I was hurt in a boating 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 an attorney handling a contingency fee case to ask the client to re-pay the attorney for the money spent on case expenses out of any settlement achieved in the case. It is not normal, however, for an attorney to charge interest on the expense money they advance for case expenses, although it seems like more and more attorneys are doing it.
The lawyers who charge interest may have a contract with a private company that charges them interest on case expenses, and then the attorney passes the interest that he or she pays 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 practice, 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. Also, make sure you ask it there are any other charges associated, such as "file opening charges" and "discounted case payments."
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.