debt Collection Practices Act (FDCPA). The Bock court held that a four-second review of the complaint in that case did not amount to meaningful review by an attorney.

Together, these and other authorities appear to be trending in a direction of increased scrutiny regarding the level of attorney involvement not just under the FDCPA, but under attorney ethical obligations as well. Consumer debt collection attorneys should be carefully reviewing their systems to conform to the standards articulated here and in Bock. Meaningful attorney involvement is a concept that extends beyond the FDCPA and should be considered as part of any consumer finance practice.