Ezel / Ethics Opinions / NYSBA
NYSBA 2016-11-15

Can a lawyer pay a client's settlement funds on a fully-loaded pre-paid debit card instead of by check?

Short answer: Yes. A lawyer may give the client that option and use a pre-paid debit card to pay funds the client is owed, provided the lawyer adequately discloses the relative merits and costs of the payment methods and follows the client's instructions.
Currency note: this opinion is from 2016
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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 Not binding precedent.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 at the bottom of this page) is the authoritative source for any reliance.

NY State Bar Ethics Opinion 1109: Paying clients with pre-paid debit cards

Short answer: A lawyer may offer a client the option of receiving funds the client is owed on a fully-loaded pre-paid debit card rather than by check, provided the lawyer discloses the relative merits and costs of the payment methods and follows the client's instructions.

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.

View original opinion

Plain-English summary

A personal-injury lawyer working on contingency wanted to give clients the choice of receiving their settlement or judgment proceeds on a fully-loaded pre-paid debit card instead of a check. Many of the lawyer's clients lack bank accounts and use check-cashing services that charge a fee; the firm would charge nothing for the card and would load the full amount due.

The committee framed the issue narrowly: the lawyer holds money that unquestionably belongs to the client, and the only question is whether the lawyer may transfer it by a fully-loaded pre-paid debit card rather than a check (¶ 11). The answer is yes. Rule 1.15(c)(4) requires the lawyer to "promptly pay or deliver" funds the client is entitled to receive "as requested by the client," which the committee read to oblige the lawyer to seek the client's consent before using a card (¶ 11-12). Rules 1.4(a) and 1.4(b), together with the Rule 1.0(j) definition of informed consent, require the lawyer to explain the material risks and reasonably available alternatives, meaning the lawyer must explain the payment options and the relative risks, rewards, and charges of each (¶ 12). The opinion canvassed the fees and weaker consumer protections of pre-paid cards as context for that disclosure (¶ 8-9).

Two mechanics flow from Rule 1.15(e): special-account withdrawals must be made to a named payee, not to cash, by check or, with the client's prior written approval, by bank transfer, so the lawyer must ensure the card issuer accepts a transfer by one of those means and obtain written approval for a wire transfer (¶ 13). The committee also warned that if a card issuer compensated the lawyer for steering customers, the lawyer would have a personal-interest conflict under Rule 1.7(a) (¶ 14).

In practice

The opinion holds that nothing in the Rules bars paying a client by a fully-loaded pre-paid debit card, because the funds belong to the client and Rule 1.15(c)(4) lets the client direct how they are delivered. The lawyer must obtain the client's consent and, under Rule 1.4, explain the options, costs, and relative risks (including the cards' fees and reduced protections) so the consent is informed. Mechanically, Rule 1.15(e) requires the transfer to go to a named payee by check or, with the client's written approval, by bank transfer, and the lawyer must not take any steering compensation from the card issuer.

Common questions

Q: Can a New York lawyer pay client funds by pre-paid debit card?

A: Yes, if the client consents after adequate disclosure. The opinion concludes the funds belong to the client and Rule 1.15(c)(4) allows delivery "as requested by the client" (¶ 11, ¶ 15).

Q: What must the lawyer tell the client first?

A: Under Rule 1.4 and the Rule 1.0(j) informed-consent standard, the lawyer must explain the payment options and the relative risks, rewards, and charges of each, including the cards' fees (¶ 12).

Q: Are there trust-account mechanics to follow?

A: Yes. Rule 1.15(e) requires withdrawals to a named payee by check or, with the client's prior written approval, by bank transfer, so the lawyer must confirm the issuer accepts such a transfer (¶ 13).

Q: Can the lawyer accept a fee from the card issuer?

A: No. The opinion warns that compensation from the issuer for steering customers would create a personal-interest conflict under Rule 1.7(a) (¶ 14).

Background and rules framework

The opinion applies New York Rule 1.15 (safekeeping of client funds; the New York analog to ABA Model Rule 1.15) and Rule 1.4 (communication; ABA Model Rule 1.4), with Rule 1.0(j) defining informed consent. Rule 1.15(c)(4) requires prompt delivery of client funds as the client requests, and Rule 1.15(e) governs how special-account withdrawals may be made.

Citations and references

Rules of Professional Conduct:

  • MR 1.15 / NY RPC 1.15(c)(4), 1.15(e) (safekeeping and delivery of client funds)
  • MR 1.4 / NY RPC 1.4(a), 1.4(b) (communication); NY RPC 1.0(j) (informed consent)

Other opinions cited:

  • N.Y. State 1086 (2016): a lawyer may not accept a referral fee creating a non-consentable conflict

See also

Source