Ezel / Ethics Opinions / WISBAR
WISBAR 1990

Can a lawyer charge interest, such as 1% per month, on a client's overdue fee and cost balances?

Short answer: The opinion (revised April 17, 2020) concludes that a lawyer may charge interest on delinquent fee and cost balances if the interest is reasonable under SCR 20:1.5(a) and the client was given advance notice of the policy, usually in the engagement agreement. The committee views a rate of 1 percent per month as not outside the realm of reasonable, and notes that SCR 20:1.5(b) requires communicating the basis or rate of fees, including any interest charges, in writing.

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This page answers the general question as of 1990. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 1990
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 Not binding precedent.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.
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Plain-English summary

Opinion E-90-4 asks whether a lawyer or law firm may include in its fee agreements or engagement letters a clause providing that invoices are due within 30 days and that failure to pay within that time results in an interest charge of 1 percent per month on the unpaid balance. The committee concludes that it is permissible to charge interest on delinquent fee and cost balances, provided the interest charged is reasonable and the client has been given advance notice of the lawyer's policy regarding interest on delinquent balances, usually in the engagement agreement.

On reasonableness, the committee applies SCR 20:1.5(a), which requires that a lawyer's fees be reasonable. It observes that the listed reasonableness factors are not easily applied to interest charges, but that the total fees and costs must be reasonable, which makes a precise numerical range hard to set. The committee notes that the proposed 1 percent per month rate comports with the amount charged on delinquent taxes and is, in its view, not outside the realm of reasonable rates; it takes no position on whether higher rates would be reasonable. On disclosure, the committee applies SCR 20:1.5(b), which requires communicating the basis or rate of the fees and expenses in writing before or within a reasonable time of commencing the representation. It reads that to include any interest charges on delinquent balances, and concludes that the proposed clause meets both SCR 20:1.5(a) and (b). A footnote points to Ziolkowski v. Great Lakes Dart Manufacturing, where a Wisconsin court held a lawyer could not collect interest on unpaid balances without a clause permitting it in the engagement agreement.

Currency note

This opinion carries an original 1990 number but was revised April 17, 2020, and as revised it interprets the current SCR 20:1.5(a) and (b). Treat the analysis as keyed to the rules in effect at the 2020 revision, and verify the current Rule before relying on any specific requirement.

In practice

Under the rule as applied in this revised opinion, conduct that matches its fact pattern is permitted: a lawyer may charge interest on a client's delinquent fee and cost balances if the rate is reasonable (the committee treats 1 percent per month as within the reasonable range) and the lawyer has given the client advance notice of the interest policy, communicated in writing under SCR 20:1.5(b). The committee notes, by reference to Ziolkowski, that a lawyer who did not include an interest clause in the engagement agreement may be unable to collect the interest.

Common questions

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

A: Yes, if it is reasonable and disclosed. The committee concludes a lawyer may charge interest on delinquent fee and cost balances provided the interest is reasonable under SCR 20:1.5(a) and the client received advance notice of the policy.

Q: Is 1 percent per month an acceptable rate?

A: The committee views it as not outside the realm of reasonable, noting it comports with the rate charged on delinquent taxes. The committee takes no position on whether higher rates would be reasonable.

Q: Does the interest policy have to be in writing?

A: It must be communicated. The committee concludes that SCR 20:1.5(b) requires communicating the basis or rate of fees, including any interest charges, in writing before or within a reasonable time of starting the representation, and notes most lawyers find the engagement agreement convenient for this.

Background and rules framework

The opinion interprets SCR 20:1.5 / Model Rule 1.5 (fees), applying subsection (a) on the reasonableness of fees and subsection (b) on communicating the basis or rate of fees and expenses, to a fee-agreement clause imposing interest on delinquent balances.

Citations and references

Rules of Professional Conduct:

  • Wis. SCR 20:1.5 / Model Rule 1.5 (fees; reasonableness and communication)

Statutes:

  • Wis. Stat. 71.82(1) (interest on delinquent taxes)

Cases:

  • Ziolkowski v. Great Lakes Dart Manufacturing, Inc., 2011 WI App 11, 794 N.W.2d 253, no interest collectible absent a clause in the engagement agreement

Other opinions cited:

  • Arizona Ethics Op. 2000-07; Connecticut Informal Op. 99-26; Michigan Informal Op. RI-40; Montana Op. 24; New York City Op. 82-6; Virginia Op. 1247; New York State Op. 1181 (2020)

See also

Source

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