Just Say No to Charging Clients Merchant Fees

Lawyers often ask if they may ethically charge clients for credit card merchant fees.credit card

There is no ethical barrier to passing on the merchant fee, or crediting the client for the net amount of the transaction only, if the client agrees. Therefore, the first step toward charging clients merchant fees would require updating your written fee agreement to include this cost. If you wish to modify existing agreements, remember that any modification in the lawyer’s favor “… requires client consent based on an explanation of the reason for the change and its effect on the client…. In addition, the modification must be objectively fair.”  OSB Formal Opinion 2005-97.

The real obstacle in passing on merchant fees is a little something called the Truth in Lending Act. (TILA).  As noted by the Oregon State Bar in OSB Legal Ethics Opinion No. 2005-172:

Passing the merchant fee on to the client or crediting the client for the net amount of the transaction only … may implicate Regulation Z of the Truth in Lending Act,
12 CFR §226.  As a result, you may be compelled to offer cash discounts to all clients and make specified disclosures to your clients who pay by credit card.
See CONSUMER LAW IN OREGON ch 14 (Oregon CLE 1996 & Supp 2000).

The bottom line: unless you are willing to immerse yourself in the TILA and create compliant disclosures, don’t try to pass on merchant fees.  The TILA is an extremely complex piece of legislation, as evidenced by this 61 page manual published by the FDIC (Federal Deposit Insurance Corporation).  Furthermore, the best practice is to build the cost of taking credit cards into your fee – what you charge for your services.  This is what the retail world does.  When we pay by credit card, retail merchants don’t say: “That will be $159.00 for the lamp (or spa services) and another $4.77 for our merchant fee.”  Clients do not like to be nickel and dimed to death.  Just say no!

For a further discussion about credit cards, including answers to FAQ, see this post.

For tips on flexible and inexpensive credit card processors for lawyers, check this out.

All Rights Reserved [2014] Beverly Michaelis

Cyber Security – Horrifying Stats and Tips for Dropbox Users

For the last two weeks, I have been featuring a potpourri of posts gleaned from tweets posted during the ABA TECHSHOW.  Today we explore cyber security with extra bonus tips for good measure.

Cyber Security – Numbers, Trends, Protecting Your Firm

Tips for Dropbox Users

  • Dropbox security: use third party apps – like Viivo – to encrypt. You own the key. @VIIVOkey happens to be in attendance.… @MrsMacLawyer RT @rocketmatter
  • Dropbox security: use 2 step authentication but put recovery code in safe place. It’s not retrievable. @larryport RT @rocketmatter
  • Also see my post, The 7 Rules of Using Dropbox and search this blog for related Dropbox posts.

Thanks 2014 ABA TECHSHOW tweeters for the tips!  And check out these resources for lawyers posted by the author on Scribd.

All Rights Reserved – Beverly Michaelis [2014]

You’re Sold on the Cloud, Now What?

Good question! Fortunately, we can glean a lot of good ideas from the 2014 ABA TECHSHOW:

Security, Ethics, and Questions to Ponder

  • Snoops, Thieves, and Idiots – The Weak Links in Cloud Storage via @betabeat – @JackSmithIV RT @VIIVOkey
  • Securing client info. Reasonable safeguards for different type of data depending on circumstances. @LtdPI RT @Westlaw (Using Oregon’s standard – your duty of reasonable care to protect confidential client information will flux based on the circumstances.)
  • If you are storing client data in the cloud, do you inform your client? @Westlaw (Yes: incorporate appropriate language into your fee agreement/engagement letter.)
  • 18 states have issued opinions related to #cloud computing or similar technology. @Westlaw (Here is the low-down on Oregon’s opinion.)
  • Uptime and data security are a crucial element of a #cloud provider’s standards. Learn more @Cetrom
  • Great tip to switch cloud data storage providers! @LeeRosen: Discourse: The Cloud Wars are On. @pegeenturner
  • Takeaway from cloud session #ABATECHSHOW: continuing requirement to stay informed on cloud tech. @Westlaw (From Oregon’s opinion:  “As technology advances, the third-party vendor’s protective measures may become less secure or obsolete over time.  Accordingly, Lawyer may be required to reevaluate the protective measures used by the third party vendor to safeguard the client materials.”)

New Features in Popular Cloud Products Clio and Net Documents

Resources

All Rights Reserved – Beverly Michaelis [2014]

It’s Social Media, Not Anti-Social Media

To start out the week I have more great tips from the 2014 ABA TECHSHOW.  To begin:  “Think before you post” on social media @bobambrogi – @Westlaw [good advice!]

The Whys and Wherefores of Having a Facebook Page

Does a law firm need a Facebook page? What are the benefits over having a great website? Do firms want likes or comments? – @MrsMacLawyer RT @JamesWegener

Designate other Admins for your #Facebook firm page, esp if you will be too busy to keep it up. @sammiem – @MrsMacLawyer

Why social media? (See pic.) But know ethics rules. Useful session w/ Jeff Lantz, @JLE_JD @bobambrogi – @rocketmatter [Oregon lawyers can start here.]

70% of folks are checking FB pages from a mobile device. Make sure your photos are sized right for mobile screens. @sammiem – @MrsMacLawyer

Once you have 30 Likes on your firm #Facebook page, it opens up a lot more things you can do with the page. @sammiem

Twitter

Are there ethical concerns using twitter? There is an ethical issue with you NOT being on it.” @bobambrogi – @legalcurrent

Not mentioned in social media session but it’s not wise to cross post to Facebook & Twitter. Customize for platform. Via @RealSheree

Yelp

RT @Westlaw: Dealing w/ negative yelp reviews – @GallagherLaw

Blogging

Your blog should not be an ad.” @rbcater #ruthbook – @familyLLB RT @MarkRosch

Wise words. @JLE_JD “Don’t insult the judge” when blogging about your case (or any case, really) – Judges read blogs too! – @JamesWegener

If you blog about client work, even if anonymously, get clients’ permission. And wait until case is finally resolved – @RealSheree

Blogging is a fun way to drive traffic to your firm’s website #ABATECHSHOW Quality content can boost traffic +1000% – @VinceDePalma RT @invinciblecrtv

[All Rights Reserved - Beverly Michaelis - 2014]

13 Resources for Protecting Data – Courtesy of the FTC

With data breaches in the news on an almost daily basis, how do you protect your law firm’s assets? What advice should you give to your clients?

The FTC offers a list of 13 data security resources to help you get started. From mobile apps to digital copiers and shutting down spam, there is a ton of good advice to be culled from these posts and PDFs: Continue reading

Rules of the Road for Sharing Fees

Lawyers who are not members of the same firm may only divide fees under
Oregon RPC 1.5(d) if the client gives informed consent and the total fee of the lawyers for all services is not clearly excessive.

Sound easy?  It is – but surprisingly there are misconceptions about fee sharing.

tug of warMyth #1 – Referral Fees are not Subject to the Oregon RPCs

This is a mistake in semantics.  Any time two or more lawyers seek to divvy up a fee and they are not practicing as members of the same firm, Oregon RPC 1.5(d) applies.  The label placed on this arrangement is irrelevant.  Referral fees, fee splitting, fee sharing, and dividing fees are treated the same under the rule.

Myth #2 – Consent is Not Required if I am a Contract Lawyer

This is not so black and white.  Whether client consent is required will depend on your financial arrangement with the principal lawyer.  Consider these possibilities:

Principal lawyer has a written fee agreement with her client which includes the use of contract lawyers to provide legal services.  The agreement specifies the client will be billed at the rate of $100 for contract work.  Oregon RPC 1.5(d) does not apply.

Same arrangement as above, except the principal lawyer’s written fee agreement provides that any contract work will be billed for cost (similar to billing the client for court reporting fees, use of an investigator, or medical expert).  Oregon RPC 1.5(d) does not apply.

Contract lawyer agrees to provide contract services to principal attorney for 10% of principal attorney’s contingent fee recovery.  Oregon RPC 1.5(d) applies.  Disclosure and consent is required.

Myth #3 Verbal Consent Complies with the Rule

This is technically true – informed consent in writing is not expressly required by Oregon RPC 1.5(d), but it is a very good idea.  Otherwise, how will you prove that you adequately disclosed the fee arrangement to your client and he or she consented?

Resources

For a sample fee sharing arrangement, and further discussion of dividing fees among non-members of the same firm, see BarBooks - specifically Michael A. Greene, “Referral Agreement Between Lawyers,” Fee Agreement Compendium (2007). [Chapter 12.]

All Rights Reserved – Beverly Michaelis [2014]

What Lawyers Can Learn from the Yahoo Email Hack

Yahoo, the second largest email service worldwide, reported a security breach last untitledweek which exposed personal information from sent email folders.

The Associated Press reports:

Yahoo Inc. said in a blog post on its breach that “The information sought in the attack seems to be the names and email addresses from the affected accounts’ most recent sent emails.”

That could mean hackers were looking for additional email addresses to send spam or scam messages.  By grabbing real names from those sent folders, hackers could try to make bogus messages appear more legitimate to recipients.

If you correspond with friends, family, clients, or colleagues who use Yahoo’s mail service, scrutinize incoming e-mail carefully to avoid phishing scams. 

This breach has another takeaway for lawyers – you are only as secure as your third party vendors.  The Yahoo and Target breaches were both the result of third-party vendor hacks.  In the case of Yahoo, the information was collected from a third-party database.  In the Target hack, credentials were stolen from a third party vendor.

Lawyers should take this to heart when evaluating their own cyber liability and security – specifically with regard to HIPAA compliance.  If your servers are hosted in the cloud, or you use cloud-based practice management, accounting, or backup solutions, inquire into the security procedures of your vendors.  Remember that encryption is your friend.  All data stored in the cloud should be encrypted – minimally by your vendor.  Better yet: go the extra mile.  Seek out cloud providers who permit you to add your own third party encryption, like Viivo or TrueCrypt, so that you (and only you) hold the final encryption key.

All Rights Reserved [2014]

Beverly Michaelis

Free Law Practice Transition CLE

On November 1, the Oregon State Bar is offering a FREE Law Practice Transition CLE for lawyers who are interested in buying or selling a law practice.  Here is the announcement:

The legal profession is undergoing a demographic shift as baby boomers retire in large numbers and a steady stream of law school grads enter the marketplace. In the meantime, the ratio of new lawyers to entry-level positions has caused many new lawyers to hang out their own shingle when they don’t find employment elsewhere.

To address this issue, a free CLE will be held on Friday, November 1, from 3:00 to 5:00 p.m. at the bar center in Tigard, with a social/networking hour hosted by LawPay immediately following. “Law Practice Transitions: Buying, Selling, or Transferring a Law Practice” is the first in a new series of seminars designed to help lawyers looking to move into our out of an existing practice.

Whether you want to sell or you are looking to start a career (without starting from scratch), this CLE will give you valuable insight into what works and what doesn’t work when it comes to transition planning. Plus, all attendees will receive a coupon code to post a practice for sale on the bar’s online Career Center for FREE!

Thanks to LawPay for graciously hosting the social/networking event immediately following the CLE.

Special thanks to the Oregon New Lawyers Division and the Sole and Small Firm Practice Section for the assistance with this program.

 

Learning the Ropes 2013

Are you new to private practice? Then I have just the ticket for you!

Attend our three day conference – Learning the Ropes: A Practical Skills & Ethics Workshop – for a mere $65.  Attendance at the full program satisfies the MCLE requirements for new admittees’ first reporting period.

Choose from these concurrent sessions:

  • Domestic Relations or Criminal Law
  • Tort Litigation or Estate Planning
  • Civil Motion Practice or Bankruptcy
  • Creating a Firm or Joining a Firm

Can’t decide?  All tracks are recorded for later viewing at no charge.

Plenary sessions include:

  • How to Develop a Successful Practice and Avoid Legal Malpractice
  • Client Communication and Other Practice Management Survival Tips
  • Alternative Dispute Resolution
  • The Ethics of Practice Management
  • Recognizing Child Abuse and Fulfilling Your Duty to Report
  • Negotiation Tips, Tricks, Traps, and Tools
  • Courtroom Do’s and Don’ts
  • Employment Law and Conscientious Communication
  • Bridging the Cultural Gap

Day 1 includes a “Meet the Judges” luncheon.  Day 2 features a networking luncheon with bar leaders and respected practitioners in the fields of Appeals, Criminal Law, Employment Law, Intellectual Property, Business Litigation, Debtor/Creditor Law, Estate Planning, Litigation, Business Transactions, Elder Law, Family Law, and Real Estate.

All meals, including the luncheons, are included in your $65 workshop fee.  The program is at the Oregon Convention Center November 6-8, 2013.  Register here or visit the PLF Web site > Upcoming Seminars (under the heading Loss Prevention – CLE).  Sign up early.  Space is limited!

Copyright 2013 Beverly Michaelis

PayPal: Lawyer’s Friend or Foe?

PayPal is a very tempting credit card processing service with nice extras like Web site integration and online invoicing.  There is no disputing its familiarity or popularity.  But before you jump on the PayPal bandwagon, do your homework

  1. Is it less expensive or more expensive than comparable services
  2. Is the Web interface user-friendly
  3. How long will PayPal hold your funds before disbursement?  (This has been a problem for some users.)  

The solution is to comparison shop.  All banks offer credit card processing, so check with your branch first.  Other options include:

If you prefer processors who cater to the legal profession consider:

To be clear, I had never heard of Lawyer Payments or Atticcus until I ran a Google search.  I’m not aware of any lawyers using these services, so conduct your due diligence – always a good idea when choosing a credit card processor.  Also of note: In 2011 Beacon Processing Solutions appeared to discontinue serving the legal profession, preferring to focus on doctors instead.  I’m happy to say that as of 2012 they are back in the business of offering specific credit card processing solutions for lawyers.

How One Lawyer Does It

Georgia Lawyer Leslie Stewart offers PayPal directly on her Web site with direct links for incremental payments of $200, $300, or $500  [scroll to the bottom of her page].  Clients are told:

“The retainer fee paid via the Internet can be paid by check or credit card.  Both of these require the use of a third party verification service, in this case, PayPal.com.  You must register and provide information to them to ensure that you are the person paying the fee and it is from verifiable funds. 

You are not charged an additional fee for using PayPal.com.  With a payment by electronic check or credit card, lawyer and client both agree that these funds are a prepayment for immediate compensation for the lawyer’s commitment to perform future services, e.g., a flat-fee agreement, the funds are the property of the lawyer and may be deposited in the lawyer’s operating or business account.  PayPal.com will remit payment to this office to be deposited in said account.

If you do not wish to enter into this arrangement, then you are welcome to mail us a check. 

Online payment will take place only after Attorney and Client have entered into an agreement concerning fees.”

Ethical Compliance: Payment Methods are Irrelevant

Make certain any terms you include on your Web site are fully compliant with the Oregon Rules of Professional Conduct.  For example, the above site contradicts itself by initially referring to the fee paid via PayPal as a “retainer fee” then later as a “prepayment for immediate compensation for the lawyer’s commitment to perform future services.”

Make your language clear, simple, and consistent. 

If your intention is to collect a fixed fee earned upon receipt, say so. See Oregon Formal Ethics Opinion 2005-151:  Fee Agreements: Fixed Fees.  A sample fixed fee/earned upon receipt fee agreement is available on the PLF Web site.  [This can be offered as a click-through agreement if desired.]

If the client is remitting a retainer for fees that have not yet been earned, and there is no written earned upon receipt fee agreement, the funds are NOT the property of the lawyer and must be deposited in your IOLTA Account.  See The Top 10 Trust Account Questions: Safekeeping Funds

Remember: the method of payment (cash, check, echeck, wire transfer, credit card) is completely irrelevant.  If the funds are earned by your actions (you did the work and billed the client) or by contract (you have a written, signed earned upon receipt fee agreement) they are yours and should be deposited into your business account. 

If the funds are not yet earned, use your IOLTA account.

Final Thoughts

Read more insightful tips about accepting credit cards in this article from GPSOLO and in this post from the Lawyerist.  For ethical limitations relating to credit card payments, see FAQ About Credit Cards.