By Ryan Stahl, Scherer Smith & Kenny
As anyone who has paid for vegetables at the farmers’ market on a merchant’s smartphone knows, the use of credit cards as a form of payment has become a universal convenience. Credit cards can now be used for the purchase of nearly all goods and services, including legal services. While law firms of almost every size can and do routinely accept payment from clients via credit card, this type of payment brings with it unique ethical considerations for attorneys.
In California, attorneys who accept credit card payments should carefully consider two fundamental ethical issues: first, whether acceptance of such payments adequately protects confidential information of the client and, second, whether the type of fee or expense paid for with a credit card complies with the Rules of Professional Conduct of the State Bar of California.
Pursuant to California Business and Professions Code section 6068 and California Rule of Professional Conduct 3-100, attorneys have a duty to keep client information confidential. Information provided to the credit card company by the attorney may breach this duty if, for example, a description of services rendered is too detailed or specific. In response to this concern, the State Bar of California, in Formal Opinion 2007-172 (“Opinion 2007-172”), recommends that such descriptions be “general in nature,” including the use of nondescriptive phrasing such as “for professional services rendered” or the like.
Regarding the types of legal fees and expenses that may be properly paid for by credit card, the State Bar of California, again in Opinion 2007-172, draws a distinction between fees and advanced costs or expenses. Attorneys may accept credit card payments for both earned and unearned fees without breaching ethical obligations. This is because an attorney is not required to deposit such fees in a client trust account. The same rule does not apply to advanced costs or expenses, however, which pursuant to the express language of California Rule of Professional Conduct 4-100 must be deposited into a separate client trust account. In this latter case, the use of a credit card may result in the credit card company’s access – via a “chargeback” – to funds in the client trust account. A chargeback in turn could deplete other clients’ funds in the event a dispute arises between the attorney and client after the client’s funds have been transferred out of the client trust account. This restriction would also apply to debit cards that allow chargebacks.
About the author:
Ryan Stahl is an associate at Scherer Smith & Kenny, where he practices civil litigation with a focus on employment law cases. He is a member of BASF’s Legal Ethics Committee.