Can My Lawyer Charge Me Interest?

I was hurt in wreck with a truck.   I talked to a lawyer and she sent me a proposed contingency fee agreement.  The agreement says that I have to pay the expenses she 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 doing so.   

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 arrangement, 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 so long as it is adequately disclosed to the client at the time the lawyer is hired.  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 because certain fees are tacked on to each expenditure.  

Therefore, before you agree to hire a lawyer who wants to charge you interest on case expensses, make sure you ask the following:   (a) is a fee imposed for opening my file; (b) is there an origination  fee (in addition to interest) that is imposed on each expense item ; (c) what is the interest rate I will have to pay; and (d) what is the APR; and (e) what is the amount of interest and other fees you (the lawyer) expect that I will have to pay in this case?  Also, ask the lawyer if she will provide you with a monthly statement of the expenses incurred and the interest and other fees that you will be expected to pay.

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    Thus, our clients avoid the extra expense of interest on case expenses.

So, the question you have to ask yourself is this:  why should I pay interest when there are other fully qualified  lawyers who are willing to handle my case without charging me interest?