Taking charge: Be smart about accepting credit card payments

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Published on 11/28/05

I believe lawyers should accept credit cards for payment. We must make it as easy as possible for clients to pay for legal services. However, accepting credit cards does pose risks for any firm that does not understand the rules. Here are two potential problem areas.

Payment Disputes

One of the benefits of paying with credit cards is that there is roughly a six-month window in which to raise a dispute and request the credit card company reverse the charge. Payment for a disputed legal bill could be placed in a suspended account. At worst, the credit card company could reverse the charge, credit the customer and debit the law firm.

Prevent this by getting the client to agree that no dispute with the law firm will be raised with or adjudicated by the credit card company. In other words, the client agrees that the charge is non-refundable.

The credit card company, when shown the client's agreement, will not credit the client nor debit the law firm. The proper forum for adjudicating the dispute thus remains the state bar disciplinary system, or the courts.

Processing Fees

I think lawyers ask for trouble if they charge clients for credit card processing fees. The processing charge is overhead, just like lights and rent. Unfortunately, too many lawyers still think of expense items as profit centers.

In no other business do clients permit or accept such charges, and they increasingly resent them in the business of law. Raising your hourly rate would likely bring less client dissatisfaction than charging for credit card processing fees.

Processing fees have other dangers. First, your contract with your credit card company and merchant account organization may prohibit surcharges and subject you to penalties if you try to assess them.

Second, you may risk a lawsuit. In California, a very consumer-oriented state, the civil code specifically states the intent to "protect consumers from deceptive price increases for goods and services by prohibiting credit card surcharges."

Consumers who are refused a surcharge refund can sue in small claims court and receive three times the surcharge plus costs and attorneys' fees.

Of course, lawyers can argue that they are not retailers under the law. But a rash of client complaints will make politicians rush to specify and include lawyers under the code.

Credit cards are a convenience for both parties. Clients today live on plastic and therefore paying legal bills with credit cards is easier for them.

But if you have the credit card information of the client and permission to charge his or her account, you get paid more readily and certainly more quickly. That's for your convenience; that's for your improved cash flow; and the few dollars (2 to 4 percent, depending on your volume, the card and your ability to negotiate with your bank and processing agent) it costs you to get the money faster is offset by the ease of payment, the assurance of payment and the speed of collection.

As any lawyer should know, time is money! MLW

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