Can a lawyer pass the credit-card processing fee on to the client when the client pays the lawyer by credit card?

Plain-English summary

A lawyer who accepts client payments by credit card is charged a per-transaction fee by the credit-card company. The lawyer asked whether the client could be charged an additional amount to cover that fee. The committee concluded the conduct is not prohibited by the Rules of Professional Conduct, conditioned on the lawyer notifying the client in advance and charging no more than an amount that reasonably reflects the actual cost of the transaction.

The committee grounded that conclusion in RPC 1.5(a) (a lawyer may charge reasonable amounts for expenses) and RPC 1.5(b) (the basis for expenses the client will bear should be communicated in writing), and in Comment 1 to RPC 1.5, which permits charging a client either a reasonable amount agreed to in advance or an amount that reasonably reflects the lawyer's cost. The committee separately cautioned that, at the time of the opinion, the operating agreements of most major credit-card companies prohibited charging customers extra fees to recover transaction costs, so doing so could violate the lawyer's obligations to the card provider. It advised consulting the applicable merchant-services agreement and contracting bank before passing the fee on, and noted that many card agreements instead permit a discount for cash payment.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee held that nothing in the RPC bars a lawyer from recovering a credit-card transaction fee from a client, so long as the client is notified in advance and the charge does not exceed the actual cost, citing RPC 1.5(a)-(b) and Comment 1. The opinion identifies the practical constraint as contractual rather than ethical: the committee observed that most credit-card operating agreements at the time prohibited surcharging the customer, so it directed the lawyer to consult the merchant-services agreement and contracting bank before charging the fee.

Common questions

Q: Do the Rules of Professional Conduct let a lawyer pass a credit-card transaction fee to the client?

A: Yes. The committee concluded the RPC do not prohibit it, provided the lawyer gives advance notice and charges no more than the actual cost of the transaction, citing RPC 1.5(a) and Comment 1.

Q: Does the lawyer have to tell the client first?

A: Yes. The committee conditioned its answer on advance notice and tied the written-communication expectation to RPC 1.5(b).

Q: What is the catch the committee flagged?

A: The committee noted that, at the time of the opinion, most major credit-card operating agreements prohibited charging customers extra to cover transaction fees, so the lawyer should consult the merchant-services agreement and contracting bank, since surcharging could violate those agreements.

Q: Is there an alternative the committee mentioned?

A: The committee observed that many credit-card agreements permit offering a discount for cash payment even where surcharging the card is prohibited.

Background and rules framework

The opinion interprets Washington RPC 1.5(a) (Model Rule 1.5(a), reasonableness of fees and expenses) and RPC 1.5(b) (Model Rule 1.5(b), communicating the basis of fees and expenses), along with Comment 1 to RPC 1.5 on charging clients for the cost of in-house services. The committee treated the credit-card surcharge as an expense governed by these provisions, while noting that the controlling limit in practice comes from the lawyer's contract with the card processor rather than from the RPC.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5(a) / Washington RPC 1.5(a) (reasonable fees and expenses)
• Model Rule 1.5(b) / Washington RPC 1.5(b) (communicating the basis for fees and expenses)

See also

• ABA Formal Op. 00-419: credit card payment of legal fees
• CA COPRAC Op. 2007-172: credit card payments, fees, and costs

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1660

Original opinion text

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

Advisory Opinion: 2214
Year Issued: 2012
RPC(s): RPC 1.5(a), 1.5(b)
Subject: Credit Card Transaction Fees Charged to Client

This opinion addresses whether credit card transaction fees may be charged to the client.

Question: A lawyer accepts payments from a client by credit card. The client pays the lawyer with a credit card and the credit card company then charges the lawyer a fee for the transaction. May the lawyer charge the client an additional amount to cover the fee charged the lawyer for the credit card transaction?

Answer: It is not prohibited under the Rules of Professional Conduct, PROVIDED that the lawyer notifies the client in advance of such charges and does not charge the client any more than a fee that reasonably reflects the actual cost incurred by the lawyer for the credit card transaction. HOWEVER, the attorney should consult the merchant services agreement from their credit card processor, as it is typically prohibited to charge these fees back to the customer.

Analysis: Lawyers may charge clients reasonable amounts for expenses. RPC 1.5(a). The lawyer should communicate with the client in writing the basis for expenses for which the client will be responsible. RPC 1.5(b). Comment 1 to RPC 1.5 further explains that a lawyer may charge a client “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.”

At the time of issuance, of this opinion, the operating agreements used by most of the major credit card companies prohibit charging customers extra fees to cover the cost of such credit card transaction fees and attempting to do so may place a lawyer in violation of obligations imposed by the credit card provider agreements. [note 1]. Before attempting to charge a client any fee to recover the costs imposed by credit card providers, the lawyer should carefully consult all applicable agreements and the contracting bank.

[n.1] Despite prohibiting transaction fees to the consumer, many credit card agreements permit the use of discounts for cash payments. A lawyer should carefully review the applicable credit card agreements and contact the contracting bank to assess what is permitted under the specific agreement at issue.