When Is It Acceptable to Accept Credit Card Payments?

Published July 23, 2013

Dealing with credit cards is another area where lawyers’ accounting practices may cause problems. Lawyers were slow to adapt to commercial reality and clients’ preferences to pay their bills with plastic. Lawyers began to find that if they enabled clients to pay with a credit card, their bills were paid in full and more quickly. Over the years, State Bars have come along with rules of professional conduct and ethics opinions, making it possible to use credit cards under certain circumstances.

When accepting credit card payments you must consult each state’s rules for particulars and follow the rules “to the letter.” There will be no tolerance by the Bar for error. Do not believe that, because an approach makes commercial sense in today’s world under “normal” business circumstances, the Bar’s rules coincide. Such rules often do not reflect The Business of Law®.

Your engagement agreement must reflect the process concerning credit cards and payment that will be offered to the client. The client must understand and agree to any charges, fees, expenses and merchant account charges. This is particularly important given the potential for a fee dispute after the engagement with a disgruntled client who has already paid by credit card. To avoid problems, secure the client’s agreement that no dispute with the law firm will be raised with or adjudicated by the credit card company. Any dispute over fees paid by credit card should be settled between the lawyer and the client, governed by the rules of professional conduct.

There are some specific issues under which disputes might most likely arise:

  • Credit cards can make a full payment for either an earned bill or for a retainer which is yet unearned, but what if the bill/payment contains an element of both? One cannot place earned payments into the trust account or unearned payments into the general account. Some states permit depositing the entire amount into the trust account provided there is an “immediate” transfer of the earned funds into the general account.

  • What if the bank/credit card charges back funds under dispute? States may permit different arrangements where the bank charges the general account for any trust account charge or lets the lawyer create a separate account from which the bank takes any such charges while notifying the lawyer, who then must immediately replace the credited amount.

  • What, also, about expenses? Some states prohibit the use of credit cards for advanced payment of expenses. Some states permit charges for “merchant fees” provided there is a provision in the engagement agreement for such charges. Again, the caveat is clear: review your state’s rules and ethics opinions for guidance on how to proceed.

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Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners