Can a Texas lawyer have a client agree in advance that the lawyer may charge the client's credit card for invoices unpaid after 30 days?

Plain-English summary

The opinion addresses a fee agreement under which the client authorizes the lawyer to charge the client's credit card for invoices that are 30 days past due. The Committee notes it has long accepted credit-card payment of legal fees (Opinion 349; ABA Formal Opinion 00-419), so a lawyer may accept a credit card for a fee.

Because the client may pay by other means during the first 30 days and the card is charged only after that, and because the charge is for services already performed, the Committee concludes there is nothing inherently illegal or unconscionable about the arrangement under Rule 1.04(a), provided the fee otherwise complies with the rules and any court-approval requirement. The funds received through the card may go into the lawyer's operating account, since the services were already performed.

A different rule applies if the client disputes the fee. The Committee says a credit-card arrangement cannot negate the duty to segregate disputed funds. Under Rule 1.14(c), when a lawyer holds funds in which both the lawyer and another claim an interest and a dispute arises, the disputed portion must be kept separate until the dispute is resolved. So the lawyer may charge the card for a disputed amount but may not place that amount in the operating account.

In practice

Under this opinion, and under the Texas rules as they stood at the time, a lawyer can build an auto-charge term into a fee agreement for earned fees, conditioned on client consent and on preserving the client's ability to challenge a disputed bill. The Committee makes the operating-account treatment turn on whether the fee is disputed: undisputed earned fees charged to the card may go to the operating account, but a disputed amount must be held separately under Rule 1.14(c).

Common questions

Q: Can my fee agreement let me charge a client's card for invoices unpaid after 30 days?

A: Yes. Per Opinion 582, that is permissible if the client consents and the client's right to challenge a disputed statement is preserved.

Q: Can the charged funds go straight into my operating account?

A: For undisputed earned fees, yes, because the services were already performed. But if the client disputes the fee, the Committee says the disputed amount must be held separately under Rule 1.14(c).

Q: Does charging the card defeat the client's right to dispute the bill?

A: No. The Committee says a credit-card arrangement cannot negate the duty to segregate disputed funds; the client's ability to challenge the bill must be preserved.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.04(a) (no illegal or unconscionable fee), corresponding to ABA Model Rule 1.5; and Rule 1.14(c) (segregating disputed funds), corresponding to ABA Model Rule 1.15. It follows Opinion 349 and ABA Formal Opinion 00-419 on credit-card payment of fees.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees)
• MR 1.15 (safekeeping property; disputed funds)
• Texas Disciplinary Rule 1.04(a)
• Texas Disciplinary Rule 1.14(c)

Other opinions cited:

• Texas Ethics Opinion 349 (1969): credit-card payment of legal fees acceptable
• ABA Formal Opinion 00-419 (2000): credit-card payment of legal fees acceptable

See also

• TX Ethics Op. 595: Using a Former Client's Public-Record Information
• TX Ethics Op. 594: Recouping More Than the Expense Actually Paid

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-582/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_582.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

QUESTION PRESENTED

May a lawyer enter into a fee arrangement in which the lawyer bills for his services and the client agrees that, if payment is not made to the lawyer within 30 days of tender of the invoice, the lawyer may charge the client’s credit card for the amount of the invoice?

STATEMENT OF FACTS

A lawyer proposes to represent a client under a fee agreement that includes a provision under which the client authorizes the lawyer to charge the client’s credit card for invoices that are 30 days past due.

DISCUSSION

Both this Committee and the American Bar Association Standing Committee on Ethics and Professional Responsibility have previously ruled that using credit cards in payment of legal fees is acceptable. See Texas Professional Ethics Committee Opinion 349 (October 1969); American Bar Association Standing Committee on Ethics and Professional Responsibility Formal Opinion 00-419 (July 7, 2000). Thus, a lawyer may accept a credit card in payment of a fee.

In the fact scenario here considered, the client is given the opportunity to pay by some other means during the first 30 days after the invoice is submitted. Only if the client does not pay within 30 days is the client’s credit card charged. Rule 1.04(a) of the Texas Disciplinary Rules of Professional Conduct states in part: “A lawyer shall not enter into an arrangement for, charge, or collect an illegal fee or unconscionable fee.” If the fee charged otherwise complies with the Texas Disciplinary Rules of Professional Conduct and any applicable requirement for court approval of the fee, then there is nothing inherently illegal or unconscionable about the arrangement as stated. Because the facts in this opinion involve charging the client’s credit card after the legal services have been performed, it is permissible for the funds received under the credit card payment arrangement to go into the lawyer’s operating account.

A different rule applies if the client disputes the fee. It is not permissible for a credit card payment arrangement to negate the requirement that an attorney hold disputed funds separately. In ordinary circumstances, when a lawyer holds money or property of another and a dispute arises, a lawyer is required to segregate any disputed funds until the dispute is resolved. Rule 1.14(c) states in part:
“When in the course of representation a lawyer is in possession of funds or other property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interest. . . . If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved . . . .”
If such a dispute exists, the lawyer may charge the client’s credit card for the disputed amount but the lawyer may not place that amount in his operating account.

CONCLUSION

The Texas Disciplinary Rules of Professional Conduct do not prohibit a lawyer’s charging a credit card for attorney’s fees that have been earned by the lawyer provided the client consents and the client’s ability to challenge a disputed statement for legal fees is preserved.

Tex. Comm. On Professional Ethics, Op. 582 (2008)