Accepting credit card payments from clients has come up several times recently on the ABA’s Solosez listserv. Some list members were questioning whether it was ethical to accept client funds online if the funds were meant to be held as a retainer. By most state bar regulations, a retainer should be held only in the attorney’s trust account.
How should an attorney operating a completely virtual law office handle accepting online payments from clients?
To start, if a virtual law practice accepts credit card payments from clients, then the attorney must make sure that the practice is Payment Card Industry Data Security (PCI DSS) compliant. PCI compliance must occur whenever any business stores, transfers or collects credit card information from clients. Failure to comply with these rules, set by the credit card industry, may result in a business no longer being allowed to take credit card purchases, in addition to multiple fines and penalties.
It is unlikely that a virtual law practice would handle the number of transactions that require an audit by the PCI DSS Qualified Security Assessors. However, the standards in this area are constantly being changed. The responsibility falls to the VLO attorney to keep any online purchases of legal services by credit card compliant with the most current rules and regulations.
It should go without saying that a VLO must also be set up to comply with rules set forth in that attorney’s state bar trust account guidelines or other bar association regulations. Because many attorneys operating a VLO will choose to use the fixed fee method of billing in which the client is provided and agrees to pay a fixed fee before the completed services are delivered in full, the VLO attorney may not require a separate retainer. If a retainer is required as part of the initial price quote and must be completed before the VLO attorney proceeds, then those funds should most likely be placed in the VLO’s trust account and kept separate from the VLO operating account per the rules of most state bar associations.
As I mentioned above, one gray area is the use of PayPal or other credit card processing service to hold retainer fees. The issue is whether the retainer may be run through the credit card processing company even if that company routes the funds to the attorney’s trust account rather than operating account. Because the funds would first be transmitted to the attorney’s online account at the credit card processing company and then routed to the trust account, this may be in violation of the online attorney’s state bar trust account rules because for a short period of time the funds are held by the credit card processing company.
There are a variety of ways that the online attorney might choose to set up the payment function of the VLO and his or her compliance with trust account rules would depend on that particular setup. With the use of the VLO billing features and invoicing process, it may be not be desirable for the attorney to request a traditional retainer fee from the online client or if necessary, the VLO attorney could request to receive the retainer through snail mail for direct deposit into the attorney’s trust account. In which case, the question of the trust account being attached to the credit card processing company would not exist.
While all of this may sound hyper-technical because the funds would end up in the attorney’s trust account as required, if PayPal or the credit card processing company in question was not one of the financial institutions approved by the attorney’s state bar for the purpose of maintaining trust accounts, then the transaction might be in violation of their bar’s trust accounting rules. This is a question that the individual state bars may have to address as more attorneys provide legal services through virtual law practices.