NYC-BAR May 31, 2014

Can a lawyer charge a client's credit card for a bill the client has disputed, if the client pre-authorized card charges?

Short answer: No. The opinion concludes that once a client disputes all or part of a bill, the lawyer may not charge the credit card for the disputed portion, even with prior advance authorization. A lawyer holding card information is the client's fiduciary, and charging disputed amounts is analogous to withdrawing disputed escrow funds, which Rule 1.15(b)(4) prohibits.

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This page answers the general question as of 2014. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.

View original ethics opinion (PDF)

Plain-English summary

The committee starts from the settled position that New York lawyers may accept payment by credit card, provided they protect confidential information (Rule 1.6) and avoid excessive fees (Rule 1.5). The narrow question here is whether a lawyer who holds advance authorization to charge a client's card may charge it for a bill the client has since disputed. The committee concludes the lawyer may not charge the disputed portion without the client's consent.

The reasoning rests on Rule 1.15. Because the rule's protections flow from the lawyer's role as the client's fiduciary, a lawyer entrusted with a client's credit card information and authority to charge it holds that information as a fiduciary. Charging the card after the client disputes the fee violates that trust. The committee draws an analogy to Rule 1.15(b)(4), which provides that when a lawyer holds escrow funds belonging in part to the client and in part to the lawyer, and the client disputes the lawyer's entitlement, the disputed portion may not be withdrawn until the dispute is finally resolved. If a lawyer cannot withdraw disputed funds from escrow, the committee reasons, the lawyer likewise may not charge disputed amounts to the client's card. The lawyer may charge the undisputed portion of the bill.

In practice

The opinion holds that, under the New York rules as they stood at the time, advance credit-card authorization does not survive a dispute: once the client disputes all or part of a bill, the disputed portion may not be charged without the client's consent, by analogy to the Rule 1.15(b)(4) bar on withdrawing disputed escrow funds. Per the opinion, the undisputed portion may still be charged. The committee notes that credit-card use may also raise consumer-protection and data-breach questions of substantive law outside its jurisdiction.

Common questions

Q: My client pre-authorized credit card charges, then disputed a bill. Can I still charge the card?

A: Not for the disputed portion. The opinion concludes that once the client disputes all or part of the bill, the lawyer may not charge the disputed amount to the card without the client's consent, despite the prior advance authorization.

Q: Can I charge the part of the bill the client agrees with?

A: Yes. The opinion concludes the lawyer may charge the client's card for the portion of the bill the client does not dispute; only the disputed portion is off limits.

Q: Why does Rule 1.15 control a credit card charge?

A: Per the opinion, a lawyer entrusted with a client's card information and authority to charge it holds that information as the client's fiduciary, so charging a disputed amount is analogous to withdrawing disputed escrow funds, which Rule 1.15(b)(4) prohibits until the dispute is resolved.

Background and rules framework

The opinion interprets New York Rule 1.15 (safekeeping client property; trust accounts; Model Rule 1.15), in particular the fiduciary duty in Rule 1.15(a) and the bar in Rule 1.15(b)(4) on withdrawing disputed funds, against the backdrop of Rules 1.5 (fees; Model Rule 1.5) and 1.6 (confidentiality; Model Rule 1.6) that govern credit-card acceptance generally.

Citations and references

Rules of Professional Conduct:

Model Rule 1.15 / NY RPC 1.15(a), (b)(4) (fiduciary duty; disputed funds may not be withdrawn)
Model Rule 1.5 / NY RPC 1.5 (fees; avoiding excessive charges)
Model Rule 1.6 / NY RPC 1.6 (confidentiality; credit-card information)

Other opinions cited:

Nassau County Bar Op. 13-5 (2013): lawyers may accept credit-card payment subject to stated caveats

Source

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