Can you charge a fee or surcharge for clients who pay you with a credit card?
Dear Claude: QUESTION: Can you charge a fee or surcharge for clients who pay you with a credit card?
ANSWER: Well, that law is (as the saying goes) “as clear as mud.” Why? Because these laws are being increasingly challenged. However, let’s discuss this question, and its answer, from the beginning.
The popularity, convenience, and increasing safety of paying with a credit card, and the use of online markets, now mean most bills in America are being paid with credit or debit cards. Additionally, most merchants (sellers or lessors) accepting credit cards will pay some sort of processing fee to their credit card processor. This is simply the cost of moving money in our society today.
These fees can vary from under 2% to more than 5%, depending on the processor and bank involved. So, merchants accepting credit card payments often charge an extra fee to the buyers or lessees to make up for the processing fee they will pay to their credit card processor. This is sometimes called a “surcharge” or a “convenience fee” in many states.
Typically, a “surcharge” relates to the amount being charged and adds a pro rata fee. A “convenience fee” is generally a lesser flat fee added to a charge simply for paying with a card. Typical convenience fees might be the $2.50 charged by a local government for renewing auto registration, regardless of the amount charged.
Many state legislatures, however, have objected to such fees for a variety of reasons. Consumer protection advocates argue the fees are not reasonable or that they can be deceptive. Others argue the fees discriminate, surcharges often lack standardization, or that they simply inhibit interstate commerce.
As recently as 2016, eleven states—California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas—and Puerto Rico had laws that prohibit merchants from surcharging consumers on credit card transactions.
However, the laws in California, New York, Texas, and Florida have all been challenged in court. The California law was declared unconstitutional in Italian Colors Restaurant et al. v. Harris in 2015. California is appealing the district court decision. In September 2016, the U.S. Supreme Court agreed to hear Expressions Hair Design v. Schneiderman, the case challenging the New York statute that prohibits merchants from imposing a surcharge for using a credit or debit card but does not prohibit cash discounts.
On January 4, 2019, the Florida Supreme Court issued a 92-page order modifying many distinct Disciplinary Rule provisions, including (on page 54) amended Bar Rule 4-1.5 (h) which now provides the following:
(h) Credit Plans. A lawyer or law firm may accept payment under a credit plan. ~~No higher fee shall be charged and no additional charge shall be imposed by reason of a lawyer’s or law firm’s participation in a credit plan.~~ Lawyers may charge clients the actual charge the credit plan imposes on the lawyer for the client's transaction.
So, Florida lawyers may pass on processing charges to their client. However, please also be aware of the limits that may be imposed by your credit card company.
Visa and MasterCard settled a dispute with merchants by allowing surcharges in 2013 but with the following rules:
- Limits. The upper limit on surcharges is 4% of the transaction. - Disclosure. There should be a sign at the point of sale. The surcharge should not come as a last-minute surprise. - Records. The surcharge should be printed on receipts. - Equal treatment. Merchants aren’t supposed to charge a surcharge on only some cards and exempt others.
Regardless of whether you can, the ultimate business decision to surcharge is yours, which leads me to…
CLAUDE’S BEST ADVICE
This is a dynamic area that changes often. I do expect some states will remain firm in barring these fees, (unless the prohibition becomes an interstate commerce issue) and some states will throw in the towel. So, always check with the Consumer Protection unit of your own state government, whether that be independent or managed by the State Attorney General, Comptroller, or Treasurer.
My personal advice, however, will NOT change. And that is: don’t do it. Don’t charge a surcharge to your client.
Why? Because it’s smart not to. After 41 years of practicing law (the last 27 in a four-lawyer general practice firm), nothing has so positively impacted my fee collections than a combination of disciplined, smart billing practices and accepting credit cards. Offering hyperlinks to my credit card page within my billing email and on my bills without any markup results in immediate payment of a substantial number of monthly bills.
Charging any extra surcharge, convenience fee, or other extra cost (assuming it is legal in your state) also puts you at a disadvantage. A powerful incentive to using a credit card is to acquire the miles or points as a side benefit, not to pay extra dollars. Adding a surcharge is like throwing up an additional steeple-chase gate in front of a payment. Additionally, after working hard on a case and providing excellent service, tacking on an extra fee in the form of a surcharge can end an otherwise positive interaction on a sour note. Why let that be the last impression a client has of your work?
So, don’t think of surcharging as a law practice-related business decision. Think of it rather as a normal cost of doing business in 2019—in any business, legal or otherwise. I am confident you’ll see that the better business practice is to avoid such charges.
If you have any specific question, please feel free to reach out. Always remember, at LawPay, we want you to succeed!