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Bar News - July 17, 2009


Legal Fees on Credit Card?

By:
Below is an excerpt of an article, originally published in the March 16, 2009 edition of Lawyers USA. It is reprinted here with permission of the author and LawyersUSA. Read the entire article.

In these difficult times, how can a law firm ensure that it will be paid for the legal work that it does?

One suggested method that might be a bit surprising in this tight credit market: focus more on accepting electronic payments, such as credit and debit cards.

For most law firms, including virtually all of those that do business with consumer clients, there seems to be no good reason not to accept credit cards. It is a positive development from a client service perspective and also good for firm cash flow. The transaction fees pale in comparison to the value of receipt of immediate payment.

Legal matters are generally expensive and often a consumer client may not have the funds in his or her bank account to immediately pay an appropriate retainer, even though the need for legal services might be immediate. Because of cash flow constraints, lawyers often get asked to accept delayed payments over a period of time. The very best answer to an inquiry about whether a client can "pay this out" is "sure, we accept credit cards."

Accepting retainer fees for new matters by credit card is also a great positive for the firm. In effect, by accepting a credit card, the firm has outsourced the risk of nonpayment to the credit card company.

No ethical prohibition

The American Bar Association has long accepted the propriety of attorneys accepting credit card payment for their fees. (ABA Formal Opinion 338, Nov. 16, 1974) The opinion was later withdrawn for other reasons.

In most jurisdictions, an attorney may accept a retainer paid by credit card as long as the entire fee is deposited directly into a trust account with any applicable service charges being borne by the attorney.

To be safe, lawyers should consult with the ethical authorities within their own jurisdictions to clarify how these retainers should be handled. [The NH Bar Association offers access to a Law Firm Merchant Account through Affiniscape that makes provisions for the particular needs of law firms in accepting legal fees and handling client funds in trust. See related article.]

Starting to accept credit cards or accepting them more frequently might not be your first impulse in a tight credit market. But hopefully this approach will increase your law firm’s bottom line.

Jim Calloway is the Director of the Oklahoma Bar Association Management Assistance Program. He publishes the weblog, Jim Calloway’s Law Practice Tips at http://jimcalloway.typepad.com.

Supreme Court Rule 42(9) requires all NH admitted attorneys to notify the Bar Association of any address change, home or office.

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