ETH 2007-172.
Court | California |
California Ethics Opinion
2007.
ETH 2007-172.
THE STATE BAR OF
CALIFORNIASTANDING COMMITTEE ONPROFESSIONAL
RESPONSIBILITY AND CONDUCTFORMAL OPINION NO. 2007-1722007ISSUES:1. May an attorney ethically
accept payment of earned fees from a client by credit card? 2. May
an attorney ethically accept payment of fees not yet earned from a client by
credit card? 3. May an attorney ethically accept payment of
advances for costs and expenses from a client by credit card? DIGEST:
1. An attorney may ethically accept payment of earned fees from a
client by credit card.
In doing so, however, the attorney must discharge his or her duty
of confidentiality.
2. Likewise, an attorney may ethically accept a deposit for fees
not yet earned from a client by credit card, but must discharge his or her duty
of confidentiality.
3. By contrast, an attorney may not ethically accept a deposit
for advances for costs and expenses from a client by credit card because the
attorney must deposit such advances into a client trust account and cannot do
so initially because they are paid through an account that is subject to
invasion.
AUTHORITIES
INTERPRETED:
Rules 1-320, 3-100, 3-700, 4-100, and 4-200 of the Rules of
Professional Conduct of the State Bar of California.
Business and Professions Code section 6068.
STATEMENT OF FACTS
Attorney desires to accept payments and deposits from her clients
by credit card for (1) earned fees, (2) fees not yet earned, and (3) advances
for costs and expenses. Attorney intends to absorb the service charge debited
by the credit card issuer, which would accordingly result in reducing the
amount netted.
DISCUSSION
1. An Attorney May Ethically Accept Payment of Earned
Fees by Credit Card.
The first question is whether an attorney may ethically accept
payment of earned fees from a client by credit card.(fn1)
By way of background, a typical transaction involving a credit
card issued by a bank operates as follows: "Issuing banks are members of
[various] . . . not-for-profit associations of member banks that operate a
worldwide communication system for financial transfers using credit cards.
Issuing banks issue credit cards to consumers, enabling those consumers to make
credit-card purchases at participating businesses. To accept credit cards,
businesses must open an account with a merchant bank. Merchant banks, like
issuing banks, are members of [the same not-for-profit associations], but
merchant banks have accounts with businesses, not consumers. Once a business is
electronically connected with a merchant bank, it can accept a consumer's
credit card by processing the credit card through a point-of-sale terminal
provided to it by the merchant bank. If the merchant bank approves the sale, it
immediately credits the business for the amount of the consumer's purchase. The
merchant bank then transmits the information regarding the sale to [the
not-for-profit association in question], who in turn forward[s] the information
to the bank that issued the card to the consumer who made the purchase. If the
issuing bank approves the sale, it notifies [the not-for-profit association]
and then pays the merchant bank at the end of the business day. The issuing
bank carries the debt until the cardholder pays the bill."(fn2) From all that
appears, credit card issuers deposit funds on use of a credit card into the
merchant account established for that purpose at the merchant bank; the
merchant bank may invade the funds via chargebacks, that is, the imposition of
debits, in the event that the credit card holder disputes the charge. Whether
and, if so, under what conditions a merchant account might be rendered
not subject to invasion is unknown to the Committee. But to
the extent that a merchant account is subject to invasion, it
is not, and cannot be deemed, a client trust account.(fn3)
More than 25 years ago, in California State Bar Formal Opn. No.
1980-53, the Committee opined that an attorney may ethically charge interest on
past due receivables from a client, provided that the client gives his or her
informed consent in advance. In the course of its analysis, the Committee
stated: "The Commitee [sic] on Ethics and Professional Responsibility of the
American Bar Association initially concluded that use of credit cards for
payment of legal fees was unprofessional because it was 'wrong' to put
professional services in the same category as 'sales of...
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