How should a North Carolina lawyer handle fee payments received by electronic transfer or credit card when the bank can deposit them into only one account?

Plain-English summary

The opinion addressed how a lawyer should handle fee payments made by electronic transfer when a bank will deposit such payments into only one account. Under Rule 10.1(c), mixed funds, unearned fees, and money advanced for costs go into the trust account, while earned fees, nonrefundable retainers, and reimbursements go into the operating account to avoid commingling. The inquiry asked whether the lawyer could open a third "interim" account for all electronic transfers, or send everything to the trust account.

The opinion concluded that no interim account should be established. If the bank cannot distinguish an earned-fee transfer from an unearned-fee transfer, all electronic-transfer payments should be deposited into the trust account, and the earned fees should be withdrawn promptly. The opinion noted that the lawyer may deposit into the trust account enough of the lawyer's own funds to cover the bank's service charges for electronic transfers, keeping a ledger for those charges.

The opinion resolved several related questions. A client may charge legal expenses as well as fees to a credit card, with those funds deposited to the trust account and held until used. With full disclosure, the lawyer may pass the cost of the electronic-transfer discount through to the client. To refund an unearned fee originally paid by electronic transfer, the lawyer sends a trust-account check for the unearned amount. Finally, the opinion concluded that lawyers in different firms may not share electronic-transfer equipment if doing so would temporarily commingle different firms' client funds in one deposit account, because that jeopardizes the integrity of trust-account record keeping.

Currency note

This opinion was issued in 1997, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a North Carolina lawyer open a separate account just for electronic-transfer fee payments?

A: No. The opinion concluded that no interim account should be established; when the bank cannot separate earned from unearned fees, all electronic transfers go into the trust account and earned fees are withdrawn promptly.

Q: Can a client pay legal expenses, not just fees, by credit card?

A: Yes. The opinion concluded that such funds should be deposited directly to the trust account and held there until used to pay the client's expenses.

Q: Can the lawyer charge the client for the bank's transfer fee?

A: Yes, with full disclosure. The opinion concluded that the lawyer may pass the expense associated with payment by electronic transfer to the client after disclosing it.

Q: How does the lawyer refund an unearned fee paid by electronic transfer?

A: The opinion concluded that the lawyer sends the client a trust-account check in the amount of the unearned fee.

Q: Can lawyers in different firms share electronic-transfer equipment?

A: No, if doing so commingles different firms' client funds in one deposit account. The opinion concluded that this jeopardizes the record keeping required for trust accounts.

Background and rules framework

The opinion applied North Carolina's then-current trust-accounting rules, Rule 10.1(c) (segregation of client funds and avoidance of commingling) and Rule 10.2 (trust-account record keeping, including Rule 10.2(c) and (e) on disbursement and refund), which correspond to Model Rule 1.15. It relied on CPR 129 for the proposition that lawyers may accept payment by credit card.

Citations and references

Rules of Professional Conduct:

• MR 1.15 (safekeeping property; trust accounts)
• North Carolina Rule 10.1(c) and Rule 10.2

Other opinions cited:

• CPR 129: lawyers may accept fee payment by credit card

See also

• NC Ethics Op. 97 FEO 9: credit-card chargebacks against a trust account
• NC Ethics Op. 2001-14: digital check images for trust records

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-247/

Original opinion text

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

Inquiry #1:

Under Rule 10.1(c) of the Rules of Professional Conduct, mixed funds, unearned fees, and money advanced for costs must be deposited directly into a lawyer's trust account. Earned fees, nonrefundable retainers, and reimbursements for expenses advanced by the lawyer on behalf of a client must be deposited into the lawyer's general or operating account to avoid the commingling of the lawyer's funds with the clients' funds.

Lawyers may accept payment of fees by credit card. CPR 129. However, when a bank processes any payments by electronic transfer, the bank will only deposit funds into one bank account maintained by the bank's customer. There is no method whereby funds representing an earned fee can be deposited into the operating account and funds representing an advance payment for legal services yet to be rendered, or an unearned fee, may be deposited into the trust account. May a lawyer establish a third account to handle all payments by electronic transfer—including payments of earned and unearned fees? Or should the bank be instructed to send all payments by electronic transfer to the lawyer's trust account although a particular transfer may be for a fee that has already been earned?

Opinion #1:

An interim account should not be established. If a payment by electronic transfer of an earned fee cannot be distinguished by the bank from a payment by electronic transfer of an unearned fee, all payments by electronic transfer should be deposited into the lawyer's trust account and the earned fees should be withdrawn from the trust account promptly. See Rule 10.1(c). A lawyer may also deposit into the trust account funds sufficient to pay the bank's service charges for electronic transfers. Rule 10.1(c)(1). A ledger should be maintained for the service charges posted against such funds. Rule 10.2(c)(3).

Inquiry #2:

May a client charge legal expenses as well as legal fees to his credit card?

Opinion #2:

Yes. These funds should be deposited directly to the trust account and held there until used to pay expenses on behalf of the client.

Inquiry #3:

May a lawyer offset the discount rate charged by the bank for electronic transfers? For example, may the lawyer surcharge the client? If so, may the lawyer levy a surcharge on the whole amount or just that portion of the payment that constitutes the attorney's fee?

Opinion #3:

With full disclosure to the client, the lawyer may charge the client the expense associated with payment by electronic transfer.

Inquiry #4:

What procedure should a lawyer follow to return an unearned fee to a client if the fee was originally paid by electronic transfer?

Opinion #4:

A trust account check should be sent to the client in the amount of the unearned fee. Rule 10.2(c) and (e).

Inquiry #5:

May lawyers in different law firms share the use of electronic transfer equipment if the funds of the clients of different law firms will be temporarily commingled in one deposit account?

Opinion #5:

No, this procedure will jeopardize the integrity of the record keeping required for trust accounts. Rule 10.2.