Can a lawyer use a web-based payment service where client credit-card payments first land in the lawyer's account with the service before going to trust?

Plain-English summary

The inquirer asked about using a web-based payment processing service to receive client payments. As described, the lawyer sets up an account with the service; clients make online credit-card payments into the lawyer's account with the service; the service emails the lawyer that a payment has arrived; and the lawyer then transfers the payment to the correct account, trust or operating. The inquiry assumed the service was optional for clients and that the lawyer paid any associated cost.

The committee concluded that, unlike a traditional credit-card arrangement, the client's payment initially lands in the lawyer's account with the service. Under RPC 1.14(a), all client funds paid to a lawyer, including advances for costs and expenses and funds belonging in part to the client and in part to the lawyer, must be deposited into a trust account meeting RPC 1.14(c). The committee reasoned that such funds therefore must go into trust and must not be placed in the lawyer's account with the service, because funds held there are not safeguarded as RPC 1.14 requires. The committee added that, assuming the lawyer investigates the service to confirm it is reliable and secure and clearly communicates to the client in advance how it works and how payments will be processed, it saw no ethical problem in using the service to collect payments belonging only to the lawyer.

In practice

Under this opinion, and under the Washington safekeeping rule as it stood in 2005, the dividing line is whose money it is. The opinion holds that funds belonging to the client (including advances for costs and mixed funds) must be deposited directly into a conforming trust account and may not sit in an intermediary web-payment-service account first, because that account does not safeguard the funds under RPC 1.14. For payments that belong only to the lawyer, the opinion permits the service so long as the lawyer vets it for reliability and security and explains the process to the client in advance. Note that Washington renumbered its safekeeping rule after the 2006 revisions, moving the trust-account requirements from RPC 1.14 to RPC 1.15A, so the current rule text should be checked.

Common questions

Q: Can client credit-card payments pass through the lawyer's web-payment-service account before reaching the trust account?

A: No, for funds belonging to the client. The committee concluded those funds must be deposited into a trust account meeting RPC 1.14 and not held in the lawyer's account with the service, which does not safeguard them as the rule requires.

Q: Can a lawyer use such a service at all?

A: Yes, for money that belongs only to the lawyer. The committee saw no ethical problem in using the service to collect the lawyer's own payments, provided the lawyer vets the service and explains the process to the client in advance.

Q: What does the lawyer have to do before using the service?

A: The committee said the lawyer should investigate the service to confirm it is reliable and secure and clearly communicate to the client in advance how the service works and how payments will be processed.

Background and rules framework

The opinion interpreted RPC 1.14 (the Washington safekeeping-of-property rule in effect in 2005, the counterpart to Model Rule 1.15), which required client funds, including advances and mixed funds, to be deposited into a conforming trust account. After the 2006 revisions, Washington moved these requirements to RPC 1.15A. The committee applied the rule to a then-new payment technology, focusing on whether client funds would be safeguarded while held in an intermediary account.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Washington RPC 1.14, 1.14(a), 1.14(c) (safekeeping of client funds; trust-account requirements as numbered in 2005; later renumbered RPC 1.15A)

See also

• WSBA Ethics Op. 193: Routing Trust Funds Through a Disbursing Account
• ABA Formal Op. 00-419: Credit-Card Payment of Legal Fees
• NY State Bar Op. 763: Third-Party Credit-Card Payments

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1545

Original opinion text

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

Advisory Opinion: 2108
Year Issued: 2005
RPC(s): RPC 1.14
Subject: web-based payment processing service

The Inquirer asks about the ethical propriety of using a web-based payment processing service (“the service”) to receive payments from clients. According to the Inquirer, the lawyer initially sets up a web account with the service. Clients then log on to the service’s website, and make credit card payments on-line to the lawyer’s account. The service immediately notifies the lawyer via email that a payment has been placed into the lawyer’s account. The lawyer then enters the account on-line and transfers payment to the correct lawyer’s account (trust or operating). We assume that the lawyer will offer the service as an option for account payment, and that it will not be required. We also assume that any cost associated with the service will be paid by the lawyer.

Unlike a traditional credit card arrangement, the client’s payment will be placed initially in the lawyer’s account with the service. Under RPC 1.14(a), all funds of clients paid to a lawyer or law firm, including advances for costs and expenses, and funds belonging in part to a client and in part presently or potentially to the lawyer or law firm, must be deposited into a trust account meeting the requirements of RPC 1.14(c). Such funds, therefore, must be placed in trust and must not be placed in the lawyer’s account with the service for transfer by the lawyer. This is because client funds in the lawyer’s account with the service are not safeguarded as required by RPC 1.14.

Assuming that the lawyer investigates the service to determine that accepting payments through it will be reliable and secure, and that the lawyer clearly communicates to the client in advance how the service will work and how payments will be processed by the lawyer, the Committee does not see any ethical problem associated with utilizing the service to collect payments belonging only to the lawyer from clients.