State Bar of Arizona Ethics Opinions
Absent a written fee agreement or the client's consent after notice, interest may not be charged on delinquent invoices.
The inquiring law firm contemplates charging interest on invoiced accounts unpaid for 30 days or more upon notice to the client where there is no written fee agreement.
Where no written fee agreement exists between the actorney and client, may the attorney charge interest on the past due balance on invoiced accounts unpaid for 30 days or more upon notice to the client?
ETHICAL RULE INVOLVED
ER 1.5. Fees.
The Rules are silent on this issue. However, ER 1.5(b) encourages attorneys to reduce all fee agreements to writing.
"ER 1.5(b). When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation."
This committee has previously addressed this issue in May, 1981. Our Opinion No. 81-14 permits an attorney to charge interest on a client's delinquent account ". . . provided the charge is made with the client's agreement."
The committee is mindful of ARS § 44-1201(A) which allows a creditor, in the absence of a written agreement providing for interest, to charge interest at the rate of 10% per annum.
"ARS § 44-1201(Al. Interest on any loan, indebtedness, judgment or other obligation shall be at the rate of 10 per cent per annum, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to."
Nevertheless, the committee interprets ER 1.5(b ) to require communication of the "rate of the fee" either before the representation begins or within a reasonable time thereafter. In the situation presented by the inquiring firm, the representation has proceeded for at least 30 days and more than likely for a substantially longer period of time.
While the committee is prevented from answering questions of law pursuant to paragraph 6(a) of our Statement of Jurisdictional Policies, we are of the opinion that the client must receive notice that interest is to be charged, consent in writing thereto, or be afforded the opportunity of bringing the account current, before the interest begins to accrue.
The committee also wishes to encourage the bar to use written fee agreements in all matters. Written fee agreements foster the attorney/client relationship, increase the efficiency of practice, and help minimize fee disputes.
The committee answers the inquiring law firm's question in the negative. Absent a written fee agreement or the client's consent after notice with opportunity to bring the account current, interest may not be charged on delinquent invoices. The committee declines to issue an opinion on whether ARS § 44-1201(a) permits a law firm to charge interest without client consent in the absence of a written agreement as being a question of law.
Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.
© State Bar of Arizona 1986