Can a lawyer charge interest on a client's overdue bill, or accept a credit card that charges the client interest?

Plain-English summary

A lawyer asked whether he could participate in a credit-card plan that charges interest on delinquent accounts, or himself charge interest on overdue fees. The committee began from recent opinions approving credit cards for legal fees subject to safeguards (N.Y. State 362 (1974); ABA 338 (1974)). N.Y. State 362 had not reached the interest question, but ABA 338 had, stating that charging interest is a necessary corollary to credit-card use and that a lawyer may charge interest provided the client is advised the lawyer intends to and agrees to pay interest on accounts delinquent beyond a stated period.

The committee held that imposing interest charges does not per se violate the Code, but set minimum conditions. For credit cards, the client must be told, before executing any credit arrangement, the rate of interest and after what period it will be charged if the account remains unpaid. For a lawyer charging interest directly, the lawyer must advise the client, before performing services, that interest will be charged on accounts delinquent beyond a stated period, and the period, rate, and overall fee must all be reasonable and the client must consent (EC 2-16, 2-17, 2-19, 2-23; DR 2-106).

To the extent they were inconsistent with this opinion, the committee overruled N.Y. State 87 (1968) and N.Y. State 193 (1971) in part. It left intact prior guidance that attorneys should avoid practices of undue commercial emphasis, such as regularly offering discounts on bills paid within a stipulated period (N.Y. State 253 (1972); ABA 151 (1936)). It also observed that in the extreme case where a lawyer may sue a client to obtain a fee under EC 2-23, interest may be charged as allowed by law.

Currency note

This opinion was issued in 1975, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009; fee questions are now governed by Rule 1.5. 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

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

A: Under this opinion, yes, if the client is advised before services begin that interest will accrue on accounts delinquent beyond a stated period, the period and rate are reasonable, the fee is not excessive, and the client consents.

Q: Does taking a credit card that charges the client interest violate the Code?

A: Per the opinion, not per se. The committee allowed credit-card plans that assess interest, provided the client is told the rate and timing before any credit arrangement is executed.

Q: Did this opinion change any earlier guidance?

A: Yes. It overruled N.Y. State 87 (1968) and N.Y. State 193 (1971) to the extent they were inconsistent, while leaving in place the caution against undue commercial emphasis such as routine prompt-payment discounts.

Background and rules framework

The opinion applied EC 2-16, 2-17, 2-19, and 2-23 and DR 2-106 of the then-current New York Code, which addressed reasonable fees and the avoidance of overreaching in fee dealings. The subject is now governed by Rule 1.5 (fees) in the Rules of Professional Conduct. The committee tied its conditions to ABA 338 (1974), which had reached the same conclusion on charging interest.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees)
• NY EC 2-16, EC 2-17, EC 2-19, EC 2-23; DR 2-106

Other opinions cited:

• ABA 338 (1974): a lawyer may charge interest on delinquent accounts with client agreement
• N.Y. State 362 (1974): use of credit cards for legal fees, subject to safeguards
• N.Y. State 87 (1968); N.Y. State 193 (1971): overruled in part by this opinion
• N.Y. State 253 (1972); ABA 151 (1936): caution against undue commercial emphasis

See also

• NY State Bar Op. 400: Using a collection agency for unpaid fees
• NY State Bar Op. 414: Advance division of fees between lawyers

Source

• Landing page: https://nysba.org/opinion-399/