Ethics Byte

DA’s letters to debt collectors raise ethical questions

By Diane Karpman

Diane KarpmanThe New York Times, "In Prosecutors, Debt Collectors Find a Partner," recently reported on a reprehensible practice. In essence, the District Attorney’s office literally sells their letterhead to debt collectors. Everyone knows that debt collection (which has resulted in numerous federal and state regulations) is highly regulated because of past abuses and outrageous conduct, such as threats of jail.

Shockingly, more than 300 district attorneys’ offices (including some in California) are involved in this practice. Letters with the seal and signature of a local district attorney’s office are being sent to thousands of people who wrote bad checks. This column does not consider the morality of bad checks, or whether they are intentionally or inadvertently executed. It concerns only the ethics of using a public law office to address the issue. We don’t have a debtors’ prison any longer.

The Times article considered a single mother, who was threatened with conviction over a $47.95 check to Wal-Mart. She received an official letter, signed by a district attorney, informing her that unless she paid $280.05, including $180 for a "financial accountability" class, she could be jailed for one year. This official letter appeared (and was intended to appear) to come from the authorities and was sent before she was convicted of any crime and before a prosecutor evaluated whether a crime had, in fact, been committed. In many of these programs, additional classes are sold, and the consumer is again misled into believing that failure to participate could result in jail. Maybe the single mom didn’t have an additional $180.

This unholy and unsupervised partnership between the DAs and collection agencies is profoundly unethical, as is explained by professor Bruce A. Green in his article, "Prosecutor For Sale." Remember, prosecutors have higher ethical duties because they are "ministers of justice." Obviously, their neutrality and impartiality can be questioned when they are financially aligned with debt collectors.

The process lacks supervision, established guidelines mandating documentation, and notice to the author of the check. Prosecutors maintain that by outsourcing these "minor" events, they are free to focus on serious crimes. The problem is that the recipients of the letters alleging criminal conduct don’t realize that it’s highly unlikely that they will be prosecuted.

All lawyers are obligated to exercise the fiduciary duty of independent judgment.  Prosecutors are required to independently evaluate facts to determine if cause for prosecution exists. They cannot just outsource this fundamental obligation to the buyer who offers the greatest remuneration.

"For an attorney to lend his name to a collection agency, without personally authorizing or supervising the procedures and processes which are pursued in his name, is a wilful misrepresentation of his professional status and a grossly improper participation in the unauthorized practice of law for which he is subjected to severe public censure by this Court." (In Re DeVinny (1977) 255 NW 2d 832.)

Recently, 24 stipulated dispositions from the State Bar Court were returned for further consideration by the California Supreme Court. About half involved some type of loan modification. Many of those cases involved allegations of aiding and abetting in the unauthorized practice of law, including sharing fees with non-lawyers.

When a lawyer allows a paralegal, staff person, or debt collector to "hold himself out" as a lawyer by using a lawyer's stationary, that is the unauthorized practice of law (Rule 1‑300). As we all know, lawyers are prohibited from sharing fees with non‑lawyers (Rule 1‑320), because it could impair the lawyer’s exercise of independent judgment.

Finally, Rule 5‑100 prohibits lawyers from threatening criminal, administrative or disciplinary charges. The justification for that rule is that a letter from a lawyer is a big deal, and has implications that are absent in normal letters. This is a well‑established concept. Many ethicists have characterized this process as flat-out abuse of power. As lawyers, we are all prohibited from threatening criminal action, so why are DA’s being compensated for this?

Diane Karpman can be contacted at 310 887-3900 or karpethics@aol.com.