Ethics Opinion 348
Accepting Credit Cards for Payment of Legal Fees
A lawyer may accept credit cards from a client for payment of fees, including unearned fees (commonly referred to as a retainer or advance fees), so long as the lawyer ensures that she complies with applicable District of Columbia Rules of Professional Conduct, including ensuring that she does not enter into a merchant agreement with the credit card company that violates the Rules.
- 1.5 Fees
- 1.4(b) Communications
- 1.6 Confidentiality of Information
- 1.15 Safekeeping Property
- 1.16 Declining or Terminating Representation
- 7.1 Communications Concerning Lawyer’s Services
A lawyer inquired whether she may accept a credit card as payment for unearned (advance) fees from a client. This inquiry prompted the Committee to consider the broader question of the acceptance of credit cards to pay earned as well as advance fees.
The District of Columbia Rules of Professional Conduct (“Rules”) do not address the issue of accepting credit cards for payment of legal fees. The issue, however, was addressed by our Committee in Opinion 23 (1976), as an interpretation of District of Columbia Code of Professional Responsibility, the predecessor of the Rules. Opinion 23 dealt only with the issue of accepting credit cards for payment for services rendered (earned fees), not the issue raised by this inquiry. Moreover, Opinion 23 was modeled after and relied upon ABA Formal Opinion 338 (1974), which the ABA has since withdrawn.
In light of the adoption of the Rules, opinions by courts and our Committee that expanded the permissible scope of advertising, and the evolution in the use of credit cards, the Committee withdraws Opinion 23 and examines anew the conditions under which a lawyer may accept credit cards for payment of fees and expenses, including as payment for advance (unearned) fees.
I. Accepting Credit Cards Generally
In Opinion 23, this Committee grudgingly approved accepting credit cards for payment of fees, but implied that the use of credit cards should be discouraged and limited. Today, credit cards are recognized as useful in facilitating the ability of many persons to obtain legal services at the time the services are needed and to pay for those services on a schedule that comports with their budgets. In addition, accepting credit card payment of fees provides lawyers with assurance that they will be paid for their services and obviates the need for them to expend time and money pursuing clients who do not pay on time.
Many jurisdictions now recognize the benefits of accepting credit cards for the payment of legal services. While the evolution of the use and acceptance of credit cards in society led many jurisdictions to approve the use of credit cards to pay for legal services, accepting credit cards for payment of legal services involves the participation of a third party—the credit card company—in the payment process and, therefore, raises concerns generally not present in the typical attorney-client fee arrangement. Thus, we must examine the ethical restrictions faced by lawyers as a result of the requirements credit card companies impose on lawyers as “merchants.”
The rights and duties of lawyers as merchants, of clients as cardholders, and of credit card companies as card issuers are contractual in nature. Each party contracts with the other independently, so there are three separate contracts to be considered. See Gregory E. Maggs, Regulating Electronic Commerce, 50 Am. J. Comp. L. 665, 678 (2002). While credit card merchant contracts applicable to lawyers may contain similar terms and conditions, there may well be as many differences as there are similarities among the form contracts used by credit card companies. Discussing the nuances of various agreements is beyond the scope of this opinion.
We emphasize, however, that, because of the unique arrangements (where the lawyer and the client each has a contract with the credit card company that imposes different rights and responsibilities) and the ethical obligations imposed on lawyers by our Rules, it is imperative that lawyers (i) know and follow the Rules, (ii) know the specifics of their merchant agreements, and (iii) ensure that those agreements comply with the letter and the spirit of the Rules. In that regard, a central tenet that undergirds every successful lawyer-client relationship is communication. Clearly communicating with clients about the unique features and challenges involved in accepting credit cards for payment of fees will help lawyers avoid some of the ethical pitfalls that could attend this type of payment arrangement. Rule 1.4(b) also requires lawyers to explain matters necessary to permit their clients to make informed decisions concerning their representation, which includes the consequences of paying by credit card.
- II. Issues Presented in Accepting Credit Cards as Payment
A. Maintaining a Client's Confidences and Secrets
- Rule 1.6(a)(1) provides that, “Except when permitted under paragraph (c), (d), or (e), a lawyer shall not knowingly reveal a confidence or secret of the lawyer’s client.” Rule 1.6(e)(1) provides that, “A lawyer may use or reveal client confidences or secrets with the informed consent of the client.”
Lawyers should advise clients that certain information, that may include “confidences or secrets,” such as the client’s identity, automatically will be revealed to the credit card company in credit card transactions. See Colorado Formal Ethics Op. 99 (1997) (“A lawyer cannot assume that a client who is paying a bill by credit card has impliedly authorized the attorney to disclose otherwise confidential information”). Where a client informs a lawyer that he wishes the fact of being represented to remain confidential, or a lawyer has reason to believe he does, the lawyer should be especially vigilant in informing the client that the use of credit cards involves the disclosure of some confidential information, and of the kind of information that is likely to be disclosed. See Id.
A credit card company may require a lawyer to provide information about the nature of services, with the amount of detail required determined by the particular credit card company. Therefore, a lawyer should make every effort to enter into an agreement with a credit card company that will allow her to provide generic descriptions of services rendered. Generic descriptions recommended by other jurisdictions include: “for professional services rendered,” California Bar Formal Op. 2007-172 (2007); “services and expenses,” or “fees and expenses,” Colorado Formal Ethics Op. 99 (1997); “services and expenses” or “consultation,” Michigan Ethics Op. R.I. 168 (1963). If this level of generality cannot be accomplished, the lawyer must inform the client and obtain his informed consent to whatever disclosures the credit card company requires the lawyer to make.
A more troubling confidentiality problem is the requirement by some credit card companies that the lawyer cooperate with them in the event there is a dispute between the client and the company. The lawyer should first seek to enter into an agreement with a credit card company that relieves her of any obligation to cooperate with the company in the event of a dispute between the credit card company and the client. If that is not possible, the lawyer is obligated to inform the client of the ramifications of the lawyer cooperating with the credit card company in any dispute between the company and the cardholder, and to obtain the client’s informed consent that he still wants to pay by using a credit card. In the event a dispute develops and the credit card company seeks the lawyer’s cooperation, the lawyer must comply with Rule 1.6. See generally Michigan Ethics Op. R.I. 344 (2008) (examining whether a lawyer may accept credit cards for payment of advance fees and discussing special concerns with respect to Rule 1.6).
- B. Treatment of Fees Charged by Credit Card Companies for Processing Payment
- Credit card issuers generally debit a merchant (here the lawyer) a percentage of the cardholder’s (here the client’s) payment as its fee for processing the payment. This practice raises the issue of how the lawyer may treat the credit card fee vis-à-vis her invoices for her services (i.e., whether to pass the fee on to the client or to absorb it as a cost of doing business).
Nothing in our Rules prohibits a lawyer from increasing her fee for legal services to cover any additional cost incurred in accepting credit cards. The only limitation imposed by the Rules is that the fee must be “reasonable.” Rule 1.5(a). Among the factors to be considered in determining whether a fee is reasonable are “the limitations imposed by the client or by the circumstances.” A client’s need to procure legal services from a lawyer whom the client believes is qualified to meet his needs and a client’s decision that using a credit card to pay for the services is the best means of obtaining those services are limitations or circumstances within Rule 1.5. We thus believe a lawyer properly may pass on to the client the fees charged by credit card companies for processing payment.
In Opinion 310, this Committee examined the propriety of a lawyer charging interest when a client fails to pay timely and is instructive in assessing the propriety of passing on to clients the additional costs incurred in accepting credit cards. Recognizing that a lawyer must somehow account for the additional cost of clients who do not pay or who pay late, the Committee stated, “[I]f the lawyer can focus the lawyer’s additional costs of dealing with clients who do not pay or pay timely on those clients themselves, that allows the lawyer to avoid attempting to spread those additional costs among all of the lawyer’s clients.” D.C. Ethics Op. 310 (2001).
We believe Opinion 345 also supports our view that a lawyer who incurs an additional cost for accepting credit cards may pass those costs on to the client who charged the legal services. In Opinion 345, this Committee recognized that a lawyer who incurs interest charges from her bank when she has used the firm’s line of credit to advance to a client the costs of the representation may pass those costs along to the client. D.C. Ethics Op. 345 (2008). Just as the lawyer who passed on the interest charges assessed against her was not making a profit, the lawyer who passes on the fee that the credit card company charges for processing payments is not making a profit.
Before passing on such fees, however, the lawyer must comply with Rule 1.5(b) by explaining to the client that the fee charged by the credit card company will be charged to the client as an expense. To guard against later misunderstanding, the Committee suggests that the lawyer go further and obtain the client’s “informed consent” to being charged an additional amount to recapture the fees that the lawyer must pay the credit card company.
We conclude that there is no ethical bar to lawyers passing on the credit card processing fees to their clients, however, we note that as a matter of good business practice, lawyers may wish to follow the practice of other merchants and absorb the costs. See Utah State Bar Ethics Advisory Op. No. 97-06 (1997). In Michigan, lawyers are required to absorb these costs. Michigan Ethics Op. R.I. 168 (1963); compare California Bar Formal Op. 2007-172 (2007) (lawyer may “ethically absorb the service charge debited by the credit card issuer”).
- C. Advertising and Promoting the Acceptance of Credit Cards
- When the ABA first considered use of credit cards - and in our now withdrawn Opinion 23 - there was considerable discussion of the lawyer’s ability to advocate and advertise the use of credit cards. Although these concerns now seem outmoded, we discuss them briefly.
Over the years, the Rules were changed to recognize the evolution in the legal profession with respect to lawyer advertising. Decades ago, it was recognized that advertising does not inherently bring dishonor to the profession and that prohibitions on all advertising conflicted with antitrust laws and the First Amendment. Rule 7.1 allows advertising so long as the lawyer does not use false or misleading statements. Stating that “the interest in expanding public information about legal services ought to prevail over considerations of tradition,” Comment  to Rule 7.1 recognizes the dual benefits of advertising: it promotes the lawyer’s active quest for clients, while at the same time, fulfills the public’s need to know about legal services. Comment  to Rule 7.1 expressly states that the Rule permits public dissemination of information about “payment and credit arrangements.”
Another issue is whether a lawyer may advocate the client’s use of credit cards or just accept the cards passively. There is nothing in the Rules that explicitly prohibits a lawyer from encouraging a client to use a credit card for payment of legal services. Although we can foresee circumstances when encouraging a client in dire financial straits to pay by credit card might not be in the client’s best interests, a lawyer is generally not a financial advisor. Unless the scope of the lawyer’s representation includes such advice, in which case Rule 2.1 might be implicated, the client is responsible for evaluating his ability to pay the lawyer’s fee and for deciding how to do so. Compare Utah State Bar Ethics Advisory Op. 97-06 (1997) (noting that, while nothing in Utah’s Rules explicitly requires an attorney to discourage the use of credit cards for payment, economic factors of a client’s situation could require the attorney to advise that client not use a credit card).
- III. Issues Presented by Accepting Credit Cards for the Payment of Advance Fees and Expenses
Opinions from other jurisdictions generally conclude that a lawyer may accept credit cards for the payment of advance fees. See California Bar Formal Op. 2007-172 (2007); Colorado Formal Ethics Op. 99 (1997); Massachusetts Bar Ethics Op. 78 -11 (1978); Michigan Op. R.I. 344 (2008); North Carolina Formal Ethics Op. 97-9 (1998); Oregon Ethics Op. 2005-172 (2005). Contra Arizona Ethics Op. 08-01 (2008) (“Use of credit cards for payment of advance fees or expected costs is not ethically permissible in Arizona for several reasons”). With the exception of California, which has no requirement that lawyers deposit advances into trust accounts, these other jurisdictions require that the advance payments - whether paid in cash, by check, or by credit card - be deposited into the lawyer’s trust account, as opposed to her operating account.
We find there is nothing in the D.C. Rules that prohibits a lawyer from using a credit card for unearned legal fees and expenses (advance fees), provided that the use of a credit card does not jeopardize the security of entrusted funds.
- A. Depositing Advance Fees into Trust Accounts
- Rule 1.15(d) provides, “Advances of unearned fees and un-incurred costs shall be treated as property of the client pursuant to paragraph (a) until earned or incurred unless the client gives informed consent to a different arrangement.”
As we noted above, the law governing credit card transactions is contractual in nature, and the details of merchant agreements vary depending on the credit card company. While we cannot detail or discuss all the provisions of every agreement, many agreements include some or all of the following requirements and prohibitions:
- Requirement that reimbursement of unused fees must be credited to the user’s card and not paid by cash or check;
- Requirement that the cardholder (client) have “chargeback” rights pending resolution of a dispute (i.e., the credit card company has the right to access the lawyer’s account to debit funds previously deposited into that account and charge it back to the cardholder);
- Provision that in disputes, no “chargeback” is made, but the client would not be charged until the matter is resolved (both parties would have an opportunity to submit evidence and have the matter resolved by the company’s dispute resolution section);
- Prohibition on charging for services before services are rendered;
- Requirement that payments made to the lawyer by the credit card company be made through an approved Settlement Account.
- Before accepting credit cards for an advance fee, the lawyer must have a complete and detailed understanding of the agreement imposed on her by credit card companies. In many cases it may prove impossible for the lawyer to deposit advance fees paid by credit card into trust accounts and adhere to the terms of the agreement. Funds in trust accounts belong to the clients, not to the lawyer. As such, they cannot be attached by the lawyer’s creditors. But because many credit card agreements permit the credit card company to invade the merchant’s bank account and charge back monies already paid the merchant if the customer disputes a bill, there is a danger that funds deposited in a lawyer’s trust account might be “clawed back.” Under some circumstances this could result in a situation where there are insufficient funds in the account.
For example, suppose a lawyer deposits an advance fee of $50,000 into her trust account and, as the fee is earned, transfers $40,000 to her operating account. If the client lodges a protest with the credit card company challenging the lawyer’s right to payment, the credit card company, under its standard merchant agreement, might invade the lawyer’s trust account, and claw back the entire $50,000, pending resolution of the dispute. This would mean that the lawyer had insufficient funds in her account to cover her obligations to other clients whose funds she is holding. In some circumstances, it could even result in the account being overdrawn.
Because the Committee does not and cannot know the details of all contractual arrangements between lawyers and credit card companies, we cannot conclude that credit cards can never be used to pay advance fees into trust accounts. But if a credit card is used in this fashion, the lawyers must ensure that under no circumstances can the credit card company invade her trust account. If that possibility exists, a credit card may not be used. Moreover, the lawyer must understand all the provisions of her agreement with the credit card company to ensure that entrusted client funds are safe and secure. Absent that assurance, a credit card may not be used to advance entrusted funds.
- B. Consent to Deposit Advance Fees in Operating Account
- Rule 1.15(d) permits the deposit of advance fees into a lawyer’s operating account provided that the client provides informed consent. Such fees are treated as the lawyer’s property, although she has the obligation to and must have the wherewithal to repay them promptly if she does not earn them. To ensure that the consent provided by a client is “informed consent,” the lawyer must explain that, unlike fees deposited in a trust account, these fees can be attached by the lawyer’s creditors because legally they are the lawyer’s property. Moreover, the provisions of the agreement with the credit card company may raise other issues if credit cards are used to pay advance fees into an operating account, which the lawyer must not only understand, but explain to her client.
A lawyer who deposits credit card advance payments into an operating account potentially faces a dilemma with respect to charge-backs. An example may help explain the potential dilemma. Clients A and B retain Lawyer for unrelated legal work. Both are required to pay a substantial advance. B pays his advance by check and grants Lawyer permission to deposit the advance into her operating account. A chooses to pay the advance by credit card, and also grants Lawyer permission to deposit the advance into her operating account. A’s credit card company has a policy of withdrawing money from merchants when the cardholder has a dispute with a merchant, pending resolution of the dispute.
Nine months into the relationship, A disputes his bill from Lawyer and contacts the credit card company to complain. The credit card company immediately invades Lawyer’s operating account and withdraws the entire disputed amount, which is substantially all of the advance. Meanwhile, Lawyer has concluded service to B successfully and owes B a refund, which she promptly makes by issuing B a check drawn on the operating account. The charge back by the credit card company has left Lawyer without sufficient funds to cover the check to B. Were this insufficiency of funds to occur in a trust account, the lawyer would face charges of misappropriations. Even if the lawyer technically has not misused client B’s funds because funds in the operating account are not “entrusted,” she still has an obligation to refund unearned fees. Having insufficient funds in her operating account might jeopardize obligations to client B.
As the foregoing example makes clear, even if advance funds may be deposited into a lawyer’s operating account and thus are not impermissibly commingled, the lawyer must employ the necessary safeguards, including accounting procedures, to ensure that she remains in full compliance with all ethical rules. A lawyer may substantially eliminate the likelihood of a charge of misusing a client’s funds if she follows a strict practice of billing clients only after the services have been rendered and withdrawing funds only after the dispute period (most cardholders typically have 120 days from the date of a transaction within which to dispute a charge). See Kentucky Ethics Op. E-426 (2007) (suggesting that a lawyer “could avoid the ethical implications of a chargeback by delaying disbursements until after the time a chargeback could occur”).
- C. Refunding Unearned Fees
- Irrespective of whether a client consents to the lawyer depositing the advance into an operating account, Rule 1.16(d) requires that the lawyer return to the client any unearned or unused portion of advanced legal fees and costs at the termination of the lawyer’s services. Specifically, Rule 1.16(d) provides, as pertinent, “In connection with any termination of representation, a lawyer shall take timely steps to the extent reasonably practicable to protect a client’s interests, such as… refunding any advance payment of fee or expense that has not been earned or incurred.”
Accepting credit cards for the payment of unearned fees imposes on a lawyer the obligation to know whether her merchant contract with the credit card company requires her to refund any unearned funds to the client directly, or whether she may leave the charge on the credit card and return the fees to the client by cash or check. If the credit card company requires crediting the refund to the account, the lawyer must explain this in writing before accepting the credit card for payment. See Rule 1.5(b) (requiring that “the basis or rate of the fee, the scope of the lawyer’s representation, and the expenses for which the client will be responsible shall be communicated to the client, in writing, before or within a reasonable time after commencing representation”). See also Rule 7.1.
- IV. Conclusion
Credit cards are an acceptable method of paying legal fees provided that the client understands and consents to whatever disclosures to the credit card company are required by the merchant agreement. The client must also be informed of the actual cost of using the credit card if the lawyer intends to recapture from her client the fees she must pay to the credit card company. While credit cards may also be used to pay advance fees or retainers, this may be done only if it does not endanger entrusted client funds and only if the lawyer thoroughly understands the merchant agreement and arranges her affairs so that she has the ability to meet her obligation to refund unearned fees.
Published: March 2009 Cf., D.C. Ethics Op. 310 (2002) (discussing considerations involved in attorney-client fee agreements and noting certain factors may have a positive impact on the formation of lawyer-client relationships).
 E.g., California Bar Formal Op. 2007-172 (2007); Colorado Formal Ethics Op. 99 (1997); Michigan Ethics Op. R.I. 168 (1963); Utah State Bar Ethics Advisory Op. 97-06 (1997).
 Lawyers who accept credit cards for payment of legal services are “merchants,” as that term is commonly used in contracts credit card companies use with business entities. The specifics of the “merchant agreement” (which sets forth the terms on which credit card companies will pay merchants who accept credit cards for payment) between the lawyers and the credit card companies may differ from other merchant agreements because the rules governing the lawyer-client relationship differ from those governing other business entities and their customers.
 In section III of this Opinion, we discuss some of the more salient requirements and prohibitions contained in credit card merchant contracts applicable to lawyers.
 Rule 1.5(b) requires that, when a lawyer has not regularly represented a client, the lawyer shall communicate in writing the basis or rate of the fee and the expenses for which the client will be responsible. The lawyer should also comply with Rule 7.1 when communicating with the client about accepting credit cards (e.g., disclose all facts necessary to ensure that the client is not misled concerning the lawyer’s services).
 As defined in Rule 1.0(e), “‘Informed consent’ denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.”
 It is difficult to imagine that a lawyer would voluntarily cooperate with a credit card company if there is a dispute between the company and the client, absent a provision in the merchant contract that requires the lawyer to do so. A lawyer must resist any effort by a credit card company to compel her to disclose client confidences or secrets protected by Rule 1.6. Absent the client’s informed consent, a contractual requirement of cooperation cannot trump the lawyer’s obligation of confidentiality.
 An alternative way of accomplishing the same result might be to offer a discount to clients who pay cash or by check.
 At least one other jurisdiction considering this issue has found that the fees charged by the credit card company “are legitimate costs that the attorney may pass on to the client.” Utah State Bar Ethics Advisory Op. No. 97-06 (1997).
 In the context of credit card use, this means the lawyer would explain to the client that the client’s use of a credit card will increase the lawyer’s fees by the exact percentage the credit card charges for a fee (e.g., if the client’s bill is $5000 and the credit card company charges three percent (3%), the client must pay $5150).
 It may be that the lawyer’s agreement with the credit card company addresses whether the fees can be passed on. This is a matter of contract, which we do not address.
 If the merchant agreement provides that services must have been rendered prior to the submission of charges, the lawyer may not accept a credit card as a payment of a retainer or advance. See Colorado Bar Formal Ethics Op. 99 (1997). The Colorado Opinion provides a much more detailed discussion of the nuances of merchant’s agreements.
 While a discussion of substantive law is beyond the scope of this Opinion, any lawyer who chooses to accept a credit card for payment of legal fees must be knowledgeable about and comply with federal and state consumer credit laws, such as the Truth in Lending Act (15 U.S.C. § 1666i); Regulation Z (12 C.F.R. § 226.12); and the District of Columbia Consumer Protection Procedures Act, (D.C. Code. § 29-3901, et seq.)