Can a lawyer pass the credit card merchant processing fee on to a client who pays legal fees by credit card?

Plain-English summary

The inquirer accepts credit card payments for legal services and is charged a merchant processing fee of roughly 3.5% to 3.75% of the invoiced amount. The question is whether the lawyer may pass that fee on to the client as an expense.

The opinion applies Rule 1.5(a), which prohibits charging an excessive fee or expense, and treats a merchant processing fee charged back to a client as an "expense" within the meaning of that rule. The opinion notes that Rule 1.5(b) requires the lawyer to advise the client in writing of the fees and expenses for which the client will be responsible. Drawing on N.Y. State 1050 (2015), the opinion concludes that nothing prohibits a lawyer from increasing the invoiced amount by the merchant processing fee, provided the lawyer complies with Rule 1.5. The opinion notes that N.Y. State 1050 also allowed a nominal up-charge to cover the processing fee imposed on the up-charge itself, subject to disclosure, advance consent, and overall reasonableness, and concludes the same principles apply to processing fees on legal fees paid after the advance retainer.

The opinion observes that other states' bars have reached similar conclusions (Illinois Op. 14-01 and D.C. Op. 348), and states that whether the up-charge complies with General Business Law section 518.1, as amended, is a question of law beyond its jurisdiction.

In practice

Under this opinion, a lawyer may charge a client the credit card merchant processing fee as an expense if the legal fee and the processing fee are both reasonable, the lawyer explains the charge to the client, and the client consents in advance, with the fees and expenses stated in writing as Rule 1.5(b) requires. Per the opinion, whether the up-charge complies with General Business Law section 518.1 is a question of law the committee does not decide.

Common questions

Q: Can a lawyer add the credit card processing fee to the client's bill?

A: Per the opinion, yes, as an expense, if the legal fee and the processing fee are reasonable and the lawyer explained the charge and obtained the client's consent in advance.

Q: Does the processing fee count as a "fee" or an "expense" under the rules?

A: Per the opinion, it is an "expense" within the meaning of Rule 1.5(a), and Rule 1.5(b) requires the lawyer to state the fees and expenses for which the client is responsible in writing.

Q: Can the lawyer add a little more than the actual processing cost?

A: Per the opinion, a nominal up-charge over the actual processing fees is permitted, as recognized in N.Y. State 1050, if the client is told of it and consents before it is imposed and the total charged is reasonable.

Background and rules framework

The opinion interprets New York Rule 1.5(a) (no excessive fee or expense) and Rule 1.5(b) (writing requirement for fees and expenses), which correspond to ABA Model Rule 1.5. The opinion treats General Business Law section 518.1 as a question of law it does not decide.

Citations and references

Rules of Professional Conduct:

• New York Rules of Professional Conduct 1.5(a), 1.5(b)
• ABA Model Rule 1.5 (analogue)

Statutes:

• New York General Business Law section 518.1 (credit card surcharge disclosure; noted as a question of law)

Other opinions cited:

• N.Y. State 1050 (2015): passing on credit card processing fees and a nominal up-charge
• Illinois Op. 14-01 (2014); D.C. Op. 348 (2009): similar conclusions

See also

• NYSBA Ethics Op. 1271: Online Bidding Service Fee-Splitting
• NYSBA Ethics Op. 1281: Trust-Account Payments via Pay.gov

Source

• Landing page: https://nysba.org/ethics-opinion-1258/