July 31, 2008
Pay You Back With Interest
The District of Columbia Bar's Legal Ethics Committee recently issued an opinion on charging interest on advanced expenses. The committee summarized its conclusion as follows:
A lawyer who uses the firm’s line of credit to advance to a client the costs of the representation will incur interest charges from the bank in doing so. The lawyer may pass these costs along to the client, so long as the client has been fully informed in advance of these charges, the client has agreed to pay them, the costs are reasonable, and the lawyer maintains a separate accounting of the interest charges incurred for that client. Finally, the costs of the line of credit must be directly attributable to the representation of that client; in other words, the lawyer may not pass on to individual clients the costs of maintaining a line of credit used to fund the firm’s general overhead expenses.
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