Law Firms Should Use Auto-Pay

Auto-Pay: It’s Ethical, Better For Your Law Firm, And Better For Your Clients

Clients want convenience, and paying bills is inconvenient.  This is especially true in the oft-archaic practice of law.  But it doesn’t have to be!  In many other facets of life, people can pre-authorize automatic payments for their bills.  Gone are the days of buying a stamp and dropping a check in the mail, or even going online and logging into an account just to process a payment every month.  The rest of the world has adopted auto-pay and, as the smart and savvy attorney that you are, you can too. What’s more, with auto-pay, you’ll see your payment rates skyrocket, and bill disputes diminish.

I know what you’re thinking: “Wait, can I do that?!  What about the RPCs?!”  Again, as the smart and savvy attorney that you are, you’re right to be concerned about ethics.  My discussion in this post considers the rules for Washington State (since that is where most of Skepsis’ bookkeeping clients are located), but all attorneys need to comply with their respective state’s Rules of Professional Conduct (those “RPCs” you asked about) and you should confirm the ethical implications of auto-pay with your licensing state’s ethics officials.

Law firms have been able to collect bill payments by credit card for decades. The American Bar Association (“ABA”) issued an ethics opinion 40+ years ago in 1975 opining that credit card payments were ethical under the ABA’s Model Rules. Yes, those same Model Rules that many states’ RPCs mirror, or at least use as their basis. (Note: The opinion was later withdrawn for other reasons; see The Washington State Bar Association (“WSBA”) even has a recommended credit card processor, with a special discount for WSBA-licensed attorneys.

With credit card payments permitted, the next logical step is getting a pre-authorization from your client to charge or debit his or her account for payment of earned legal fees as the bills come due.  WSBA Advisory Opinion 1826 previously contemplated exactly that.  Specifically, the WSBA’s Ethics Committee considered “whether it is ethical to charge legal fees and costs to a client’s credit card sixty days after billing the client when the client has authorized such a charge in an engagement letter.” They found doing so ethical “assuming that the fee has been earned, is reasonable, has not been contested and that the fee agreement complies in other respects with [the RPCs governing fees].”  Additionally, since you are not charging or debiting the client’s account until after you have already performed the services you’re being paid for, the funds can be deposited directly into your operating account.  WSBA Advisory Opinion #2108 goes a step further and says that you can even use a payment processing service that puts the funds in your account at the service provider prior to the funds going to your operating account, so long as the funds are payment for services already rendered. 

The WSBA’s Ethics Committee even said in Advisory Opinion #2214 that an attorney can charge his or her client for the fees associated with making the credit card payment.  They noted that RPC 1.5(a) allows an attorney to collect reasonable costs associated with the representation of a client and that Comment 1 to RPC 1.5 further clarified the rule by permitting attorneys to charge clients “for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges.”  

Pro tip: At Skepsis, we don’t generally recommend that law firms pass along credit card fees directly to their clients; even though it’s ethical, there are larger business and marketing considerations that generally prevail, and other ways to absorb those fees that are more palatable to clients. More importantly, directly passing along credit card fees to the client is typically a violation of your card processing agreement.

The RPCs require an attorney to wait a reasonable amount of time after sending a client their bill to withdraw payment from client funds held in a trust account. You should do the same in an auto-pay situation.  Waiting for five days after sending the client their bill will give them an opportunity to raise any disputes prior to your taking possession of their funds.  The bar likes this because it provides a layer of protection to clients by giving them a chance to challenge the bill, but you should also like it because it gives you an opportunity to avoid the headache of moving funds around into a trust account for the client if they raise a dispute after the funds are in your possession.  The client’s payment of the bill won’t extinguish their right to challenge the bill, but if there is something wrong the client is likely to raise the issue prior to your taking their money.

Lastly, as with nearly anything you do for your client, you should clearly communicate to them how your billing system works. You should especially be clear on things like the billing cycle, when bills will be sent to the client, when the client’s account will be charged or debited and, if you use a third party service, how that service works and what information of the client it may require.

Setting up an auto-pay system for your firm can provide you with more certainty and provide more convenience for your client. If you’re interested in developing an auto-pay system for your firm’s clients, Skepsis can help with everything from engagement letter language to processors to everything in between. Get in touch with us here.

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