Use of credit cards redux

More than a year ago in this column, I wrote about using credit cards for payment of earned legal fees. Massachusetts bar counsel subsequently critiqued my approach by referring to payments for legal fees not yet earned.

In a subsequent column I commented that I had not made reference to legal fees not yet earned and fully agreed that client payments by credit card should only be for legal services rendered - not for unearned retainers or charge-backs of unearned fees.

California's Standing Committee on Professional Responsibility and Conduct has recently issued Proposed Formal Opinion Interim No. 05-0009 concerning use of credit cards for payment of earned and unearned legal fees and costs.

In effect, the committee opines that it is acceptable to use credit cards for payment of both fees earned and not yet earned, but not for costs or expenses. In the California report, the Committee cites Massachusetts Bar Association Ethics Opinion 78-11 (1978), which prompted me to re-visit this issue.

In Massachusetts, since 1978, lawyers may accept credit cards for both earned and unearned fees. Nothing was mentioned in Opinion 78-11 about payment of expenses. But, if the logic of the opinion holds true, expenses should be treated in the same manner.

Nearly 20 years later, the MBA affirmed its position in Opinion 95-11, which held that an attorney may not enter into a fee agreement that requires the client to pay a non-refundable retainer - a position I've supported in an earlier column. If you take a retainer in advance, whether the fee be called "refundable" or not, and work is promised in exchange for that fee, then failure to perform the work requires a refund.

To focus on earned fees, the California opinion suggests that payment by credit card offers "parity" to both cash and check. This seems sensible, if confidentiality requirements are observed. The lawyer must describe the nature of the services to the credit card company in very general terms, such as "for professional services rendered," while of course providing a more detailed service summary to the client.

The duty to charge a reasonable fee is not altered by use of a credit card. And, there is no fee splitting or fee sharing merely through the debit of a service charge. This is merely for the convenience of receiving payment of fees owed the attorney.

Further, the attorney would normally pay these credit card service charges. It is a matter to be discussed in the engagement agreement. Any interest and late fees to the client is a matter for the client, not the attorney.

The theory that a credit card company is an independent intermediary that can interfere with the use of the funds defies today's commercial logic. The credit card company is an implied agent-in-fact, if not one in law, of either or both the client and lawyer. Thus, parity should be given to credit cards as to checks and cash.

I do believe that the California opinion strays when holding that payment of unearned fees also may be by credit card. Contrary to most states, California does not obligate lawyers to place unearned fees into a client trust account. But for this quirk, the opinion continued, credit card payments for unearned fees would not be acceptable.

The parity approach seems to be the most logical and should be applicable to all payments for fees and costs. Thus, use of credit cards should be universally accepted in the legal community.