Can an Alaska lawyer let clients pay legal fees by credit card and charge interest on overdue accounts, and can charges be made automatically under a retainer agreement signed in advance?

Plain-English summary

The Committee was asked whether a lawyer may let clients voluntarily pay fees and costs by credit card, and about specific methods of charging past-due balances. It concluded that credit-card payment is permissible if the plan is formulated and administered within all applicable laws and ethical considerations, and that interest may be charged on overdue accounts. Past-due balances, however, could be charged to a client's card only with the client's current consent at the time the charge is made, not automatically under an agreement signed before the charges were incurred.

Reviewing the development of the issue through the 1960s and 1970s, the opinion noted that by the mid-to-late 1970s credit-card payment for legal services was generally accepted under the ABA Code of Professional Responsibility if specified guidelines were followed, citing ABA Formal Opinion 338 (Nov. 16, 1974) and surveying other states' opinions on recourse arrangements, holder-in-due-course defenses, and categories of cases (such as bankruptcy, domestic relations, and criminal matters) where some states restricted card use. The opinion set five conditions for Alaska: full advance disclosure of all terms; charges only for services actually rendered or cash actually paid; scrupulous protection of client confidences and secrets; no adverse effect on the client's fee-arbitration rights under Alaska Bar Rules 34 through 42 or other rights and remedies; and administration within all applicable laws and ethical considerations. It declined to broadly prohibit card use in particular substantive areas, leaving that for later opinions, while cautioning that problems involving the rights of others could arise in bankruptcy, domestic relations, and criminal cases.

On interest, the opinion concluded a lawyer may charge interest on any delinquent account whether or not a card is involved, provided the client is advised in advance and agrees, is told the rate and other applicable terms, and the rate does not violate applicable law. On automatic charging, it disapproved two proposed retainer provisions: one deeming undisputed past-due fees reasonable and necessary, and one authorizing automatic card charges for fees left past due. A client cannot know in advance that future services will be reasonable and necessary, and a charge based on the client's non-action (for example, failure to object to a bill the client may not have received) could produce an ethical violation or unwarranted hardship. Charges for future work could therefore be made only for services actually rendered and only with the client's current consent at the time of the charge, which the client may withdraw in a bona fide fee dispute; a client may also give current consent to a defined schedule of periodic payments.

Currency note

Ethics Opinion 85-5 was later modified by Alaska Ethics Opinion 2023-2; the credit-card preauthorization analysis below should be read together with that later opinion, and the version linked here reflects the 2023-2 modifications. This opinion was issued in 1985, before the Alaska Bar Association's adoption of the Alaska Rules of Professional Conduct (Alaska then followed the former Code of Professional Responsibility) and before the 2009 revisions to those rules. Subsequent rule amendments or later opinions may have changed the analysis, and the cited bar rules and laws may have been amended. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, rate, or requirement mentioned here.

Common questions

Q: Could an Alaska lawyer accept payment of legal fees by credit card?

A: Yes. The opinion concluded credit-card payment for fees and costs is permissible if the plan is formulated and administered within all applicable laws and ethical considerations and the client is fully advised in advance of all terms.

Q: Could a lawyer charge a client's card for a past-due balance automatically under a retainer agreement?

A: No. The opinion disapproved automatic charges authorized only by a prior agreement or by the client's failure to object; a card could be charged for past-due amounts only with the client's current consent at the time the charge was made.

Q: Could a lawyer charge interest on overdue accounts?

A: Yes. The opinion concluded interest may be charged on a delinquent account whether or not a card is involved, if the client is advised and agrees in advance, knows the rate and terms, and the rate does not violate applicable law.

Background and rules framework

The opinion analyzed credit-card payment and interest charging as questions of fee practice under the former ABA Code of Professional Responsibility (the topic now addressed by Model Rule 1.5 on fees), drawing its conditions from ABA Formal Opinion 338. It tied the conditions to the client's existing rights, including the right to fee arbitration under Alaska Bar Rules 34 through 42, and grounded the disapproval of automatic charges in the requirement of the client's informed, current consent.

Citations and references

Rules and bar rules:

• Former ABA Code of Professional Responsibility (fee practice; cf. Model Rule 1.5)
• Alaska Bar Rules 34 through 42 (fee arbitration)

Other opinions cited:

• ABA Formal Opinion 338 (Nov. 16, 1974): credit cards for payment of legal fees and expenses under the ABA Code
• Numerous state bar opinions on recourse, holder-in-due-course defenses, and restricted case types (collected in ABA/BNA Lawyers' Manual on Professional Conduct 41:602 (1984))

See also

• Alaska Ethics Op. 2023-2: Modifying Credit Card Preauthorization
• Alaska Ethics Op. 2014-1: Credit Card Surcharge for Legal Fees
• Alaska Ethics Op. 86-1: Billing for Intra-Office Conferences
• Alaska Ethics Op. 87-1: Non-Refundable Fee Retainers

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/85-5-as-modified-by-2023-2.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Ethics Opinion No. 85-5
(modified by Ethics Opinion 2023-2 – deletions indicated below)
Payment of Attorney Fees by Credit Card; Interest on Overdue Accounts.
The Committee has received a request for an opinion regarding the
propriety of allowing clients the voluntary option of paying attorney's fees and
costs through the use of their individual credit cards. The request also asks for
an opinion regarding specific methods of charging past due balances.
The Committee concludes that the use of credit cards is permissible,
provided that any plan is formulated and administered within the framework of
all applicable laws and ethical considerations. Past due balances may be
charged against the client's credit card only upon current consent of the client
at the time the charge is made, and cannot be done automatically pursuant to
an agreement executed prior to the time the charges and expenses were
incurred. Interest may be charged on overdue accounts.
The Use of Credit Cards is Permissible
In the 1960's and 1970's, the propriety of the use of credit cards for the
payment for legal services and expenses was a matter of great controversy. By
the mid and late 1970's, however, the use of credit cards for the payment for
legal services and costs was generally accepted as being permitted under the
ABA Code of Professional Responsibility, if specified guidelines were followed.
American Bar Association Formal Opinion 338 (November 16, 1974)
approved the use of credit cards for the payment of legal expenses and services
under the provisions of the ABA Code of Professional Responsibility. Numerous
states issued similar opinions, some states adopting the guidelines of ABA
Formal Opinion 338, and other states imposing their own or additional
guidelines. [See ABA/BNA Lawyers Manual on Professional Conduct 41:602
(1984)]
Some states have expressed concern with the terms of the agreement
between the attorney and the credit card issuer. Kansas has disapproved a
credit card program with a buy-back provision under which the attorney must
agree to buy back any drafts from the bank over which the cardholder disputes
the performance or quality of service, since that type of plan may place the
attorney in a position where the full discharge of the duty to the client would be
impaired. (Maru, Digest of Bar Association Ethics Opinions, 8463, Kansas Bar
Association Opinion 45, May 17, 1970) Maine has stated that any credit card
arrangement must be on a recourse basis, and the client must be so advised.
(Maru, 11206, Maine State Bar Association Opinion 49, March 1, 1977)
Massachusetts has stated that any assignment of the obligation to the bank by
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the attorney must be without recourse. (Maru, 8648, Massachusetts Bar
Association Opinion 74-1, February 9, 1974) Oklahoma has also stated that
the credit card issuer can have no recourse against the attorney. (Maru, 9375,
Oklahoma Bar Association Opinion 268, December 14, 1972) New Hampshire
has stated that the issuer must waive all holder-in-due-course defenses, and
the attorney must reserve the right to decide whether or not to sue on a
disputed or unpaid obligation. (Maru, 8792, New Hampshire Bar Association,
1975) New York has also stated that the issuer must waive all holder-in-duecourse defenses. (Maru, 9122, New York State Bar Association Opinion 362,
October 25, 1974)
Some opinions have stated that it is improper to use credit cards for
certain purposes. Maine prohibits the use of credit cards to advance funds for
the payment of fines and judgments. (Maru, 11206, Maine State Bar
Association Opinion 49, March 1, 1977) The Chicago Bar Association has
stated that it is improper to accept credit cards in certain situations, such as
divorce and bankruptcy proceedings. (Maru, 11051, Chicago Bar Association
Opinion 79-4, 1979) Montana has stated that fees for bankruptcy matters may
not be financed with credit cards. (Maru, 11980, State Bar of Montana Opinion
3, 1976) Ohio has stated that credit cards may not be used in bankruptcy,
criminal, or domestic cases. (Maru, 9678, Ohio State Bar Association Opinion
29, February 1975) Oklahoma has stated that a contingent fee cannot be
financed by a credit card. (Maru, 9375, Oklahoma Bar Association Opinion
268, December 14, 1972)
Summaries of the State Ethics Opinions regarding use of credit cards are
collected in ABA/BNA Lawyer's Manual on Professional Conduct (1984),
beginning at 41:602. Some of these opinions express considerations other than
those referred to above. Some of the considerations expressed relate to attorney
advertising, which has been substantially affected by developments in the law
subsequent to the issuance of the opinions.
In Alaska, credit cards may be used for the payment for legal services
and costs, subject to the following conditions:
(1) The client must be fully advised, in advance, of all terms and conditions under
which a charge is to be made.
(2) Charges made pursuant to a credit card plan shall be only for services actually
rendered or cash actually paid on behalf of a client. (ABA Opinion 338,
November 16, 1974)
(3) In participating in a credit card program, the attorney shall scrupulously
observe the obligation to preserve the confidences and secrets of the client. (ABA
Formal Opinion 338, November 16, 1974)
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(4) Any credit card plan shall not adversely affect the client's right to fee
arbitration pursuant to Alaska Bar Rules 34 through 42; shall not adversely affect
any other right or remedy available to the client under any law or principle of
legal ethics; nor may it adversely affect any duty of the attorney to the client
relating to payment in the event of a fee dispute or regarding the use or
application of disputed funds or other property.
(5) The credit card plan must be formulated and administered within the
framework of all applicable laws and ethical considerations.
There are certain situations in which it would be improper to accept a
credit card. Other states have recognized bankruptcy, domestic relations, and
criminal proceedings, as examples of these areas. At this point, however, the
Committee will not broadly prohibit the acceptance of credit cards in cases
involving specific areas of substantive law. This question will be left open for
later opinions upon more particular facts, if it becomes necessary. At this
point, the Committee will do no more than point out that there are problems
involving the rights of others, including the issuer, which might exist when a
credit card is accepted in a bankruptcy, domestic relations, or criminal case.
Attorneys should be particularly careful in accepting credit cards in these types
of cases, to insure that all ethical principles and requirements of law are
followed.
Interest May be Charged on Overdue Accounts
A necessary corollary to the use of credit cards is the charging of interest
on delinquent accounts.
Attorneys may charge interest on any delinquent account, regardless of
whether or not a credit card is involved. The client must be advised that the
attorney intends to charge interest, and the client must agree to the payment of
interest on accounts that are delinquent for more than a stated period of time.
The client must be fully advised as to the rate of interest, and other terms that
may be applicable. The interest charged must not exceed the rate, or be in
other violation, of any applicable law or regulation.
Generally, Credit Card Charges May be Made Only by Contemporaneous
Agreement
The Committee has been requested to opine as to the following:
(1) The propriety of charging against the client's credit card account those
attorney's fees and costs which have remained past due for a specified period of
time when done in conjunction with a provision in a written retainer agreement by
which the client has agreed that any fees or costs which remain past due for a
length of time without dispute shall be deemed reasonable and necessary, both in
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terms of the quality and quantity of work, and that such undisputed fees and costs
which have remained past due for the specified length of time could be charged
against the client's credit card account, and
(2) The propriety of automatically charging against the client's credit card account
any fees or costs which remain past due beyond a specified period of time when
there is a provision authorizing same in the written retainer agreement. Unlike the
situation in paragraph 1 above, the retainer agreement would contain no provision
as to the client's implied consent as to the quality and quantity of the services.
With respect to proposal (1), it is not appropriate for an agreement to
provide that any costs or fees, which are incurred in the future, and which
remain past due for a length of time without dispute shall be deemed
reasonable and necessary, both in terms of the quality and quantity of the
work. The client cannot know with certainty, at the time of signing a retainer
agreement, that the services to be performed in the future will be reasonable
and necessary, both in terms of quality and quantity. That decision can be
made by the client only after the work in question has been performed.
Additionally, with respect to both proposal (1) and (2), the Committee
envisions serious problems in a contractual provision authorizing credit card
charges based on future non-action by the client, such as failure to object. It is
very possible that a client may not object to a bill, simply because the client
has not received it, or for some other valid reason. An automatic credit card
charge in such a case, where the client in fact would have objected to the
charge, could result in an ethical violation. Additionally, a charge on the
client's credit card, unanticipated by the client, particularly in a large amount,
could create undue or unwarranted financial hardship or embarrassment to
the client in the use of the credit card to deal with third parties.
Accordingly, credit card charges for work performed and expenses
incurred in the future cannot be authorized by non-action of the client.
Pursuant to this opinion and ABA Formal Opinion 338 (November 16, 1974),
charges to the credit card may be made only for services actually rendered or
cash actually paid on behalf of a client. The credit card charge may be made
only if the client actually consents to the charge, with full knowledge of all the
relevant facts and circumstances, at the time the charge is made. In addition to
consenting to a single charge, a client may also give a current consent to a
program of periodic payments, such as to the payment of an undisputed
$500.00 charge by a credit card charge of $100.00 per month for the next five
months. Any consent given by the client may be withdrawn, and further
charges to the credit card may not be made, in the event of a bona fide fee
dispute.
Accordingly, the procedures set forth in paragraphs (1) and (2) above are
disapproved.
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Adopted by the Alaska Bar Association Ethics Committee on August 19, 1985.
Approved by the Board of Governors on August 23, 1985.

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