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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