The plusses and pitfalls of accepting plastic as payment

The way in which legal services are marketed and delivered to clients must coincide with what the client wants and needs. One effective marketing tool is a law firm billing approach that is convenient and efficient. Service is the one thing that clients want from lawyers more than anything else, even more than lower fees.

That’s why every lawyer and law firm should consider accepting credit cards in payment for fees. In today’s economic environment, recession and tight credit still restrict cash flow for both businesses and individuals. For that reason alone, accepting credit cards is a practical choice that makes it as easy as possible for clients to pay for legal services.

Clients today live on plastic, so paying legal bills with credit cards is familiar. This creates a tremendous marketing advantage for the lawyer.

Plusses: Mutual convenience

Credit cards are convenient for both parties. 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 gives you improved cash flow.

To facilitate the process, be sure to spell out in your original engagement letter that credit cards will be accepted in payment. Stipulate how the card will be used and have the client sign an authorization to charge their cards. Send the authorization along with your bill, so that you know the client has received it.

Accepting credit card payment has particular advantages for sole practitioners focusing on legal services for individuals.

Consider the emotions that a family lawyer confronts in divorces. Clients in such situations may be tempted to “win” by vindicating themselves at any cost, such as filing for bankruptcy after a divorce to get rid of their debt. When such risk exists, payment by credit card gives the lawyer immediate compensation and eliminates, except in rare circumstances, the danger of becoming an unsecured creditor.

In several states it is acceptable to use credit cards for payment of fees both earned and not yet earned, but not for costs or expenses. Payment by credit card should offer “parity” with both cash and checks in terms of confidentiality. The lawyer should describe the nature of the services to the credit card company in very general terms, such as “for professional services rendered,” while of course providing a more detailed bill to the client.

Pitfalls: Fees and disputes

Despite the advantages, accepting credit cards is neither problem nor risk free. One notable issue is the administrative charge that the credit card companies impose on lawyers who accept cards in payment. As with other merchants, lawyers have the right to raise their fees across the board by 1 to 2 percent to make up the difference, even for clients who do not pay with plastic; the uniform increase is essential, because some jurisdictions prohibit charging clients differently solely based on the means of payment.

An alternative is to keep your fee as is and add an “administrative charge” equal to the merchant fee percentage, similar to additional charges for photocopying or faxing. Of course, many clients object to such charges, which they believe are part of the cost of doing business. If your competitor firms do not impose such ancillary charges, think twice about doing so yourself.

A second problem/risk is the potential for a fee dispute with a disgruntled client who has already paid by credit card.

To avoid problems, secure the client’s agreement 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 and cannot be reversed by the credit card company.

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 proper forum for adjudicating the dispute remains the state bar disciplinary system, or the courts.

It’s a good idea to call your merchant account holder or the credit card company to confirm that the language you use will be accepted by them to prevent a chargeback. There might be a temporary “hold” until they can get the story from both sides, but with proper language the card service providers should back you up. Of course, when you talk to them, get the name/position of the person contacted and date/time of discussion and keep it on record – it is best not to be too trusting in matters of getting paid.

This article previously appeared in Lawyers USA, another Dolan Company publication.