Can I pass my credit card processing fees on to clients, and what do I have to tell them first?

Plain-English summary

The inquiring attorney wanted to pass credit card processing fees on to clients in flat fee and hourly matters, and also where a client pays the attorney in connection with issuing a payment to a third party, and asked whether doing so would violate the Rules of Professional Conduct.

The panel concluded the attorney may pass those fees on to clients, subject to two conditions drawn from Rule 1.5. First, under Rule 1.5(a), attorney's fees and related expenses must be reasonable; Comment [1] provides that a lawyer may charge an amount for expenses that reasonably reflects the cost incurred. The panel reasoned that passing on credit card processing fees fits that framework because the attorney charges no more than the amount the processor charged the attorney to process the client's payment. It noted that at least four other states' ethics authorities had reached the same conclusion on identical inquiries.

Second, under Rule 1.5(b), the client must be told about the obligation to pay these fees before or as near as possible to the start of the representation. The panel concluded the attorney should include clear language in the written fee agreement informing the client that he or she will be responsible for reimbursing credit card processing fees incurred in the representation.

In practice

Under this opinion, a Rhode Island lawyer may pass credit card processing fees on to clients in flat fee and hourly matters, and where the client funds a payment to a third party, provided the charge is reasonable under Rule 1.5(a) and is disclosed to the client in writing before or near the start of the representation under Rule 1.5(b). The panel treated a charge that passes along no more than the processor's actual fee as reasonable, and identified written advance disclosure in the fee agreement as the mechanism that satisfies the notice requirement.

Common questions

Q: Can a Rhode Island lawyer charge clients for credit card processing fees?

A: Yes. The panel concluded the lawyer may pass those fees on to clients so long as the charge is reasonable under Rule 1.5(a) and disclosed in writing under Rule 1.5(b).

Q: What makes the charge reasonable?

A: The panel concluded passing on no more than the amount the processor charged the lawyer to process the client's payment falls within Rule 1.5, Comment [1], which lets a lawyer charge an amount that reasonably reflects the cost incurred.

Q: How and when must the client be told?

A: The panel concluded the lawyer should include clear language in the written fee agreement, given before or as near as possible to the start of the representation, telling the client he or she will be responsible for reimbursing the processing fees.

Background and rules framework

The opinion applies Rule 1.5 (Model Rule 1.5, fees). Paragraph (a) bars an unreasonable fee or an unreasonable amount for expenses and lists the reasonableness factors; Comment [1] allows a lawyer to charge for expenses an amount that reasonably reflects the cost incurred. Paragraph (b) requires the basis or rate of the fee and expenses to be communicated to the client in writing before or within a reasonable time after commencing the representation. The panel cited four sister-state opinions reaching the same result: NYSBA Op. 1258, Alaska Bar Op. 2014-1, ISBA Advisory Op. 14-01, and D.C. Bar Op. 348.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees; 1.5(a), 1.5(b); Comments [1] and [2])
• RI RPC 1.5

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• New York State Bar Association Committee on Professional Ethics Opinion 1258.
• Alaska Bar Association Ethics Opinion No. 2014-1.
• Illinois State Bar Association Advisory Opinion No. 14-01.
• D.C. Bar Ethics Opinion 348.

See also

• Alaska Bar Ethics Opinion 2014-1: Credit Card Surcharge for Legal Fees
• ISBA Advisory Opinion 14-01: Credit Card Used to Fund a Security Retainer
• D.C. Bar Opinion 348: Accepting Credit Cards for Legal Fees

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP-2023-12.pdf

Original opinion text

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

Rhode Island Supreme Court
Ethics Advisory Panel Op. 2023-12
Issued December 14, 2023

FACTS

The inquiring attorney wishes to pass on credit card processing fees to his or her clients in both flat fee and hourly billing matters, as well as in situations when the client has paid fees to the inquiring attorney in connection with issuance of payment to a third party. However, the inquiring attorney is unsure whether passing along these expenses would violate the Rules of Professional Conduct.

ISSUE PRESENTED

May the inquiring attorney pass on credit card processing fees to his or her clients in both flat fee and hourly billing matters, as well as in situations when the client has paid fees to the inquiring attorney in connection with issuance of payment to a third party?

OPINION

It is the Panel's opinion that the inquiring attorney may pass on credit card processing fees to his or her clients in both flat fee and hourly billing matters, as well as in situations when the client has paid fees to the inquiring attorney in connection with issuance of payment to a third party, so long as the inquiring attorney clearly communicates his or her intention to do so to the client, in writing, prior to or near the start of the representation.

REASONING

Rule 1.5 of the Rules of Professional Conduct pertains to attorney fees:

(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
(b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client. Where the fee is not fixed or contingent, billings regarding the fees, costs, and expenses shall be provided to the client on a quarterly basis or as otherwise provided in the agreement.

[The opinion here reproduces Rule 1.5(b)(1) on limited scope representation, and Rule 1.5(c) through (e) on contingent fees, prohibited fees, and division of fees between lawyers.]

Rule 1.5(a) establishes that both attorney's fees and related expenses charged by lawyers must be "reasonable under the circumstances." Rule 1.5, Comment [1]. With regard to expenses, Comment [1] to Rule 1.5 explains that "[a] lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer." Id.

Rule 1.5(b) requires that lawyers convey fee and expense information to new clients in writing prior to or as near as possible to the beginning of the representation. See also Rule 1.5, Comment [2] (noting that "[i]n a new client-lawyer relationship . . . an understanding as to fees and expenses must be promptly established"). The written notice should set forth "the general nature of the legal services to be provided, the basis, rate or total amount of the fee and whether and to what extent the client will be responsible for any costs, expenses or disbursements in the course of the representation." Id.

In this case, the inquiring attorney seeks to pass on credit card processing fees to his or her clients. To comply with Rule 1.5, such an expense must be "reasonable." See Rule 1.5(a). Comment [1] to Rule 1.5 explains with regard to expenses that the lawyer may charge an amount that "reasonably reflects the cost incurred by the lawyer." The Panel concludes that passing on credit card processing fees to clients falls within this framework, as the inquiring attorney is charging his or her clients no more than the amount initially charged to the inquiring attorney to process payments made by credit cards in connection with the representation. At least four (4) other states' attorney ethics authorities have reached the same conclusion in response to identical inquiries. See e.g., New York State Bar Association, Committee on Professional Ethics Opinion 1258; Alaska Bar Association Ethics Opinion No. 2014-1; Illinois State Bar Association Advisory Opinion No. 14-01; D.C. Bar Ethics Opinion 348.

Second, Rule 1.5(b) requires that the client be made aware of his or her obligation to pay credit card processing fees prior to or as near as possible to the start of the representation. The inquiring attorney should therefore include clear language in his or her written fee agreement form informing the client of this fact so that the client has explicit notice that he or she will be responsible for reimbursing the inquiring attorney for credit card processing fees incurred as a result of the representation.