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                                         105 N.J.L.J. 105
                                        February 7, 1980


Appointed by the New Jersey Supreme Court


Attorney's Demand for
Interest on Delinquent Account

    An attorney asks whether he should be permitted to advise his clients that reasonable interest will accrue if a delinquent account is not paid.
    It was previously held in our Opinion 293, 97 N.J.L.J. 929 (1974), that an attorney can accept a note with reasonable interest on an overdue account; and that when his fee agreement initially contemplates delay in payment, he may seek the agreement of the client to pay interest within legal limits. However, our opinion further held that X is improper for an attorney to demand interest on delinquent accounts.
    We now determine that it is not improper for an attorney to demand interest on a delinquent account provided the attorney has made it clear at the outset that interest at a lawful rate will be charged if the fee is not paid within 30 days after receipt of a written statement by the client. An important limitation pertaining to the practice of law was overcome by the Supreme Court of the United States in Bates v. Arizona, 433 U.S. 350 (1977). In that landmark decision, the court held that advertising by attorneys may not be subjected to blanket suppression, and that the advertisement at issue, to wit, "whether lawyers may constitutionally advertise the prices at which certain routine services will be performed" is protected. In so deciding, the Court further said that it did not hold that advertising by attorneys may not be regulated in any way, and cited as a permissible limitation on advertising, that which is false, deceptive, or misleading, which, of course, is subject to restraint. The Court brushed aside the concept that to permit advertising, would bring about an adverse effect on professionalism. It said:
        But we find the postulated connection between advertising and the erosion of true professionalism to be severely strained. At its core, the argument presumes that attorneys must conceal from themselves and from their clients the real-life fact that lawyers earn their livelihood at the bar. We suspect that few attorneys engage in such self-deception. And rare is the client, moreover, even one of the modest means, who enlists the aid of an attorney with the expectation that his services will be rendered free of charge... In fact, the American Bar Association advises that an attorney should reach "a clear agreement with his client as to the basis of the fee charges to be made," and that this is to be done "(a)s soon as feasible after a lawyer has been employed.'' Code of Professional Responsibility, EC 2-19 (1976). If the commercial basis of the relationship is to be promptly disclosed on ethical grounds, once the client is in the office, it seems inconsistent to condemn the candid revelation of the same information before he arrives at that office. Id. at 368-369.

    Thereafter, our New Jersey Supreme Court amended Disciplinary Rule DR 2-101 entitled "Publicity and Advertising," to bring us into substantial compliance with the Bates case. Approval has also been given for the use of credit cards for the payment of legal fees. See Notice to the Bar in 101 N.J.L.J. 265 (March 23,1978).

    The Bates case, the amendment of DR 2-101 and the right of lawyers to use credit cards have necessitated a change in the ultimate conclusion set forth in our Opinion 293, where we held that it was improper for an attorney to demand interest on a delinquent account. The previous quotation from the Bates case emphasizes the fact that fee charges should be agreed upon as soon as feasible after a lawyer is employed. Interest should not be charged after the work has been done, unless it was a part of the agreement at the outset. It is not only a question of agreement, but one of fairness and equity.

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