Ezel / Ethics Opinions / OSB
OSB August 2005

Can a lawyer charge clients 18 percent annual interest on past-due bills, what rate applies without an interest agreement, and can the lawyer add the interest charge just by noting it on a bill?

Short answer: An 18 percent charge is permissible if the client expressly agrees and the agreement as a whole is not clearly excessive; absent an enforceable agreement the rate is capped at 9 percent under ORS 82.010(1)(a); and a lawyer cannot impose 18 percent by merely stating it on a bill, because a fee-agreement modification favoring the lawyer requires the client's informed, objectively fair consent.

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This page answers the general question as of 2005. Ezel answers yours: whether it's allowed on your facts, under the current Oregon Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2005
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 Not binding precedent.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

A lawyer wants to charge clients 18 percent annual interest on accounts 30 days or more past due. The opinion answers three questions: whether the lawyer may charge that rate if the client expressly agrees in the fee agreement, what rate applies if there is no interest agreement, and whether the lawyer can add the 18 percent charge by stating on a bill that future late payments will bear it.

On the first, the opinion concludes 18 percent is not clearly excessive per se. Oregon RPC 1.5(a) bars an illegal or clearly excessive fee, and Oregon RPC 1.8(i)(2) permits a reasonable contingent fee; the opinion notes (per OSB Op. 2005-54) that the "clearly excessive" and "reasonable" standards are the same. Because Oregon clients may pay for legal services by credit card and many credit cards carry interest of 18 percent or more, the opinion concludes an 18 percent charge is not clearly excessive unless the fee agreement as a whole is clearly excessive or unreasonable.

On the second, the opinion concludes that if no enforceable agreement on a higher rate is reached, the lawyer is limited to 9 percent under ORS 82.010(1)(a). On the third, the opinion concludes a mere statement on a bill does not work: a fee-agreement modification in the lawyer's favor requires the client's consent based on an explanation of the reason for the change and its effect, and the modification must be objectively fair. Adding a line to a bill does not meet that standard, so it cannot justify charging 18 percent instead of 9 percent, even if such a notation might modify a contract not involving a lawyer.

In practice

The opinion holds that, under the Oregon rules as they stood at the time of the opinion, an agreed 18 percent interest charge is permissible within a fee agreement that is not clearly excessive, the statutory 9 percent rate governs absent an enforceable agreement, and a unilateral bill notation is not a valid modification. The analysis turns on whether the overall agreement is clearly excessive under RPC 1.5(a) and on whether a purported modification rests on the client's informed, objectively fair consent. Verify the current text of Oregon RPC 1.5 and ORS 82.010(1)(a) before relying on any specific point.

Common questions

Q: Can I charge my clients 18 percent interest on overdue bills?

A: Yes, if the client expressly agrees and the fee agreement as a whole is not clearly excessive. The opinion concludes 18 percent is not clearly excessive per se because it is within the range of common credit-transaction rates.

Q: What rate can I charge if my fee agreement is silent on interest?

A: 9 percent. The opinion concludes that without an enforceable agreement on a higher rate, the lawyer is limited to the statutory 9 percent rate under ORS 82.010(1)(a).

Q: Can I just add an interest charge by putting a note on the monthly bill?

A: No. The opinion concludes a modification favoring the lawyer requires the client's consent based on an explanation of the change and must be objectively fair; a bill notation does not meet that standard.

Background and rules framework

The opinion interprets Oregon RPC 1.5(a) (illegal or clearly excessive fees), corresponding to Model Rule 1.5, and Oregon RPC 1.8(i)(2) (reasonable contingent fees), corresponding to Model Rule 1.8, against the statutory interest rate in ORS 82.010(1)(a) and the contingent-fee limits in ORS 20.340.

Citations and references

Rules of Professional Conduct:

  • Oregon RPC 1.5(a) / Model Rule 1.5 (illegal or clearly excessive fees)
  • Oregon RPC 1.8(i)(2) / Model Rule 1.8 (reasonable contingent fees)

Statutes:

  • ORS 82.010(1)(a) (statutory 9 percent interest rate)
  • ORS 20.340 (limits on personal-injury and wrongful-death contingent fees)

Cases:

  • In re Schroeder, 15 DB Rptr 212 (2001)
  • In re Yacob, 318 Or 10, 860 P2d 811 (1993)
  • In re Skinner, 14 DB Rptr 38 (2000)
  • United Farm Agency v. McFarland, 243 Or 124, 411 P2d 1017 (1966)
  • Sabin v. Terrall, 186 Or 238, 206 P2d 100 (1949)

Other opinions cited:

  • OSB Formal Ethics Op. No. 2005-54 ("clearly excessive" and "reasonable" fee standards are the same)
  • OSB Formal Ethics Op. No. 2005-172 (paying legal fees by credit card)
  • OSB Formal Ethics Op. No. 2005-69 (charging no more than the agreed fee)

See also

Source

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