Opinion on Surcharging

11/30/2016

Guest Blog by Sam Harden

Imagine you are checking out at the grocery store. The cashier rings up all your groceries and the screen shows your total. You pull out your credit card to pay, and the cashier pipes up and says “Oh, credit card? We’re going to have to add 3% to the total because there’s a transaction fee and we shouldn’t have to pay that.”

Now imagine a person is consulting with an attorney for a relatively simple case, one the attorney can handle for a fixed flat fee. The attorney tells the prospective client “The total fee for your case will be X. Oh, you want to pay with a credit card? I’m afraid that will add an additional 3% to the total fee because there’s a transaction fee when I process credit cards.”

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By now, nearly every attorney who serves the general public accepts credit cards as a form of payment. “Cash only” practices are few and far between. But transaction fees when using credit cards can add up over time and cut into your bottom line.

In 2013, most of the major credit card companies changes their rules to allow merchants to pass on transaction fees to their customers. However, there is still a good bit of confusion on whether attorneys can charge a convenience fee for accepting credit cards to offset the transaction fee charged for processing. While some states allow attorneys to pass transaction fees on to the client, other states do not allow it. Some states have not yet addressed the issue. Before deciding on which course to take check with your state bar association to see what your options are.

States That Do Allow Passing the Transaction Fee on to the Client

Several states allow attorneys to pass on credit card transaction fees to their clients. Most states that do allow it require the attorney to obtain written consent from the client before passing on the charge. For example:

If you do decide to pass on transaction fees and you practice in a state where written client consent is not expressly required, consider obtaining written consent anyway. In the event of a disagreement it is always better to have consent in writing than resorting to memory about what was discussed with the client.

States that Explicitly Prohibit Passing on Transaction Fees to Clients

At least three states explicitly prevent attorneys from passing on credit card transaction fees to their clients:

States Where it is Unclear

Many state bars have not addressed this issue directly. For example, California has not issued a formal ethics opinion saying that attorneys may pass on transaction fees to their clients, only that an “attorney may also ethically absorb the service charge debited by the credit card issuer.” Other states have not addressed the issue at all. If it is not clear whether your state allows attorneys to pass on transaction fees to clients, consider erring on the side of caution and absorbing transaction fees as a cost of doing business.

Ethical and Other Considerations

Most typical retail vendors do not charge a convenience fee anymore for paying with a credit card instead of cash or check. In today’s market clients may balk at paying even a slightly higher fee for representation, even if it is only a small amount. Also be aware that in 10 states charging a convenience fee above 4% of the purchase price is illegal.

You should also be careful of the ethical considerations of passing on such a cost to your clients. The Kentucky Bar’s ethics opinion on accepting credit cards specifically states that:

“Because the practice of passing service charges on to the client deviates so dramatically from the commonly accepted practice in the commercial world, lawyers have an unusually high burden in making sure the client fully understands the consequences of electing to use a credit card.”

While your state may allow you to pass on transaction fees to clients, think carefully before doing so. Potential clients will not expect a higher fee simply because they use a different form of payment. In today’s market the best practice may be to simply absorb these fees yourself as the cost of doing business.