Can a Texas lawyer put a clause in a retainer agreement charging interest on attorney's fees that go unpaid past a set date?

Plain-English summary

The inquiry asked whether a retainer agreement could provide that statements for services and disbursements are payable on receipt and that any balance unpaid after ninety days bears simple interest at ten percent per year. The Committee narrowed the question to whether a lawyer may charge interest at all on an unpaid balance of attorney's fees; it expressly did not decide whether the particular fee or the particular ten percent rate was proper, assuming for the analysis that the fee terms were appropriate and that any interest charged would have to be reasonable and within legal limits.

The Committee concluded that nothing in the Code of Professional Responsibility prohibits charging interest, but stressed that there should be a definite understanding between the lawyer and the client about the fee, citing Archer v. Griffith for the rule that contracts between attorney and client are scrutinized closely, carry a presumption of unfairness, and place the burden of showing fairness and reasonableness on the attorney. The Committee noted that it had earlier recognized, in Opinion 349, that a lawyer may accept a reputable credit card in payment, which indirectly allows interest because the card company charges it, though that interest is not a direct charge by the lawyer.

Building on that reasoning, the Committee approved, 9-0, the charging of reasonable interest where the charge is reasonable and complies with custom and law, and where the original fee is set properly and is reasonable.

Currency note

This opinion was issued in 1984, under the former Texas Code of Professional Responsibility, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. The Disciplinary Rules have since been amended, and Texas never adopted the ABA's Ethics 2000 framework. The closest current provision on fees is Texas Rule 1.04, with the ABA analog Model Rule 1.5. Subsequent rule changes 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 Treat this page as historical context, not current guidance.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 Texas lawyer charge interest on a client's unpaid fee balance?

A: Per the opinion, yes. The Committee concluded that nothing in the Code of Professional Responsibility prohibits the charging of interest and approved reasonable interest where the charge is reasonable and complies with custom and law.

Q: What conditions did the Committee attach to charging interest?

A: The Committee required that the interest charge be reasonable and within legal limits, that it comply with custom and law, and that the original fee be set properly and be reasonable, with a definite understanding between the lawyer and the client about the fee.

Q: Did the opinion decide whether ten percent interest was permissible?

A: No. The Committee expressly declined to consider whether the ten percent rate, or the underlying fee terms, were proper, and assumed for the analysis that any interest would have to be reasonable and within legal limits.

Background and rules framework

The opinion analyzes the question under the former Texas Code of Professional Responsibility's general requirement that a lawyer's fee be reasonable, without citing a Disciplinary Rule by number; it grounds the duty of fairness in fee dealings in Archer v. Griffith. The closest current provision is Texas Rule 1.04, with the ABA analog Model Rule 1.5. The analysis turns on the fee and any interest being reasonable and on a clear understanding with the client.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (reasonableness of fees), as the modern analog; the opinion itself refers to the Code of Professional Responsibility generally without citing a numbered rule

Cases:

• Archer v. Griffith, 390 S.W.2d 735 (Tex. 1964), close scrutiny of attorney-client fee contracts and the presumption of unfairness

Other opinions cited:

• Tex. Comm. on Professional Ethics, Op. 349 (1969): a lawyer may accept a reputable credit card in payment of a fee

See also

• TX Ethics Op. 431: Whether an Attorney May Charge a Non-Refundable Retainer
• TX Ethics Op. 433: Fixed Fee Covering a Fine as a Criminal Contingent Fee
• TX Ethics Op. 449: Acquiring an Interest in Disputed Property as Fee Security

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-409/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_409.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative. The section symbol, which did not render in the source HTML, is restored as the word "Section."

QUESTION PRESENTED

May a retainer agreement contain language concerning the matters that will be considered in arriving at a fee, and specifically the following language: "Statements for services and disbursements may be rendered monthly and are payable upon receipt. Any balance remaining unpaid after ninety days of the date of billing will, at the discretion of this firm, bear simple interest at the rate of ten percent per annum."

DISCUSSION

We do not address here the issue of matters that will be considered and shall be considered by an attorney in setting his fee. These are set forth in other opinions and they are not an issue here. Therefore, for purposes of this opinion it will be assumed that those matters stated in the retainer contract are proper and appropriate. Further, it will not be considered here whether or not ten percent interest is appropriate or proper. Any interest charged would have to be considered reasonable and certainly would have to be within legal limits. Thus, the question here is whether or not an attorney may charge interest on an unpaid balance of attorney's fees.

There is nothing in the code of professional responsibility that prohibits the charging of interest. However, it is clear that there should be a definite understanding between the attorney and the client as to the fee. See, Archer v. Griffith, 390 S.W.2d 735 (Tex. 1964), which states: "[T]he courts, because of the confidential relationship (between the attorney and client), scrutinizes with jealousy all contracts between them for compensation which are made while the relation exists. There is a presumption of unfairness or invalidity attaching to the contract, and the burden of showing its fairness and reasonableness is on the attorney." Id. at 739 (quoting Pomeroy, Equity Jurisprudence Section 960d (5th Ed. 1941).

It has been held that an attorney may accept a reputable credit card in payment of his fee. Certainly most of these companies charge interest and the client would then be paying to the credit card company interest on amounts not promptly paid. Thus, the committee has indirectly held in Opinion 349 (October, 1969) that interest could be charged because it is certainly understood that a credit card company would charge interest. Yet, this is not a direct charge by the attorney and the attorney does not get the benefit of the interest charged. However, the committee now approves the charging of reasonable interest wherein the charge is reasonable and complies with custom and law, and wherein the original fee is set properly and is reasonable. (9-0)

Tex. Comm. On Professional Ethics, Op. 409 (1984)