Can a New Jersey lawyer charge interest on a client's overdue legal-fee bill?

Plain-English summary

An attorney asked whether he could advise clients that reasonable interest would accrue on a delinquent account if not paid. The Committee recalled its Opinion 293, which had held that an attorney can accept a note bearing reasonable interest on an overdue account, and may seek the client's agreement to pay interest within legal limits where the fee agreement initially contemplates delayed payment, but that it was improper for an attorney to demand interest on delinquent accounts.

The Committee revised that position. It determined that it is not improper for an attorney to demand interest on a delinquent account, provided the attorney has made it clear at the outset that interest at a lawful rate will be charged if the fee is not paid within 30 days after the client receives a written statement.

The Committee tied the change to the relaxation of restrictions on the commercial side of practice following Bates v. Arizona, which held that lawyer advertising may not be subjected to blanket suppression while remaining subject to restraint where false, deceptive, or misleading. It quoted the Supreme Court's observation that the commercial basis of the lawyer-client relationship is properly disclosed early, citing EC 2-19's advice that a lawyer reach a clear fee agreement with the client as soon as feasible, and noted that New Jersey had since amended DR 2-101 and approved the use of credit cards for legal fees.

Currency note

This opinion was issued in 1980, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and predates the 1984 replacement of the Disciplinary Rules by the RPCs. It modified Opinion 293 and applied the fee principles then governing; in current New Jersey terms those correspond broadly to RPC 1.5. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could a lawyer charge interest on an overdue fee?

A: Yes. The opinion held it is not improper to demand interest on a delinquent account, provided the interest charge was disclosed at the outset and the fee remained unpaid 30 days after a written statement.

Q: What did this change?

A: It modified Opinion 293, which had allowed accepting an interest-bearing note or agreeing to interest in advance but had held it improper to demand interest on delinquent accounts.

Q: What disclosure does the opinion describe?

A: That the attorney make clear at the outset that interest at a lawful rate will be charged if the fee is not paid within 30 days after the client receives a written statement.

Citations and references

Rules of Professional Conduct:

• MR 1.5 / NJ RPC 1.5 (fees)
• DR 2-101 (publicity and advertising) (as amended 1979)
• EC 2-19 (clear fee agreement as soon as feasible) (Code of Professional Responsibility)

Cases:

• Bates v. State Bar of Arizona, 433 U.S. 350 (1977)

Other opinions cited:

• NJ ACPE Opinion 293, 97 N.J.L.J. 929 (1974) (modified)

See also

• NJ ACPE Op. 455: A Bar Foundation Legal-Fee Financing Plan
• NJ ACPE Op. 456: Developer-Set Legal Fees Passed to the Lot Purchaser

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp446-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

105 N.J.L.J. 105, February 7, 1980

OPINION 446

Attorney's Demand for Interest on Delinquent Account

An attorney asks whether he should be permitted to advise his clients that reasonable interest will accrue if a delinquent account is not paid. It was previously held in our Opinion 293, 97 N.J.L.J. 929 (1974), that an attorney can accept a note with reasonable interest on an overdue account; and that when his fee agreement initially contemplates delay in payment, he may seek the agreement of the client to pay interest within legal limits. However, our opinion further held that it is improper for an attorney to demand interest on delinquent accounts. We now determine that it is not improper for an attorney to demand interest on a delinquent account provided the attorney has made it clear at the outset that interest at a lawful rate will be charged if the fee is not paid within 30 days after receipt of a written statement by the client.

An important limitation pertaining to the practice of law was overcome by the Supreme Court of the United States in Bates v. Arizona, 433 U.S. 350 (1977). In that landmark decision, the court held that advertising by attorneys may not be subjected to blanket suppression, and that the advertisement at issue, to wit, "whether lawyers may constitutionally advertise the prices at which certain routine services will be performed" is protected. In so deciding, the Court further said that it did not hold that advertising by attorneys may not be regulated in any way, and cited as a permissible limitation on advertising, that which is false, deceptive, or misleading, which, of course, is subject to restraint. The Court brushed aside the concept that to permit advertising, would bring about an adverse effect on professionalism. It said: But we find the postulated connection between advertising and the erosion of true professionalism to be severely strained. At its core, the argument presumes that attorneys must conceal from themselves and from their clients the real-life fact that lawyers earn their livelihood at the bar. We suspect that few attorneys engage in such self-deception. And rare is the client, moreover, even one of the modest means, who enlists the aid of an attorney with the expectation that his services will be rendered free of charge... In fact, the American Bar Association advises that an attorney should reach "a clear agreement with his client as to the basis of the fee charges to be made," and that this is to be done "(a)s soon as feasible after a lawyer has been employed." Code of Professional Responsibility, EC 2-19 (1976). If the commercial basis of the relationship is to be promptly disclosed on ethical grounds, once the client is in the office, it seems inconsistent to condemn the candid revelation of the same information before he arrives at that office. Id. at 368-369.

Thereafter, our New Jersey Supreme Court amended Disciplinary Rule DR 2-101 entitled "Publicity and Advertising," to bring us into substantial compliance with the Bates case. Approval has also been given for the use of credit cards for the payment of legal fees. See Notice to the Bar in 101 N.J.L.J. 265 (March 23, 1978).