Interest charges on client accounts

Registrar of Solicitors 12/02/2021

The Society is aware that some banks in the State have or intend to introduce interest charges/negative interest rates (hereinafter referred to as "interest charge(s)") on certain classes of accounts, including client accounts. The Regulation of Practice Committee, which is responsible for the monitoring of compliance with the Solicitors Accounts Regulations 2014 ("the 2014 Regulations"), have approved the issuing of this practice note in order to assist solicitors in respect of the introduction of interest charges.

The Solicitors Acts 1954-2015 and the 2014 Regulations permit clients' moneys to be held in a non-interest bearing account and permit an interest charge applied in respect of client moneys to be passed on to the client on the basis that certain steps are taken by the solicitor, as outlined below.

What steps should a solicitor take?

In circumstances where a bank informs a solicitor that it intends to impose or imposes an interest charge on a client account and unless the solicitor has a specific arrangement in writing with the client regarding interest charges, the following steps should be taken.

  1. The solicitor should contact the bank and instruct that such charges should not be debited on the client account (or should be reversed if already applied) but should be debited on the solicitor's office account, with the solicitor to disburse same from the office account.
  2. Where the interest charge is applied to the moneys in the client account regardless of any step taken above, the solicitor shall, as soon as possible, arrange for moneys to be transferred to the client account in the amount deducted by the bank so that no deficit occurs in respect of the moneys in the client account.

Can interest charges be treated as outlay?

Any moneys paid by the solicitor in satisfaction of any interest charge may be recovered as outlay from the client in question. Solicitors should be aware of their obligations under Section 150 of the Legal Services Regulation Act 2015 in that regard. In particular, where solicitors propose to recover any payment of interest as outlay, solicitors should provide prior notice under Section 150 to their clients of any such interest charge in the same manner as would apply in respect of any other outlay. For existing matters, solicitors should serve a notice of the interest charge under Section 150(5) of the 2015 Act.

Further, under the 2014 Regulations, solicitors should note that, where a solicitor discharges any interest charge themselves as outlay from the office account, the solicitor is entitled to withdraw moneys from the client account which are required towards payment of outlays already paid by the solicitor (including interest charges).

Is there an obligation to move account?

Solicitors are not under an obligation to move their client account to a different account or to another bank where a bank imposes an interest charge, unless an interest bearing solicitors’ client account is available at the bank to the practice of the solicitor (or if more than one bank, the principal bank to the practice).

Can I reach an arrangement with the client regarding interest charges?

A solicitor is permitted to enter into an arrangement with a client regarding interest charges on client moneys held in client accounts, by virtue of Section 73(3)(a) of the Solicitors (Amendment) Act 1994 and Regulation 8(6) of the 2014 Regulations. Such an arrangement should be set out in writing. By way of example, a solicitor may enter into an arrangement with a client directly in respect of a dedicated client account that interest charges be deducted directly from that dedicated client account but this must be arranged directly with the client. Where the client's money is held in a general client account, any such arrangement can only apply in respect of that specific client's moneys in that account.

General Obligations in respect of Clients' Moneys

Solicitors should be aware of their obligations in respect of clients' moneys as provided for under the Solicitors Acts 1954-2015 and the 2014 Regulations. In particular, solicitors should note:-

  1. Their general obligations to ensure that client moneys are not reduced, save as provided for in the 2014 Regulations;
  2. the obligation on solicitors who receive, hold or control client moneys to pay such moneys, without delay, into a client account; and
  3. a client account can only be opened and maintained in a bank (or branch thereof) that is situate in the State by virtue of Section 75 of the Solicitors (Amendment) Act 1994.

Solicitors must ensure that client moneys are not reduced as a result of any interest charges that may be imposed by banks unless in accordance with the 2014 Regulations and this Practice Note. Any deficit arising in client moneys held by a practice is the personal responsibility of the partners/principal of the practice, whether caused by a solicitor or staff member or by a bank. It is the responsibility of the partners/principal to reimburse the client account the amount deducted, rectifying any deficit, whether from the office account and/or from personal funds.

Further Queries

Please contact should any further queries arise.

John Elliot, Registrar of Solicitors and Director of Regulation