Can a law firm charge clients who pay a retainer by credit card a little more than the processing fee the card company charges the firm?
NY State Bar Ethics Opinion 1050: Charging clients more than the credit card processing fee
Short answer: A lawyer may, as an administrative convenience, charge a client a nominal amount above the actual credit card processing fee on an advance-payment retainer, provided the client receives disclosure of and consents to the up-charge before it is imposed, the up-charge is nominal, and the total of the retainer and processing fees is reasonable.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.
Plain-English summary
A law firm wanted clients to be able to pay advance-payment retainers by credit card and to pass the card company's processing fee (2.75% to 3.2%) on to the client. Because a client who pays the processing fee itself by credit card incurs a further fee, and so on, the firm proposed a single flat charge slightly above the actual fee (3% to cover a 2.75% fee, 3.5% to cover a 3.2% fee), producing a small up-charge of roughly $17 on a $10,000 retainer (¶¶ 1-3). The question was whether charging more than the processing fee the card company actually imposes is permissible (¶ 4).
The committee recounted the settled rule that New York lawyers may accept credit card payment of fees subject to conditions: the fee must be reasonable, client confidentiality protected, the lawyer's independent judgment uncompromised, the client notified before charges and given a chance to question errors, and fee disputes handled amicably and through the Part 137 program where applicable (¶ 5). It noted N.Y. State 763 (2003) permits passing along the actual processing charge if that is part of the understanding with the client, and otherwise the charge comes from the firm's operating account (¶ 6).
On the new question, the committee drew on the expense-billing line of authority, ABA 93-379 and N.Y. City 2006-3, reflected in Comment [1] to Rule 1.5, which allow a lawyer to charge an in-house cost either at an amount the client agreed to in advance or at the lawyer's actual cost, provided it is not excessive (¶¶ 10-11). Applying that analysis, the committee held a lawyer may charge more than the card company's processing fee if (i) the client receives disclosure of the up-charge and consents before it is imposed, (ii) the up-charge is nominal, and (iii) the total of the retainer and processing fees (including the up-charge) is reasonable; when an up-charge becomes excessive is a fact question (¶ 12). The committee distinguished prior opinions barring interest charges above the lawyer's actual cost (N.Y. City 1997-1, N.Y. State 729, N.Y. State 754) as not affecting this nominal-convenience charge (¶¶ 13-14), and assumed the up-charge does not violate law or the card contract and that it is explained in the written engagement letter required by 22 N.Y.C.R.R. § 1215.1 (¶¶ 15-17).
In practice
Under the New York rules as they stood at the time of the opinion, the committee treated the credit card up-charge like any other billed expense under Rule 1.5. Passing along the actual processing fee is permitted if disclosed and agreed to in advance and the total is reasonable. A nominal charge above the actual fee is also permitted on the same conditions: advance disclosure and client consent before imposition, a nominal up-charge, and a reasonable total of retainer plus fees. The committee flagged that whether an up-charge has become excessive is fact-specific (considering the size of the up-charge and retainer and the client's ability to avoid it by paying with cash or check), that the up-charge should appear in the written engagement letter, and that it took no position on whether the practice complies with consumer-protection law or the card contract.
Common questions
Q: Can a lawyer pass credit card processing fees on to the client?
A: Yes. The committee confirmed a lawyer may pass along the actual processing fee if the client is advised of and agrees to it in advance and the processing fee plus the attorney's fee is reasonable (¶ 8).
Q: Can the firm charge a bit more than the actual processing fee?
A: Yes, as an administrative convenience, if the client receives disclosure and consents before the up-charge is imposed, the up-charge is nominal, and the total of the retainer and processing fees is reasonable (¶ 12).
Q: When does the up-charge become improper?
A: When it becomes excessive, which the committee treats as a fact question turning on the size of the up-charge, the size of the retainer, and the client's opportunity to avoid it by paying with cash or check (¶ 12).
Background and rules framework
The opinion interprets New York Rule 1.5(a) (no excessive fee or expense) and Rule 1.5(b) (communicating the basis or rate of fees and expenses), corresponding to ABA Model Rule 1.5. The analysis applies the expense-billing principle in Comment [1] to Rule 1.5, that a lawyer may bill an in-house cost at an agreed amount or actual cost so long as the charge is not excessive.
Citations and references
Rules of Professional Conduct:
- MR 1.5 / NY RPC 1.5(a), 1.5(b) (excessive fees and expenses; communicating the basis of fees)
Regulations:
- 22 N.Y.C.R.R. § 1215.1 (written letter of engagement)
- 22 N.Y.C.R.R. Part 137 (fee dispute resolution program)
Other opinions cited:
- N.Y. State 763 (2003), as modifying N.Y. State 362 (1974): conditions for accepting credit card payment of fees
- ABA 93-379 (1993); N.Y. City 2006-3: billing in-house and outsourced costs at no more than cost plus reasonable overhead absent agreement
- N.Y. City 1997-1; N.Y. State 729 (2000); N.Y. State 754 (2002): no interest charge above the lawyer's actual cost
See also
- ABA Formal Op. 00-419: Credit Card Payment of Legal Fees
- NY State Bar Op. 1202: Flat fees, advance payments, and a client-satisfaction discount
Source
- Landing page: https://nysba.org/ethics-opinion-1050/