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.

4 thoughts on “PayPal: Lawyer’s Friend or Foe?

  1. Pingback: Law Practice Management Wrap Up | Ramsey LawRamsey Law

  2. Pingback: A Look at the Year Past – Tips You May Have Missed | Oregon Law Practice Management

  3. Pingback: Just Say No to Charging Clients Merchant Fees | Oregon Law Practice Management

  4. Pingback: Credit Cards, Square, and PayPal Revisited | Oregon Law Practice Management

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s