August 11th, 2016 By Virtual Paralegal Services

Credit card and other non-cash payment methods have long been considered taboo or even unprofessional in legal circles. Resistance is primarily driven by ethical concerns. Can these payment methods compromise confidential information? If credit cards are used to pay for services rendered as well as retainers and other unearned funds, is the risk of commingling the law practice’s funds with client funds too great?

From a business standpoint, nobody likes to pay fees to credit card companies. However, by offering the option to pay via credit card, law firms can take control of cash flow and shorten billing cycles. While this shifts receivables to the credit card companies and allows you to focus on providing legal services, there is a potential ethical dilemma of allowing a client to go into debt to pay for those services.

However, we live in an age where many people loathe writing checks and carrying cash. When virtually any bill can be paid via credit card, requiring a check or cash payment is often considered antiquated and inconvenient. This is why PayPal, Apple Pay, Square and other online and mobile payment services have entered the mainstream.

To be clear, the American Bar Association and many state bar associations allow law firms to accept credit card payments for legal fees. However, advance legal fees must be credited to a client’s trust account until the fees are earned to prevent commingling with law firm funds.

Take Five

Law firms that currently accept or plan to accept credit card payments should consider doing the following:

  1. Check State Bar Rules. Find out how advanced fees are characterized in your state, and whether certain card processing services comply with trust account rules.
  2. Understand Payment Card Industry (PCI) Standards. Increasingly stringent PCI security standards protect cardholder data from being stolen. For example, if a client has a new EMV computer chip card and you’re only capable of processing a magnetic strip card, you will be liable if cardholder data is compromised, not the credit card company. Keep technology current.
  3. Explore Lawyer-Specific Credit Card Processors. LawCharge, PayPros Legal, LawPay, and Lex/Actum were designed for lawyers. However, not all versions of these platforms separate trust and operating accounts, so look for a solution that includes this functionality.
  4. Generalize Service Descriptions. While it is important to provide clients with a detailed account of services rendered, including this information when processing credit card payments increases the risk of a client confidentiality breach. General, non-descriptive language removes that risk.
  5. Include Payment Method Details in your Engagement Letter. Communication and transparency are key. Have your client sign an engagement letter that explains payment terms and what types of services can be paid via credit card. To avoid chargebacks resulting from disputed fees, attorneys will sometimes include language that prohibits the credit card company from refunding fees, and mandates that any disputes must be settled between the attorney and the client.

Virtual Paralegal Services helps solo and small law firms implement consistent, ethical billing procedures that remove confusion, minimize risk, and meet client demand for convenient billing methods. Contact us to learn more.

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