Solicitor's client account - interest

[blueriver]

Hi all, I have a question on whether a legal firm should pay interest on funds held in their general/pooled 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.

[atticus]

First of all. Client funds are not 'pooled'. They are specifically held on behalf of the client to whom they belong.

Second, in all my years in private practice there was no question that interest should be paid to clients on substantial amounts. The approach taken at my last firm was that if interest would exceed £20, it would be paid to the client.

You speak of a large amount of money. The firm should have opened a "designated deposit account" to secure the best rates.

So yes, you appear to have good reason to complain.

[PallasAthena]

Note that the SRA rule refers to [my caps] "...the firm's pooled client BANK account...".

So as atticus says the clients funds themselves aren't pooled but they can be held in a single (pooled) bank account.

[blueriver]

Thanks Atticus and Pallasathena. The amount is £245,000 and it's been in the client account for 4 years and 8 months.

[atticus]

You should definitely escalate this for this amount of money held..

[blueriver]

Thanks Atticus and Pallasathena. The amount is £245,000 and it's been in the client account for 4 years and 8 months.

[blueriver]

Sorry, the above post is a duplicate by error

[blueriver]

So, a bit of an update.

Despite the Terms of Business stating that interest will be calculated and paid on monies which are held by their firm on the client's behalf at the applicable rate(s) payable by their bank, the TOB also refers to their policy on the payment of interest on client monies (which is available on request or via their website).

I went onto their website and obtained a copy of their Payment of Interest Policy. Under one of the clauses it states that they will retain interest paid to them by the bank on the aggregate of all client monies held in the General Client Account.

I wonder if the SRA Accounts Rule 7.1 still overrides this practice?

[PallasAthena]

I suspect the information you posted in Post #1 about SRA rules has come from either AI or from someone else's interpretation of it. If you are going to base an argument on it you need to check the actual SRA wording.

This is Rule 7.

Rule 7: Payment of interest
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.
7.2 You may by a written agreement come to a different arrangement with the client or the third party for whom the money is held as to the payment of interest, but you must provide sufficient information to enable them to give informed consent.

SRA | Accounts Rules | Solicitors Regulation Authority

You need to consider Rule 7.2 as well as Rule 7.1. My guess is they will cite Rule 7.2 but whether they have actually met the 'informed consent' criterion is another matter.

[blueriver]

Thank you Pallasathena.

In case it matters, the monies are from a deceased’s estate (house sale proceeds) so the widow (who is one of the executors) is the one missing out, as she was given life interest.