Can a lawyer let clients pay legal fees through a third-party financing program like a credit card (LAWCARD)?

Plain-English summary

A Mobile attorney asked whether lawyers could use "LAWCARD," a third-party program that finances attorney's fees for clients who cannot otherwise afford to pay. A participating lawyer offers the option much as a credit card is used: the client opens a charge account with the financing company solely for legal fees, the lawyer sends payment vouchers to the company, and the lawyer may pay a $500 setup fee taken out of the first voucher. The program had tiered service levels (A, B, and C) based on a client's creditworthiness, and it encouraged lawyers to tell clients with overdue bills about financing their balances. The question was whether using LAWCARD violated the Rules of Professional Conduct.

The Commission answered that Alabama lawyers may offer LAWCARD as an alternative means of paying fees incurred in the past or to be incurred in the future. It noted that the former Code's DR 2-107(B) had provided for payment of fees through an approved credit-card plan, that earlier opinions (RO-84-112 and Ethics Opinion 298) had approved payment and receipt of fees through such plans with no higher fee charged for participation, and that ABA Formal Opinion 320 (1968) found it not unethical for lawyers to arrange financing of fees for creditworthy clients with lending institutions.

The opinion concluded there was no Rule 1.8(e) problem because the lawyer provides no financial assistance himself; it quoted Rule 1.8(e), which bars a lawyer from providing financial assistance to a client in connection with pending or contemplated litigation except for advancing court costs and litigation expenses. As long as the lawyer simply offers information about LAWCARD as an option and takes no affirmative role in the credit application process, the opinion found no rules are violated. The opinion added that the lawyer cannot charge higher fees to clients who use the financing, cannot make money from the financing itself, and must not represent the financing company in debt actions against the client arising out of the fee financing.

Currency note

This opinion was issued in 1993, before the 2002 Ethics 2000 revisions to the ABA Model Rules of Professional Conduct and Alabama's subsequent amendments to its Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer let clients finance legal fees through a third-party credit program?

A: Per the opinion, yes. Alabama lawyers may offer a program like LAWCARD for clients to pay past or future fees, so long as the lawyer takes no affirmative role in the credit application process.

Q: Does offering fee financing violate the rule against giving clients financial assistance?

A: The opinion concluded it does not, because the lawyer provides no financial assistance himself under Rule 1.8(e); the third party, not the lawyer, extends the credit.

Q: Can the lawyer charge more or earn money for participating in the financing program?

A: No. The opinion concluded the lawyer cannot charge a higher fee to clients who use the financing and cannot make money from the financing itself.

Q: Can the lawyer represent the financing company against the client?

A: No. The opinion stated the lawyer must not represent the financing company in any debt actions against the client arising out of the fee financing.

Background and rules framework

The opinion interprets Rule 1.8(e) (Model Rule 1.8(e), a lawyer's own financial assistance to a client in litigation) of the Alabama Rules of Professional Conduct, distinguishing the lawyer's prohibited assistance from a client's independent financing arrangement with a third party. It also draws on the former Code's DR 2-107(B) treatment of approved credit-card fee payment and on prior bar and ABA opinions approving such arrangements.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.8(e) / Ala. R. Prof. C. 1.8(e) (financial assistance to a client in litigation)
• Former Code DR 2-107(B) (payment of fees via an approved credit-card plan)

Other opinions cited:

• ABA Formal Op. 320 (1968): not unethical to arrange financing of fees for creditworthy clients with lending institutions
• Ala. RO-84-112 and Ethics Opinion 298: payment and receipt of fees via an approved credit-card plan, with no higher fee for participation

See also

• ABA Formal Op. 04-432: Posting Bail for a Client
• AK Bar Ethics Op. 2004-2: Guaranteeing Fee Awards
• AK Bar Ethics Op. 2014-4: Lawyer Indemnifying Parties

Source

• Landing page: https://www.alabar.org/office-of-general-counsel/formal-opinions/1993-19/
• Original PDF: https://www.alabar.org/assets/2019/02/RO-93-19.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

ETHICS OPINION

RO-93-19

QUESTION:

A Mobile attorney requested a formal opinion regarding an association with __. He has provided documents for review which are attached to this opinion. Basically, _ will finance attorney's fees for persons who cannot otherwise afford to pay. A participating lawyer makes this option available to his clients, much in the same way charge/credit cards are used. The client opens a charge account with , solely for payment of legal fees. It is called "LAWCARD". "Vouchers" for payments are sent directly from the lawyer to ___. The lawyer may pay an initial $500.00 set up fee which is taken out of the first voucher payment.

There are three levels of services for clients and that apparently is based on their relative credit-worthiness. There are A, B, and C eligible services. A client's credit-worthiness determines whether a particular legal service sought can be financed as A, B, or C eligible. ______ encourages lawyers to contact clients who are behind in their legal bills and offer them information about financing their outstanding balances. Is utilization of "LAWCARD" by Alabama attorneys in violation of the Rules of Professional Conduct?

ANSWER:

Alabama lawyers may offer "LAWCARD" to their clients as an alternative means of paying legal fees incurred in the past or to be incurred in the future.

DISCUSSION:

Disciplinary Rule 2-107(B) under the old Code of Professional Responsibility provided for payment of attorney's fees via an approved credit card plan. There is no counterpart in the Rules of Professional Conduct.

In RO-84-112 and Ethics Opinion 298, the Disciplinary Commission approved the payment and receipt of legal fees via an approved credit card plan. No higher credit fee can be charged because of the lawyer's participation.

ABA Committee on Professional Ethics Formal Opinion 320 (1968) held that it was not unethical for lawyers to arrange with lending institutions for credit-worthy clients to finance legal fees.

Since the lawyer is not providing any financial assistance per se, there is no problem with Rule 1.8(e) which states:

"Rule 1.8 Conflict of Interest: Prohibited Transactions

(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:

(1) A lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter;

(2) A lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client; and

(3) A lawyer may advance or guarantee emergency financial assistance to the client, the repayment of which may not be contingent on the outcome of the matter, provided that no promise or assurance of financial assistance was made to the client by the lawyer, or on the lawyer's behalf, prior to the employment of the lawyer."

As long as the lawyer is simply offering information on "LAWCARD" as an option to his clients and has no affirmative role in the credit application process, no rules are seemingly violated. The lawyer cannot charge higher fees to those clients who avail themselves of this financing nor can the lawyer make any money from the financing itself. They must not represent ______ in any debt actions against client arising out of any legal fee financing.

MLM/vf

9/14/93