A lawyer may charge his client interest on bills for legal services and disbursements which have remained unpaid for more than a stated period of time, if the client so agrees in advance. [Editor's note: See MBA Opinion 83-1
, which supercedes Opinion 75-5
"to the extent that it is inconsistent ... ."] MBA Opinion No. 74-1
, relating to a lawyer's use of credit card arrangements, is affirmed without modification: a lawyer should not display a credit card sign or insignia in his offices. [Editor's note: But see MBA Opinion 77-15
, which reconsidered Opinion 74-1
in light of more recent cases construing the First Amendment as applied to professional advertising: "We now hold that the truthful use of credit card signs or insignia in the office of a lawyer is proper."]
Facts: In light of Formal Opinion No. 338 of the ABA Standing Committee on Ethics and Professional Responsibility, published on November 16, 1974, we are asked two questions: (1) whether it is permissible for a small insignia to be tactfully displayed in a lawyer's office to indicate his participation in a credit card arrangement; and (2) whether it is permissible for a lawyer to charge interest on delinquent accounts, provided a client is advised that the lawyer intends to charge interest and the client agrees to pay interest on a balance that is delinquent after a stated period of time.
Discussion: In our Opinion No. 74-1 we indicated our view that it is proper for a lawyer to participate in a credit card arrangement with a bank, under which his clients pay for legal services and disbursements by charging them with a credit card, subject to certain conditions as set forth in that opinion.
Subsequently, the ABA Standing Committee on Ethics and Professional Responsibility published its Formal Opinion No. 338 which deals with the same subject matter and generally is consistent with our Opinion No. 74-1.
The ABA opinion states that an acceptable credit card plan should include a provision that:
No promotional materials of any kind will be supplied by the credit card company to a participating attorney except possibly small insignia to be tactfully displayed in the attorney's office indicating his participation in the use of the credit card ... .
We are uncertain what the ABA committee had in mind when it used the words "except possibly" in the paragraph quoted above; perhaps the members of the committee were unable to reach agreement on the matter of displaying insignia.
In our Opinion No. 74-1 we said that "We believe it would be unprofessional for a lawyer to publicize the fact that he accepts credit card arrangements for his services, even by displaying a small credit card sign or insignia in his offices." With all due respect to the ABA committee, we adhere to that view.
The ABA opinion also stated the following:
It is also the committee's opinion that a lawyer can charge his client interest providing the client is advised that the lawyer intends to charge interest and agrees to the payment of interest on accounts that are delinquent for more than a stated period of time.
We agree that a lawyer should be permitted to charge interest on delinquent accounts if the client so agrees. As we pointed out in our Opinion No. 74-1, "We are aware from experience that often the lawyer is given the minimum priority in allocation of payments to creditors; yet there is no logical reason why he should be treated less favorably than the doctor, the dentist, or even the department store."
If a lawyer is permitted to charge interest on delinquent accounts, he may to some extent minimize the risk of being placed at the bottom of the list of the client's creditors, below those who regularly charge interest on unpaid balances owed.
However, to preserve a proper relationship of trust and confidence between lawyer and client, we think that the client should not be charged interest on an unpaid bill for legal services or disbursements unless the client agrees to such an arrangement before the services are rendered or the disbursements are incurred. The client should be informed of the precise terms of the proposed arrangement in advance.
In this connection, we invite the attention of the bar to the fact that a lawyer who proposes to charge interest on unpaid legal bills may be required to comply with the provisions of various state and federal statutes which relate to credit transactions.
Permission to publish granted by the Board of Delegates, 1975. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.