June 04, 2019 Feature

Third-Party Fee Financing Sails into Uncharted Waters

Fee financing triggers disclosure duties, risk of excessive fees, and conflicts of interest

By Onika K. Williams

Advisory opinions from three bar associations highlight the potential ethical pitfalls for attorneys when clients seek to pay by taking loans from third-party finance companies, crowdfunding, or giving a secured interest in property.

Sailing uncharted waters of third-party financing

Sailing uncharted waters of third-party financing

Photo Illustration by Elmarie Jara | Getty Images

Such arrangements can raise a number of ethical issues, including what, if anything, attorneys must tell clients about their financing options, the potential for overcharging clients or misclassifying their funds, inadvertent waiver of privilege, and hidden conflicts of interest, among others. Moreover, certain financing plans may cross the line into unethical business transactions or fee splitting. ABA Section of Litigation leaders urge practitioners to fully disclose to clients the potential consequences of any financing arrangement as both financing options and ethics rules continue to evolve.

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