Request By:
Mr. E. A. Lockhart
Office Manager
Financial Recovery Services, Inc.
Room 218 Security Building
West Mt. Vernon Street
Somerset, KY 42501
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Susan N. Mastin, Assistant Attorney General
This is in response to your recent request for an opinion regarding whether or not your collection agency can advance the small claims court costs for filing fees, along with the proper papers, to your clients without violating the law. In your letter you state that, as a collection agency, you have several clients that use the small claims courts to file suits when other avenues of collection are ineffective. You state in your letter that under the contracts you have with your clients, they file the necessary papers in small claims court, but you advance the costs for filing fees to them and also provide them with the proper complaint forms.
KRS 24A.240(3) states:
No person, firm, partnership, association, or corporation engaged, either primarily or secondarily, in the business of lending money at interest, nor any collection agency or collection agent, may bring an action in the division in furtherance of their business.
This law forbids a collection agency from bringing an action in small claims court in furtherance of their business. If a collection agency does no more than provide their client with the proper small claims papers to file and advance the small claims court costs for filing fees, they would not appear to be in direct violation of this law. The small claims action could not be filed in the collection agency's name, because this law would prohibit it. It is also important to note that KRS 24A.240(2) forbids any party from filing an assigned claim in the small claims division.
Furthermore, the collection agency could not make any court appearance for their client, because such an appearance would be engaging in the unauthorized practice of law, as defined by Supreme Court Rule 3.020.
We hope this information is of some value to you.