Should a law firm pay interest on monies held in their Client account?

goldfish33

Hi all, I have a question on whether a law firm should pay interest on funds held in their general client account? The Solicitor told me that they don't make any interest on their client account therefore there is no interest to pay me for the funds they are holding. I have never questioned his position on this, however, the other day I came across the following:

- Rule 7.1 of the SRA Accounts Rules requires firms to pay their clients a 'fair' sum of any interest earned on client money.
- The Firm’s Liability: If the firm’s pooled client bank account yields little to no interest, the firm is still obligated to calculate and pay a "fair" amount of interest based on what the client would have earned had their funds been placed in a designated instant-access deposit account.

We are talking about a large amount of money that has been held in the firm's client account for over 4 years (pending resolution of a dispute) Therefore, if a fair amount of interest should be paid, it would be a significant amount.

I checked the paperwork I have with the law firm and in their terms of business it says they pay interest on funds held by their firm.

Based on what I’ve found, I believe this warrants a letter to the solicitor to look into this further. If anyone is knowledgeable in this area or would like to comment, I'd really appreciate this. Thank you.

Section62

https://forums.moneysavingexpert.com/discussion/6670345/should-a-law-firm-pay-interest-on-monies-held-in-their-client-account

Have a read of this thread -

https://forums.moneysavingexpert.com/discussion/6523422/solicitor-held-my-money-for-20-years-should-i-get-interest-on-top-of-the-capital-amount/p1

If the terms of business say they pay interest on funds held by their firm then what did the solicitor say when you pointed this out?

MattMattMattUK

Most solicitors general client accounts are non interest paying accounts specifically to remove any issues around this.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82016601#Comment_82016601

The OP quoted this:

Rule 7.1 of the SRA Accounts Rules requires firms to pay their clients a 'fair' sum of any interest earned on client money.
- The Firm’s Liability: If the firm’s pooled client bank account yields little to no interest, the firm is still obligated to calculate and pay a "fair" amount of interest based on what the client would have earned had their funds been placed in a designated instant-access deposit account.

Section62

Something related which I hadn't heard about before - there's a proposal for the MOJ to help themselves to a percentage (up to 75%) of the interest earned on solicitor client accounts…

https://www.lawsociety.org.uk/topics/client-care/interest-on-lawyers-trust-accounts

So if this comes in, people who have the misfortune to be in a position where some of their money is tied up in a solicitor client account would effectively have super-tax levels of tax taken off the interest that could be earned, on top of the increased costs solicitors will likely pass on to clients to cover the additional work involved in administering the scheme.

goldfish33

Thanks all, for your responses.

Section62 - I haven't pointed this out yet to the Solicitor. I am preparing a letter to send to him on Monday. In the meantime, I wanted to ask for comments/information from others on the forum, especially those that perhaps know the rules around this.

In the past, the Solicitor has been very short and matter-of-fact in the fact that there is no interest to pay. He said the client bank account makes no interest. My issue is that the SRA 7.1 rule seems to contract that. (SRA 7.1 - You account to clients or third parties for a fair sum of interest on any client money held by you on their behalf).

We are talking about the sum of £245,000 and it has been in the Solicitor's client account for 4 years and 8 months so far.

Is there anything else that I should consider before reaching out?
THANK YOU

martindow

Perhaps it would be wise to wait until the resolution of the dispute that you mention before pushing on this. You want your solicitor to be working for you to deal with this efficiently and as quickly as possible. Annoying him now might not be your best course of action..

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/82016938#Comment_82016938

After 56 months (and £30k+ in lost interest) maybe the solicitor needs a little annoying?

Grumpy_chap

Why has £245k been in a Client account for nearly 5 years?

When that did duration become evident / foreseeable?

It is just, often, even if the sums involved might be large, the durations are sufficiently short that the interest that would have been earned is sufficiently close to zero as to be irrelevant. For example, when I sold my house, the funds were received from the sale a few days before the funds were paid over for the purchase. For that money held for less than a week, it would have been petty to get overly concerned with the effort involved in working out potential interest.

However, if it became apparent after a few weeks that the OP's funds would be held for a prolonger period extending to years, the Solicitor might reasonably have been expected to manage the deposit in a different manner to how my house funds were manged for a week.

Did the OP ever query the interest status of the deposit during the past 5 years, thus prompting the Solicitor to be aware of the potential for interest to be claimable?

QrizB

Why has £245k been in a Client account for nearly 5 years?

Is the OP called Jarndyce, by any chance?

user1977

Why are you even going to the SRA rules if their own terms say they pay interest?