Can an Illinois lawyer take a security retainer by credit card, and charge the client a service fee for using a card?

Plain-English summary

A lawyer wanted to accept a retainer through the client's credit card, but the card company required payments to be deposited into the lawyer's business account, from which the lawyer would then transfer the retainer to the trust account. The lawyer also wanted to charge a service fee for card payments, disclosed in the engagement agreement.

On the first question, the opinion turns on Rule 1.15 and the type of retainer. The committee explains that earned fees, fixed fees, and general or advance-payment retainers are the lawyer's property and may be deposited in the business account, but a security retainer remains the client's property until applied and must be deposited in the trust account (citing Dowling v. Chicago Options Associates and Rule 1.15 cmt. 3[B]). Routing a security retainer through the business account first, even temporarily, would be impermissible commingling under a long line of Illinois Supreme Court discipline cases (In re Johnson, In re Clayter, In re Vrdolyak, and others); the committee notes that intent and the temporary nature of the deposit do not cure the violation.

The committee's solution is for a lawyer who takes both earned fees and security retainers by card to designate two accounts with the card company: a business account for earned fees and advance or general retainers, and a trust account for security retainers, with care taken to route each payment to the correct account. The committee declined to follow states that allow all card payments into the trust account, finding that approach contemplates extensive commingling inconsistent with Illinois law. The opinion flags additional trust-account concerns: depositing enough to cover card service fees (permitted by Rule 1.15(b)), and the risk that a "chargeback" could deplete the trust account below the required balance (on which the committee declined to opine in detail).

The committee also identifies Rule 1.6 confidentiality concerns: charge-slip descriptions should be general ("for professional services rendered"), the lawyer should advise the client that using a card reveals some information (such as the client's identity) to the card company, and the lawyer should try to avoid an obligation to cooperate with the card company against the client in a dispute, obtaining informed consent if that obligation cannot be avoided.

On the second question, the opinion concludes that the Rules of Professional Conduct do not bar a service fee for card payments so long as the fee is reasonable under Rule 1.5(a) and disclosed to the client (preferably in writing) under Rule 1.5(b). Whether such a fee violates the card company's contract or other law is beyond the opinion's scope.

In practice

Under this opinion, an Illinois lawyer who accepts a security retainer by credit card must arrange for it to be deposited directly into the client trust account; the opinion holds that running it through the business account first is impermissible commingling regardless of intent. The recommended structure is two designated accounts with the card processor. The opinion concludes a credit-card service fee is permissible if it is reasonable and disclosed in advance, and it directs the lawyer to keep charge-slip descriptions general and to address the confidentiality and chargeback issues the rules raise.

Common questions

Q: Can I deposit a credit-card retainer into my business account and then move it to trust?

A: Not for a security retainer. The opinion concludes that depositing a security retainer (the client's property) into the business account even temporarily is impermissible commingling; it must go directly into the trust account.

Q: Do all credit-card retainers have to go into the trust account?

A: No. Per the opinion, earned fees, fixed fees, and general or advance-payment retainers are the lawyer's property and may be deposited into the business account; only security retainers must go into trust. The committee suggests designating two accounts with the card company.

Q: Can I charge the client a fee for paying by credit card?

A: Yes, under the Rules of Professional Conduct, if the fee is reasonable (Rule 1.5(a)) and disclosed to the client in advance, preferably in writing (Rule 1.5(b)). The opinion does not address whether the card company's contract or other law allows it.

Q: What confidentiality issues does accepting cards raise?

A: The opinion notes that charge-slip descriptions should be general, that the client should be told a card payment discloses some information (such as identity) to the card company, and that the lawyer should seek to avoid an obligation to cooperate with the card company against the client, getting informed consent if that cannot be avoided.

Background and rules framework

The opinion interprets Illinois Rules of Professional Conduct 1.15 (safekeeping property; Model Rule 1.15), 1.5 (fees; Model Rule 1.5), and 1.6 (confidentiality; Model Rule 1.6). The analysis rests on the distinction among retainer types drawn in Dowling v. Chicago Options Associates and on the Illinois Supreme Court's longstanding prohibition on commingling client and lawyer funds.

Citations and references

Rules of Professional Conduct:

• Illinois RPC 1.15 (Model Rule 1.15): safekeeping property and trust accounts
• Illinois RPC 1.5 (Model Rule 1.5): reasonable fees and fee communication
• Illinois RPC 1.6 (Model Rule 1.6): confidentiality of information

Cases:

• Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d 277 (2007), types of retainers
• In re Johnson, 133 Ill. 2d 516 (1989); In re Clayter, 78 Ill. 2d 276 (1980); In re Vrdolyak, 137 Ill. 2d 407 (1990), commingling discipline cases

Other opinions cited:

• Colorado Bar Formal Op. 99; D.C. Bar Op. 348; Kentucky KBA E-426; Michigan RI-344; New Mexico Advisory Op. 2000-1; North Carolina 2009 FEO 4; Oregon Formal Op. 2005-172; Virginia LEO 999 and LEO 1848; Washington Op. 2214: sibling state authorities on card payments

See also

• ISBA Ethics Op. 12-19: Use of Advance Payment Retainers in Family Law Matters
• ISBA Ethics Op. 15-02: Disposition of Unclaimed and Unidentified Client Funds
• NY State Bar Op. 1050: Up-Charging Credit Card Processing Fees on a Retainer
• NY State Bar Op. 1134: Credit Card to Secure Fees in a Divorce Matter

Source

• Landing page: https://www.isba.org/ethics/opinions/1401