Payment by Debit or Credit Card

Lawyers and paralegals may enter into agreements with financial institutions or other companies that offer debit or credit card processing services, subject to certain conditions. Such institutions or companies’ fees are a cost of carrying on practice and are not to be charged to the client.  As a result, any agreements that a lawyer or paralegal enters into for processing debit or credit card payments must provide that all service charges, discounts, and other fees payable by the lawyer or paralegal to the financial institution or other company are to be deducted from the lawyer or paralegal’s general account and that no such charges are to be deducted from the lawyer or paralegal’s trust account.  The client must receive full credit for the face amount paid in respect of the invoice.

Confidentiality of client information must also be preserved in the use of debit or credit cards. The debit or credit card sales slip issued by the lawyer, paralegal or firm to the client may show the name of the lawyer, paralegal or firm and its address, the words “legal services”, a file number, any other necessary code numbers, the dollar amount, and the date.  The nature of the legal services must not be indicated.  Details of the services are to be provided to the client in the usual way.

It is important for lawyers and paralegals to consider that the procedures of some financial institutions or debit and credit card processing companies may place lawyers or paralegals in contravention of By-Law 9.  Some institutions or companies require merchants (including lawyers and paralegals) to designate only one account into which debit or credit card payments are to be deposited.  In addition, the fee charged by the financial institution or debit or credit card processing company is automatically debited from this account.  This process does not permit lawyers or paralegals to receive both retainers and payments for billed fees and/or disbursements by debit or credit card.  Subsection 7(1) of By-Law 9 requires lawyers and paralegals to deposit funds received in trust (e.g. retainers) into an account designated as a trust account.  Meanwhile, subsection 8(2) of By-Law 9 prohibits the deposit into trust accounts funds that are received by the lawyer or paralegal on account of fees for which a bill has been delivered. Consequently, the use of one account for both purposes is not permissible.  Lawyers and paralegals are urged to canvass this issue with the financial institution or company that they are using or contemplating using for processing debit or credit card payments.  If the financial institution or company imposes the above restrictions, lawyers and paralegals can only designate their general account and thus may only receive payments for billed fees and/or disbursement by debit or credit card.

Some lawyers or paralegals wish to take clients’ credit card numbers over the telephone and process payment of accounts that way.  Although the signature of the client on the sales slip is the best proof of the client’s agreement to use this payment service, accepting credit card numbers by phone could be acceptable provided that the lawyer or paralegal has delivered the bill to the client for the services rendered before doing this and the agreement with the processing company allows this.  After the payment is processed in this manner, there is a risk that the client could claim that the lawyer or paralegal was not authorized to process the payment. Lawyers or paralegals who opt to process credit card payments by telephone are urged to consider implementing additional safeguards so that misunderstandings do not arise between the firm and the client. 

Additional Resources:

Payment by E-commerce

BookkeepingGuide for Lawyers

Bookkeeping Guide for Paralegals