Ezel / Ethics Opinions / COBAR
COBAR October 5, 2016

Can a Colorado lawyer charge interest or a finance charge on a client's unpaid legal fees, and does the lawyer have to disclose it in advance?

Short answer: The opinion concludes that a lawyer may contract to charge reasonable interest on unpaid fees and expenses, but may not unilaterally impose interest or a finance charge absent a prior agreement with the client specifying that interest will be charged and the applicable rate; the same writing that satisfies the Rule 1.5(b) duty to communicate the basis or rate of the fee suffices, and the interest itself must be reasonable. A lawyer who later sues to collect may still seek statutory interest even without such an agreement.

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This page answers the general question as of 2016. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 2016
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
View original ethics opinion (PDF)

Plain-English summary

Opinion 66 (adopted October 20, 1984; revised October 5, 2016) addresses whether a lawyer may charge interest on unpaid legal fees and, if so, whether the lawyer must specify the intent to charge interest in writing beforehand. The Committee concluded that nothing inherent in the lawyer-client relationship prohibits charging interest: a lawyer whose client carries an unpaid balance may contract to charge interest like any other creditor, though lawyers owe duties to clients that exceed those of ordinary creditors.

The Rules do not address interest directly, but the Committee found guidance in Colo. RPC 1.4 (communication) and 1.5 (fees). It concluded that interest on unpaid fees is technically neither a "fee" (a charge for services) nor an "expense" (a cost incurred by the lawyer), but that the Rules, consistent with the spirit of Rules 1.4 and 1.5, govern the charging of interest. A lawyer who intends to charge interest should enter a prior agreement with the client stating that interest will be charged, the rate, and the period for which it will run. The Rules require no particular form; because Rule 1.5(b) requires the basis or rate of a fee to be communicated in writing, the Committee concluded that the same writing satisfying Rule 1.5(b) also suffices for the interest disclosure, and that the disclosure need not be made at the very outset of the representation but as the facts of the matter dictate. The interest charged, like the fee, must be reasonable under the circumstances (Rule 1.5(a)).

The Committee drew one distinction. A lawyer's submission of a bill is governed by the lawyer-client contract and therefore by the Rules; but a lawyer's pursuit of relief in a lawsuit because the client breached that contract by not paying is governed by other law, including potentially applicable interest statutes. So a lawyer who sues to collect unpaid fees may seek statutory interest even without a fee agreement permitting interest, which the Committee acknowledged can produce the apparently anomalous result that a court allows interest from the date the account was due even though unilaterally charging it would have been improper.

In practice

Under the Colorado rule as addressed in the 2016 revision, the analysis turns on prior agreement and reasonableness. The opinion holds that a lawyer may charge reasonable interest on unpaid fees and expenses only where the client has agreed in advance, with the agreement stating that interest will be charged and the applicable rate; absent such an agreement, the lawyer may not unilaterally impose interest or a finance charge. The opinion treats the writing that satisfies Rule 1.5(b)'s duty to communicate the basis or rate of the fee as sufficient for the interest disclosure, and notes the disclosure need not come at the outset of the representation. It separately recognizes that a lawyer who sues a client to collect may seek statutory interest under other law even without an interest provision in the fee agreement. Because the fee rules may have been amended since 2016, confirm the current text of Rules 1.4 and 1.5 before relying on any specific provision.

Common questions

Q: Can a Colorado lawyer charge interest on a client's overdue bill?

A: Yes, by agreement. The opinion concludes a lawyer may contract to charge reasonable interest on unpaid fees and expenses, treating the lawyer like any creditor owed money, subject to the duties Rules 1.4 and 1.5 impose.

Q: Can the lawyer just add interest to a delinquent account without telling the client first?

A: No. The opinion concludes a lawyer may not unilaterally impose interest or a finance charge on a delinquent account unless there is a prior agreement specifying that interest will be charged and the applicable rate.

Q: Does the interest agreement have to be in a particular form?

A: No special form. The opinion concludes the Rules require no specific form, and that the same writing used to satisfy Rule 1.5(b)'s duty to communicate the basis or rate of the fee also suffices for the interest disclosure, which need not be made at the very start of the representation.

Q: If the lawyer sues to collect, can the lawyer get interest without an agreement?

A: Possibly, under other law. The opinion concludes that a lawyer who initiates a collection lawsuit may seek statutory interest even without a fee agreement permitting interest, because that pursuit is governed by law outside the Rules.

Background and rules framework

The opinion interprets Colo. RPC 1.4 (communication, including Comment [7A] on explaining fees and expenses) and Colo. RPC 1.5 (fees and expenses, including the Rule 1.5(a) reasonableness requirement and the Rule 1.5(b) duty to communicate the basis or rate of the fee in writing when the lawyer has not regularly represented the client). The corresponding Model Rules are 1.4 and 1.5. The Committee noted the Rules do not expressly address interest and reasoned from their spirit, surveying opinions from other jurisdictions.

Citations and references

Rules of Professional Conduct:

  • Colo. RPC 1.4 / Model Rule 1.4 (communication; explanation of fees and expenses)
  • Colo. RPC 1.5(a) / Model Rule 1.5 (fees and interest must be reasonable)
  • Colo. RPC 1.5(b) / Model Rule 1.5 (basis or rate of fee communicated in writing)

Other opinions cited:

  • D.C. Bar Op. 310 (2001): a lawyer may charge interest with the client's advance agreement
  • NYC Bar Formal Op. 2000-2 (2000): charging interest on unpaid legal fees
  • Nebraska Lawyer's Advisory Committee Op. 86-3 (1986): interest on unpaid fees with a written, early agreement

See also

Source

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