Can I start charging interest on my clients' overdue legal bills even though our fee agreement never mentioned interest?

Plain-English summary

The inquiring attorney proposed to send a memorandum to existing clients who had not paid their legal bills, notifying them that he would charge a stated interest on amounts due if payment was not made within sixty days of the notice. He asked whether he could charge interest on overdue accounts without a prior agreement with the client.

The panel concluded that the Rules do not prohibit it, subject to conditions. The Rules do not expressly address charging interest on unpaid balances, and the overriding obligation is that a lawyer's fee be reasonable under Rule 1.5(a). The panel observed that most ethics committees followed ABA Formal Opinion 338 (1974), permitting interest on delinquent accounts when the client has agreed to it, but that several committees permitted the practice without a prior agreement provided the client is given advance notice and an opportunity to pay the balance without interest. The panel aligned with the latter view, reasoning that such charges are not unreasonable additions to the legal fee but the reasonable consequences of nonpayment.

The panel therefore concluded that the attorney's charging of interest was not prohibited by the Rules, provided he complied with applicable law and, absent a prior agreement by the client to pay interest, the client received advance notice with a reasonable opportunity to pay the balance due without interest.

Currency note

This opinion was issued in February 1998, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.5 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. Subsequent rule amendments or later opinions may have changed the analysis, and this opinion does not resolve the separate question of what state law permits on charging interest. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can a lawyer charge interest on a client's overdue bill without a prior agreement?

A: On these facts, yes. The opinion concluded the Rules do not prohibit it, provided the lawyer complies with applicable law and, absent a prior agreement, gives the client advance notice and a reasonable opportunity to pay the balance without interest.

Q: What ethical rule governs charging interest on fees?

A: The opinion identified Rule 1.5(a)'s reasonableness requirement as the overriding obligation, noting the Rules do not expressly address interest, and concluded that interest for nonpayment is not an unreasonable addition to the fee.

Q: Does the client have to be told first?

A: Yes, when there is no prior agreement. The opinion required advance notice and a reasonable opportunity for the client to pay the balance without interest before interest could be charged.

Background and rules framework

The opinion applied Rhode Island Rule of Professional Conduct 1.5(a) (Model Rule 1.5(a)) as originally adopted, which requires a lawyer's fee to be reasonable. The Rules do not expressly address interest on unpaid balances, so the panel drew on the national body of ethics opinions, contrasting the ABA Formal Opinion 338 (1974) approach (interest permitted where the client agreed) with opinions permitting interest without a prior agreement given advance notice and an opportunity to pay. The panel adopted the latter position, tying it to the reasonableness standard.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / RI RPC 1.5(a) (a lawyer's fee shall be reasonable)

Other opinions cited:

• ABA Formal Op. 338 (1974) (interest on delinquent accounts proper where the client agreed): cited as the majority approach
• Ga. State Bar Disciplinary Bd. Op. 45 (1985) and Mass. Bar Assn. Ethics Comm. Op. 83-1 (1983): cited for permitting interest with notice and no prior agreement
• Calif., Ohio, Philadelphia, and Texas ethics opinions: cited as following ABA Op. 338

See also

• RI EAP Op. 98-14: Splitting a contingent fee with a disbarred referring attorney
• RI EAP Op. 99-01: Abiding by a client's decision not to settle

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2098-06.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Final

                        RHODE ISLAND SUPREME COURT
                          ETHICS ADVISORY PANEL
                           Opinion 98-06 - Request 742
                            Issued February 19, 1998

Facts:

    The inquiring attorney proposes to send a memorandum to existing clients who have not

paid their legal bills, notifying them that the inquiring attorney will charge a stated interest on
amounts due if payments are not made within sixty days of the notice.

Issue Presented:

   The inquiring attorney asks whether he/she may charge interest on overdue accounts

without a prior agreement with the client.

Opinion:

    The Rules of Professional Conduct do not prohibit the inquiring attorney from charging

clients interest on unpaid balances for legal services previously rendered provided that he/she
complies with the applicable laws governing the charging of interest and provided further that in
the absence of a prior agreement, clients receive advance notice with a reasonable opportunity to
pay the balance without interest.

Reasoning:

    The Rules of Professional Conduct do not expressly address the charging of interest on

unpaid balances for legal services. The overriding ethical obligation under the Rules is that a
lawyer's fee shall be reasonable. See Rule 1.5(a). Most ethics committees have followed ABA
Formal Opinion 338 (1974) which provided that charging interest on delinquent accounts is
proper when the client has agreed to pay such interest. See ABA/BNA Lawyers' Manual on
Professional Conduct at 41:602 (1990 Supp.); see also, Calif. State Bar Standing Comm. on
Prof. Responsibility Op. 1980-53 (1980); Ohio State Bar Comm. on Legal Ethics Op. 35 (1981).
Phil. Bar Assoc. Prof. Guidance Comm. Op. 81-77 (1981); Tex. State Bar Prof. Ethics Comm.
Op. 409 (undated). Several ethics committees, however, have found that the practice is proper
without the prior agreement with the client provided that the client is given advance notice and
the opportunity to pay the balance due without interest. See Disciplinary Bd. of Georgia State
Bar Op. 45 (1985); Mass. Bar Assoc. Ethics Comm. Op. 83-1 (1983). This Panel aligns with
those ethics committees that permit attorneys to charge interest on unpaid legal bills in the absence
of a prior agreement with the client. Such charges are not unreasonable additions to the
legal fee, but rather are the reasonable consequences of nonpayment.
Final 98-06
Page 2

    The Panel therefore concludes that the inquiring attorney's charging of interest is not prohibited

by the Rules of Professional Conduct provided that he/she complies with applicable law,
and provided further that in the absence of a prior agreement by the client to pay such interest,
the client receives advance notice with a reasonable opportunity to pay the balance due without
interest.