Published in Lawyers USA, August 6, 2012
By: Correy Stephenson
Ed Poll is quoted in this article
In the wake of a proposed settlement between credit card-issuers Visa and MasterCard and merchants that would allow vendors to pass along "swipe fees" to their customers, lawyers who accept credit card payments are grappling with the issue of whether such up-charges are a good practice.
Previously, merchants were unable to recoup the fees â€“ typically 1 to 3 percent of the cost of purchases â€“ from customers.
But under the terms of the settlement, the fees could be passed along as long as notice of the surcharge is posted and included on the billing statement and receipt. The fees can't be passed along selectively, and must be applied across the board.
Many legal practice management consultants frown on the idea of passing swipe fees to clients.
"Don't nickel and dime your clients to death," said Laura Calloway, director of the Law Office Management Assistance Program in Montgomery, Ala. "Just charge a reasonable fee."
Clients expect that things like swipe charges will be covered by the lawyer's fee because they are part of the cost of doing business, said Ed Poll, founder of LawBiz Management Company in Venice, Calif.
Nancy Hendrickson, who operates a three-attorney firm in Chicago, agreed.
"I don't think clients would react well" to the additional expense, she said.
Poll warned that lawyers who decide to pass along the fees run the risk that clients may choose other firms that don't do so.
Further, having to explain the addition of the surcharge "adds one more element to the fee conversation, which is a conversation you want to keep simple," he said. "The more you load it up with gobbledy-gook, the more problems you have collecting fees."
Calloway suggested approaching the issue from the other side and offering a discount for paying cash or paying promptly.
When she was in private practice, she said, "I used to offer clients a 2 percent discount if the invoice was paid within 10 days."
Poll noted that lawyers who want to add a swipe fee should check with their local ethics authority or bar association to ensure that such a surcharge doesn't violate their ethical responsibilities.
For example, said Calloway, "obviously you can't take a credit card payment from a client that you are preparing a bankruptcy filing for."
Poll said that lawyers who decide to upcharge for swipe fees need to be careful to spell out what the fee is in the engagement letter. That can eliminate any "he said, she said" arguments with clients later on.
Even better, have a client "initial the margin [of the retainer agreement] where the discussion of fees appears," Poll suggested. "That highlights that a specific conversation took place about the fee and the client indicated that he or she understood."
While passing along swipe fees may not be advisable, accepting credit cards is clearly good business for sole practitioners and small firm lawyers.
"We live in a society rapidly moving toward almost exclusively using electronic forms of payment," noted Calloway. "Why would you not want to be paid?"
Accepting credit card payments allows lawyers to be paid immediately. But it's also attractive to clients, said Ellen Freedman, law practice management coordinator for the Pennsylvania Bar Association and president of Freedman Consulting in Montgomery County, Pa.
"It's more convenient for them and they can pay it off on their own terms," she said. "It's a win-win for lawyers and clients."
Hendrickson said she began accepting credit cards after a client inquired because he wanted to get the reward points for his fee.
Technology has made it increasingly easy to accept credit card payments. Freedman said that lawyers can now purchase a credit card reader to attach to their smartphone, which allows them to accept payments at any time or in any place.