As recently as a decade ago, most lawyers accepted only cash or payment methods processed through a bank such as a check, wire, or EFT. In the past two decades, the methods by which people have become accustomed to paying for goods and services have expanded exponentially. For example, PayPal grew from a boutique product created to pay for items purchased via a specific online auction website into a common method of transferring funds to pay for goods and services, donate to a charitable cause, and even just send money to a friend. Apple, Inc. has introduced its own payment system and many other companies, such as Venmo, have become regular way to conduct business. Technology is always developing and the future common payment methods are only limited by imagination, reliability, and consumer confidence.
The rules of professional conduct do not prohibit accepting credit card, PayPal, or other non-traditional payment methods into an IOLTA account. The method by which a lawyer elects to be paid is a business decision to be made by the lawyer. The two main principles of the rules of professional conduct regarding all trust funds are (1) the protection of client funds and (2) maintaining proper trust account records.
A lawyer that makes the business decision to accept a non-traditional form of payment, such as a credit card, must address the chargeback issue. Under the traditional payment model, a fee dispute is handled through the traditional fee arbitration process. When a lawyer accepts a credit card payment, however, she/he subjects herself/himself to the credit card chargeback policy. Consider this scenario: a lawyer accepts a $5,000.00 retainer via credit card. The lawyer does $5,000.00 worth of work and withdraws the earned fee. Months later, the client disputes the fee directly with the credit card company. The credit card company, authorized by the credit card agreement, withdraws the $5,000.00 directly from the IOLTA account. As a result of this action, one of two things has happened: (1) the lawyer’s IOLTA account balance went negative or (2) the lawyer has misused another client’s funds to cover the chargeback. The solution to this problem is ensuring that the credit card agreement authorizes the company to withdraw chargebacks ONLY from the lawyer’s operating account. A lawyer should NEVER authorize another party to withdraw funds from his/her IOLTA account without his/her knowledge for any reason.