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American Bar Association Issues New Ethics Opinion Regarding Debt Collectors Renting Prosecutor Letterhead


Two years ago, I wrote a blog post about debt collectors using prosecutors' letterhead to collect a debt. This is generally done because the prosecutor takes a cut of any funds recovered. On November 12, the American Bar Association's Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 469: Prosecutors and Debt Collection Companies. The opinion finds that a prosecutor who rents out letterhead to debt collection companies to create letters that appear to come from the prosecutor's office which threaten prosecution, but does not review the case file to determine if a crime has been committed, has violated the model ethical rules as set forth by the ABA.

That last sentence is a mouthful, so let's unpack it.

Here is what is happening. Prosecutors are renting out their letterhead to debt collectors. Those collectors then send letters to consumers. These letters are demand letters, but also cite the criminal law allegedly violated. The most frequent use is for collecting on bad checks, as writing a bad check is illegal in many states. They imply that paying the amount owed will prevent further action from the prosecutor's office. In reality, no attorney at the prosecutor's office has reviewed the file to determine whether action is warranted. In most instances, the prosecutor never sees the file. Ever.

According to the ABA, this conduct violates Rule 84, which prohibits attorneys from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. Clearly, this behavior falls under that description. As the ABA opinion aptly notes, "[these letters] carry with them the implication that the prosecutor...has reviewed the facts and found that a crime has been committed and criminal prosecution is warranted."

The ABA opinion also finds that this conduct violates Model Rule 5.5, which prohibits the unauthorized practice of law. Threatening to initiate a lawsuit is the practice of law as defined under the Model Rule. When prosecutors rent out their letterhead to debt collectors, prosecutors violate Rule 5.5 if an attorney does not reveiw the letter before it goes out to the consumer. This is because the Rule also prohibits aiding and abetting the unauthorized practice of law. Allowing a non-lawyer to use a lawyer's letterhead to threaten a lawsuit does exactly that.

This is good news for consumer defense attorneys whose clients receive these types of letters. Not only does this potentially put the prosecutor on the hook for state law-based unfair business practices claims, but it also seems like a textbook Fair Debt Collection Practices Act violation. Both the debt collector and the prosecutor are using false representations to collect a debt.

Whether the prosecutor is a debt collector under the Act is an interesting question. On one hand, it would seem that the prosecutor's immunity as a prosecutor would provide protection. Also, prosecutors aren't necessarily debt collectors. However, it seems that one could argue that a prosecutor that rents out letterhead in exchange for a cut of any funds collected steps into the shoes of a debt collector. After all, the renting of letterhead for collection purposes has become part of the prosecutor's business model and part of the prosecutor's regular business practice.

It will be interesting to see where these cases end up. Currently, a case is pending in federal court in Washington State against a collector called Bounceback. If you live in Illinois and receive a letter like the one described in this post, please let us know.