Can My Lawyer Charge Me Interest on Case Expenses?

 I was hurt in a car accident. I talked to a lawyer and he sent me a proposed contingency fee agreement.  The agreement says that I have to pay the expenses he incurs in prosecuting my case and that interest accrues on the expense money.  Is that normal?

It is normal for a lawyer handling a contingency fee case to ask the client to re-pay the lawyer for the money spent on case expenses out of any settlement achieved in the case.  It  is not normal, however, for lawyers to charge interest on the expense money they advance for case expenses, although it seems like more and more lawyers are charging interest.    

The lawyers who charge interest may have a contract with a private company that charges them interest, and then they pass the interest that they pay while the case is pending onto you as their client.  The interest rate may be very high – much higher than the “prime rate.”  The lawyer does not profit from this, but simply passes the cost of the interest on to you.  Sometimes there are additional fees associated with this service that are passed on to you.

There is nothing illegal or unethical about this practice.  However, it does increase the cost of legal services and is one factor you should take into account in determining what lawyer to hire for your personal injury or wrongful death case.  If a lawyer wants to charge you interest, make sure you ask what the interest rate is and how it is calculated.  Sometimes the “APR” (annual percentage rate) is much higher than the quoted rate.    

Our firm has never charged a client one penny of interest.   We believe that the contingent fee we charge adequately pays us for our professional service and for advancing case costs on behalf of a client.