Credit cards and client payment: some additional thoughts

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Published on 2/6/06

In an earlier column I addressed the advantages and the caveats for lawyers who allow clients to pay their legal fees with credit cards. Because of the comments and questions generated by that column, I'd like to revisit the topic, expand on a couple of issues and suggest some additional ideas - all with the important objective of helping lawyers get paid.

  • When not to accept credit card payments

    Client payments by credit card should only be for legal services rendered. They should not be requested or accepted for unearned retainers or charge-backs of unearned fees.

  • How to handle disputed charges

    As I mentioned previously, and would emphasize again, there is a distinction between credit charges that are non-refundable under the terms of a client's engagement agreement, and the right of the client to dispute the lawyer's charges through traditional state bar dispute resolution procedures.

    Any dispute over fees paid by credit card should be settled between the lawyer and the client, governed by the rules of professional conduct. The credit card company should not be involved. Your fee agreement can provide that the client agrees not to dispute your fee with the credit card company, though the client retains the right to dispute the fee with the lawyer directly or through the bar.

  • The role of arbitration in fee disputes

    Lawyers who consider suing a client to collect a fee are well advised to first offer arbitration of the fee dispute through the state bar. I am not aware of any mandatory arbitration or mediation provisions anywhere in the country. That means that a client can always reject an offer of arbitration or mediation, but it also means that a lawyer can reject an arbitrator's award and still sue for the fee after the hearing.

    State bar associations generally seem to encourage the arbitration process, but, again, neither the process nor the result is considered mandatory. There may be exceptions, so be sure to check the rules of your jurisdiction.

  • Why a written fee agreement is important

    A written fee agreement is required for contingency work but not for hourly or transactional work in some jurisdictions. I would suggest that attorneys miss a real opportunity by not having a written fee agreement in every engagement. There are marketing benefits in terms of defining and managing client expectations and how those expectations should be met.

  • Special considerations applying to trust funds

    I advise lawyers to provide in their engagement letters that the client authorizes the lawyer to debit IOLTA trust account funds after a reasonable time from the date of billing - for example, 15 days. This provides a date certain for payment to the lawyer. The client, in most jurisdictions, will retain the right to dispute the charges though clients are unlikely to do so if they understand that, by agreement, they need to be timely with any objections.

    Communication is a two-way boulevard and the client ought not sleep on his rights. While I'm concerned for the benefit of clients (that's what I preach to lawyers), lawyers also have rights.

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