Can a lawyer charge a client interest on litigation costs the lawyer advanced on the client's behalf?

Plain-English summary

A firm handling personal-injury and workers' compensation cases considered borrowing on a line of credit to pay advanced litigation costs and passing each client a pro-rata share of the interest, with disclosure in each retainer agreement. The inquiry asked whether a lawyer may charge a client interest on expenses advanced on the client's behalf.

The opinion concluded that ISBA Opinion No. 87-10 was dispositive: it is professionally proper to charge a client interest on either overdue bills or advanced expenses. It noted that Opinion No. 632 had expressly overruled two earlier opinions (Nos. 380 and 490) that had treated charging such interest as unethical. The opinion concluded that Rule 1.8(d), which permits a lawyer to advance or guarantee litigation expenses where the client remains ultimately liable, the repayment is contingent on the outcome, or the client is indigent, contains no prohibition on charging interest on advanced expenses, and that the lawyer may elect to advance expenses and charge interest where the client remains ultimately liable regardless of outcome.

The opinion concluded, following Opinion No. 87-10, that any interest agreement should be put in writing before any interest accrues, usually when the written fee agreement is executed, and it offered no opinion on whether such an agreement triggers statutory reporting or disclosure requirements such as periodic statements. It concluded that, because Rule 1.5(a) requires a lawyer's fee to be reasonable, the rate or amount of interest charged on advanced expenses, and the costs on which it is charged, should likewise be reasonable.

Currency note

This opinion was issued in 1994, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in January 2010 as generally consistent with the 2010 Rules (referring to Rules 1.5(a) and 1.8(e)), while noting the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer charge interest on costs advanced for the client's case?

A: The opinion concluded it is professionally proper to charge a client interest on advanced expenses, relying on ISBA Opinion No. 87-10.

Q: Does the lawyer have to put the interest arrangement in writing?

A: The opinion concluded the agreement should be in writing before any interest accrues, usually at the time the written fee agreement is executed.

Q: Are there limits on the interest rate?

A: The opinion concluded that, because Rule 1.5(a) requires a reasonable fee, the interest rate and amount, and the costs on which interest is charged, should likewise be reasonable.

Background and rules framework

The opinion interpreted Rule 1.8(d) (a lawyer may advance or guarantee litigation expenses where the client remains ultimately liable, repayment is contingent on the outcome, or the client is indigent) and Rule 1.5(a) (a lawyer's fee must be reasonable) (Model Rules 1.8, 1.5).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.8 (conflicts; advancing litigation expenses) / Illinois Rule 1.8(d)
• Model Rule 1.5 (fees; reasonableness) / Illinois Rule 1.5(a)

Other opinions cited:

• ISBA Opinion No. 87-10: proper to charge interest on overdue bills or advanced expenses
• ISBA Opinion No. 632: overruled the contrary Opinions Nos. 380 and 490

See also

• ISBA Ethics Op. 94-17: Responsibility for Payment of Court Reporter's Fees
• ISBA Ethics Op. 12-20: Contingent Fee for Discovering and Collecting Assets

Source

• Landing page: https://www.isba.org/ethics/opinions/9406