Can a lawyer pass the credit card company's service fee on to clients who pay fees or retainers by credit card, and does it matter if the retainer is nonrefundable?

Plain-English summary

An attorney planned to start accepting credit cards so clients could charge bills and retainer fees, under an agreement where the credit card company kept 3.75% of each charge as its service fee. The inquiry asked whether the attorney could charge that 3.75% administrative fee back to clients as a cost inherent in the representation, or had to absorb it, and whether the answer changed if the retainer was nonrefundable.

The committee concluded the attorney may charge a client any fee or retainer that is objectively reasonable. Drawing on Opinion 96-06, it stated that an attorney may charge a client's credit card for fees and retainers so long as the attorney notifies the client of the charges before they are billed and offers the client an opportunity to question any errors. The reasonableness factors in Rule 1.5(a) do not preclude charging the actual credit-card service fee back to the client, particularly where the attorney gives the client the option to pay by credit card (with the added service fee) or by cash, and Rule 1.5(b) requires that the fee be clearly communicated to the client. By analogy to the rule's comment about offering alternative fee bases, the committee said an attorney who plans to charge a client's card should first offer the client the opportunity to pay by other methods.

On the second question, the committee concluded the answer is not affected where the retainer is nonrefundable. It added that where a refundable retainer exceeds the charges to the client, the attorney is not required to refund the service fee already paid to the credit card company, so long as the original retainer amount was reasonable under Rule 1.5.

Currency note

This opinion was issued in 1998, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer pass the credit card processing fee on to clients?

A: The committee concluded yes, where the overall fee is reasonable under Rule 1.5(a), the charges are fully disclosed before billing, and the client is offered the option to pay another way.

Q: What disclosure is required before charging a client's card?

A: Per the opinion, the lawyer must notify the client of the charges before they are billed, give an opportunity to question errors, and first offer the option to pay by another method.

Q: Does it matter if the retainer is nonrefundable?

A: No. The committee concluded the answer is unchanged for a nonrefundable retainer, and that even with a refundable retainer the lawyer need not refund the already-paid service fee if the retainer was reasonable.

Background and rules framework

The opinion applied South Carolina RPC 1.5 (fees), corresponding to Model Rule 1.5. Rule 1.5(a) sets the reasonableness factors, and Rule 1.5(b) requires the fee to be communicated to the client; the committee read both as permitting a disclosed, optional credit-card service-fee pass-through. It relied on its prior Opinion 96-06.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.5(a), (b) / Model Rule 1.5: reasonableness of fees and communication of the fee.

Other opinions cited:

• S.C. Bar Ethics Op. 96-06: charging a client's credit card for fees and retainers with prior notice.

See also

• SC Bar Ethics Op. 06-02: Recording-Fee Markups
• SC Bar Ethics Op. 02-07: Refunding a Third-Party-Paid Fee

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-98-08/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 98-08

Attorney plans to obtain the ability to accept credit cards so clients may charge bills and retainer fees to their credit card. Under Attorney's agreement with the credit card company, the company keeps 3.75% of the amount charged as its service fee.

QUESTION:

1. May Attorney charge back the 3.75% administrative fee charged by the credit card company to her clients as a cost inherent to representation or must Attorney bear the cost of the service fee?
2. Will the answer to the above question be affected if the retainer fee is nonrefundable?

SUMMARY:

1. Attorney may charge the client any amount for a fee or retainer that is objectively reasonable.
   A. Attorney may charge a client's credit card for fees and retainers so long as Attorney notifies Client of these charges before they are billed to the credit card.
   B. The reasonability factors set forth in RPC 1.5 (a) do not preclude charging actual credit card service fees to Client so long as there is full and prior disclosure of all charges.
   C. Where Attorney plans to charge Client's credit card for fees or a retainer, she should first provide Client with the opportunity of payment by other methods.

2. The answer to the above is not affected where the retainer fee is nonrefundable.

DISCUSSION:
In advisory opinion 96-06, this committee held that an attorney may charge a client's credit card for fees and retainers so long as the attorney notifies the client of charges before they are billed to the credit card, and offers the client an opportunity to question any errors. Attorney must comply with RPC 1.5 regarding fees. So long as the fee is reasonable under the factors set forth in 1.5(a), then Rule 1.5 (b) implies that the only other requirement pertinent in this case is that the fee be clearly communicated to the client. The reasonableness factors outlined in RPC 1.5(a) do not appear to preclude charging back credit card service fees to the client. This is particularly true where the attorney gives a client the option of payment either by credit card, with an additional service fee, or by cash. The comments to RPC 1.5 state that "...where there is doubt whether a contingent fee is consistent with the client's best interest, the lawyer should offer the client alternative bases for the fee and explain their implications." This requirement may be applied by analogy to the situation of payment by credit card. Where an attorney plans to charge a client's credit card for fees or retainer, she should first provide the client with the opportunity of payment by other methods. Where the retainer is refundable and amounts to more than the charges to the client, the attorney is not required to refund the service fee already paid to the credit card so long as the original amount set for the retainer was reasonable under RPC 1.5.