OSB Professional Liability Fund

Tips for Accepting Credit Card Payments

December 28, 2018
by Lee Wachocki

“Can I pay with a credit card?”  If a lot of clients are asking and your answer is still “no,” it might be time to say “yes.”
 
If you don’t accept card payments, consider the advantages.  Some clients don’t own a checkbook.  Some have never written a check.  Taking card payments will make it easier for some clients to pay, which will make it easier for you to get paid (and paid on time).
 
Don’t let the thought of accepting card payments make you nervous.  You can navigate most of the practical and ethical issues surrounding card payments if you identify avoidable risks and use a card processing service that offers safe solutions.
 
Before you accept card payments, read OSB Formal Ethics Opinion 2005-172.  The opinion addresses the interplay between card payments, your trust account, and your duty to keep client funds safe and separate from your own (i.e., your general account).  This article provides a few beginner’s tips for taking card payments.

Step 1: identify avoidable risks

Card transactions involve processing fees (also known as “surcharges” or “service charges”), and these fees carry avoidable risks.  If one client makes a card payment to your trust account and there aren’t sufficient funds to cover the processing fee, the fee could be impermissibly taken from another client’s funds.  If you ask clients to bear the cost of card processing fees, you risk implicating laws requiring disclosures and discounts (see OSB Formal Ethics Opinion 2005-172 and its discussion of the Truth in Lending Act). 
 
Another avoidable risk involves a “chargeback,” where a cardholder disputes a payment and their card company starts a process that could result in money being taken “back” from your trust account.  A chargeback from trust could result in an overdraft or a deduction from another client’s funds – ethical violations you can easily prevent.
 
Another avoidable scenario is using a bank or card processing service that forces you to designate a single account for all card payments: either your trust account or your general account.  If you designate your trust account and a client makes a card payment for an earned fee, you must promptly move that money into your general account.  If you designate your general account, you can only accept card payments for earned fees – never for retainers or any unearned money that belongs in trust.

Step 2: adopt safe solutions

For card processing fees, the safest solution is to treat them as the cost of doing business and deduct them all from your general account – even for card payments deposited to trust.  You’re allowed to pay these fees from your general account, and card processing services like LawPay, LexCharge, and Lex/Actum can do it automatically (and they were all designed for lawyers).  Be careful using card processors like Square or Stripe, which were designed for retailers.  Read the card processor’s service agreement before you sign up.  A card processor that automatically takes processing fees from your general account can spare you the chore of depositing money into trust to cover every single processing fee.
 
For chargebacks, the safest solution is similar: use a card processing service that will deduct the chargeback from your general account rather than your trust account.  Before you sign up with a card processor, make sure it offers this option.
 
If your bank or card processor requires you to deposit all card payments into a single account, consider less restrictive options.  The Oregon Law Foundation has a list of institutions where you can open an IOLTA with a favorable interest rate, and most allow card payments into both accounts.  The bank where you keep your general and trust accounts probably offers card processing services (usually through a third party), but you don’t have to use them!  Don’t use a card processor unless it offers what you need.

Card payments and fees “earned upon receipt”

To avoid the issues involved with mixing card payments and the trust account, some attorneys only take card payments for fees already earned and fees “earned upon receipt” (both of which must be deposited into your general account – never your trust account).  Be aware that fees “earned upon receipt” require a signed, written agreement that complies with ORPC 1.5(c)(3).  Clients could be entitled to a full or partial refund of the fee for services not completed, so the safest approach is to keep that money available after the card payment clears.

Conclusion

You can take card payments safely if you identify the risks and use a card processor that offers safe solutions.

For more information:

Consult our Practice Aid on Accepting Credit Cards.
 
Read OSB Formal Ethics Opinion 2005-172.
 
Visit the Oregon Law Foundation’s website for information about financial institutions that offer IOLTAs.