eChecks and eCourt

The most recent issue of the Capitol Insider reminded bar members that OJD eFiling now accepts electronic checks (eChecks) as a payment method.  You can setup an eCheck account at the OJD HTML 5 eFiling Site.  (If you’re still using the “Silverlight” version of OJD eFiling go here.)

What are eChecks?

The term “eCheck” attempts to lend a familiar name to a new(er) process, but the descriptor also leads to confusion.  

What eChecks are not

  • eChecks are not “checks” in the traditional sense. 
  • They require no special setup.
  • There is no cost to using eChecks.
  • You don’t have to visit your bank to start using eChecks.

What eChecks Are

  • A way to send electronic payments directly from your bank account.
  • Equivalent to electronic transfers or ACH payments.
  • Used by merchants like PayPal.

What do I need to know to pay by eCheck?

If you have a bank account and know your routing and account numbers, you can pay by eCheck.

HOW QUICKLY DO ECHECK TRANSACTIONS CLEAR MY BANK?

eCheck payments generally clear within 24-48 hours.

Are there any advantages to using eChecks?

Yes!

  • The May issue of the Capitol Insider reports that using eChecks will “keep costs down and limit future increases in filing fees.” This makes sense because eChecks eliminate credit card processing fees. Paying by eCheck is free to both parties – the payor/eFiler and the payee/OJD. It is a bank-to-bank transaction.
  • Bookkeeping will be simpler for OSB eFilers. Paying eFiling fees by credit card requires the extra step of reconciling your credit card statement to your eCourt account. And there is also the matter of billing. Even if you bill or post a filing fee expense to your client’s account when it is incurred, this only improves the timing of your reimbursement – it doesn’t shorten the accounting steps.
  • You now have the flexibility to easily use your trust account as a source of paying filing fees. (A debit card tied to your trust account is also permissible, but be sure to take proper steps to protect client funds.)
  • Lawyers who don’t have credit cards won’t be forced to get one just to use the OJD eFiling system.
  • Lawyers who can’t get credit cards will no longer be penalized.
  • Firms won’t have to set up special reminders to renew or update credit card information in OJD eFiling accounts, since routing and bank account numbers never expire. Do remember to update your payment information if you change banks!

Do you currently have a debit or credit card dedicated to paying eCourt filing fees?

If yes, and you make the switch to eChecks, quit using your debit or credit card for eCourt filing fees. This starts the process of closing your account. Verify that all pending transactions have been processed. Reconcile your final card statement, bill clients, then wait an additional month before you direct your bank or processor cancel your account. There should be no more debit or credit activity during this time. Assuming all transactions are accounted for, close your account. Remember to delete your debit or credit card from the OJD eFiling system.

NOTE

If your debit/credit card is used for other purposes beyond paying eCourt fees, ignore this advice.

How do I set up eCheck payments?

Users can create an eCheck payment account under Payment Accounts in FIRM ADMIN. If you need help with this process on the HMTL 5 site, download the Firm Administrator Guide 3.15 available here.  You can also get help with this step from the vendor, Tyler Technologies:

New Terms of Use

With the addition of eChecks as a payment method, the OJD and Tyler Technologies Terms of Use have been updated. View the new TOU here

All Rights Reserved 2017 Beverly Michaelis

On Demand CLE Store Now Open

If you weren’t able to attend eCourt Malpractice Traps 2017 or one of my other recent CLEs, don’t fret.  On demand CLE is now one click away through Selz.

Visit my online store to download these programs from 2017 and 2016:

OSB accreditation

All programs are current and accredited by the Oregon State Bar.  Visit the online store for details.

Your on demand CLE purchase includes

  • MP4 download (combined audio and video file)
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  • Answers to polling questions asked during the live CLE
  • MCLE Form 6 for self-reporting of MCLE credits

Instant digital delivery with options to save to the cloud or your mobile device

Digital files are delivered instantly at checkout.  Download, stream, save to your Dropbox account, or send files to your Kindle.

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All transactions are handled by Selz and protected with industry standard security, including encryption and SSL secure. The Selz platform is also PCI compliant. Visa, MasterCard, American Express, and Discover accepted.

Ethical Guidelines for Client Files – Live CLE June 7, 2017

If you can’t attend Ethical Guidelines for Client Files live on June 7, it will be available to download from the online store on June 8.

Passing on Credit Card Surcharges to Clients

The Back Story

In 2013, the U.S. District Court for the Eastern District of New York approved a Class Settlement among merchants, Visa, MasterCard, and other defendants.  Allegedly, the defendants conspired to collect excessive “surcharges,” also called merchant fees, transaction fees, or convenience fees.

The class action litigation was drawn out over 8 years and involved 400 depositions, 80 million pages of documents, 17 expert reports, and 32 days of expert deposition testimony.

On September 28, 2015, the Second Circuit Court of Appeals held a hearing regarding an appeal of the settlement. The matter has now been submitted to the Court for decision. It is not known when the Second Circuit will issue its decision.

Why should Oregon lawyers care about the Payment Card Interchange Fee Settlement?

Because it’s all about the money.  Or more precisely, the cost of getting paid.

Can Law Firms Pass On Credit Card Surcharges?

Some lawyers are taking the position that the Payment Card Interchange Fee Settlement permits them to pass on credit card surcharges to clients.

Depending on the situation, these fees can add up to real money:

  • Jane Client owes her law firm $7,000.  A fan of frequent flyer miles and other perks, she charges her legal bill to her Visa card.  Surcharge to the firm: $210.* Net amount collected by the firm: $6,790.
    If the firm has five “Jane’s” in a month, it ends up losing over $1,000 in billed fees.
  • Corporate client Oregon, Inc. informs its law firm that henceforth it will pay only by credit card.  A typical monthly invoice for Oregon, Inc. is $10,000.  Over a 12 month span, the law firm will eat $3,600 or more in legal fees – the cost of absorbing surcharges each time Oregon, Inc. pays its bill by credit card.*  Bottom line: taking credit cards isn’t cheap.

You Might Say a $10,000 Client Payment is a Good Problem to Have

Agreed.  It may not be easy to sympathize with or relate to either of these scenarios. But most lawyers do take credit cards, and by year-end the surcharge fees add up.

What to do?

If you’ve read my blog before, you know I’m an advocate of building the cost of taking credit cards into your fee – what you charge for services.  This continues to be a valid approach for the following reasons:

  • Assessing surcharges [or crediting clients for the net amount less fees] involves extra administrative and bookkeeping steps.  If you get the math wrong and the transaction involves trust account funds, you could face disciplinary action.
  • Passing on surcharges is unpopular.  Clients don’t like to be “nickel and dimed” to death.
  • Ethically, clients are not obliged to pay any cost to which they did not agree.  If you did not include the right to assess surcharges in your fee agreement, you cannot unilaterally pass on the cost after the fact.  [Granted, you can fix this by modifying your fee agreement – but it isn’t necessarily advisable and may not be successful.]  See OSB Formal Opinion 2005-97.
  • Legally, there are more than a few barriers.

Legal Implications of Passing on Surcharges

A bit of research reveals that passing on surcharges may be acceptable under the Payment Card Interchange Fee Settlementprovided you:

  1. Inform Visa and MasterCard before you begin surcharging.
  2. Show the surcharge as a separate item on all transaction receipts.
  3. Display prominent signage at checkout advertising surcharge fees.
  4. Apply surcharges only to credit card purchases – you cannot legally add a surcharge to a pre-paid card or debit card (even if you run it as a credit card transaction).
  5. Limit surcharges to transactions in the domestic United States and US territories.
  6. Verify surcharges are not prohibited by state law.
  7. Assess no surcharges to clients using American Express or Discover, as they are not part of the Payment Card Interchange Fee Settlement.

How Do These Requirements Translate to the Legal Profession?

Good question!  Assuming the Payment Card Interchange Fee Settlement gives you the right to begin surcharging:

  • Step two might require you to change your credit card processing practices. When a card is swiped, a receipt is generated.  Assuming it shows the surcharge as a separate item, and you provide the receipt to the client, you have complied with this step.  But what about “card not present” transactions where the card is not available to swipe?  These are far more common in a law firm. Do you currently email a contemporaneous receipt?  Maybe you should.  Will you list surcharges as a separate line item on billing statements?  Maybe you should do that too.
  • Step three may mean displaying a sign in your office, drawing prominent attention to the fees in your written fee agreement, including information on your intake form, discussing surcharges during the initial client interview, etc.
  • Step six would require vigilance when working with out-of-state clients. Surcharges are illegal in California and nine other states. Some predict this number will grow.

Can I Do it or Not?

I can’t give you the unequivocal green light.

While some law firms are surcharging now, please remember the settlement is under appeal.

Additionally, consider this comment 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).

While the language is “may implicate Regulation Z,” the safe harbor has always been to assume the Truth in Lending Act applies to these transactions.  [The Ethics Committee added this substantive law caveat to alert practitioners to the possibility.]

I’ve read the Orders and other documents posted at the Payment Card Interchange Fee Settlement in an effort to wrap my head around this.  I’ve never seen any source that fully reconciles the issues in the class action with the requirements set out in Regulation Z – not that I’m an expert.

Assuming the appeal doesn’t upset the apple cart, my suggestions on how the Payment Card Interchange Fee Settlement would translate to lawyers are only best guesses. There is no authoritative source to guide us on applying point-of-sale retail transaction requirements to a law firm setting.  For example, how does a law firm “display prominent signage at checkout?”

Proceed at Your Own Risk

If you want to assess surcharges, do your own substantive legal research and proceed at your own risk.  Before taking the plunge, consider these words of wisdom from LawPay, a popular credit card processor serving the legal profession:

Many law firms simply build the additional cost [of accepting credit cards] into their fees as a standard business expense. This is generally recommended as the proper and more professional way to handle the business expense of processing payments.

[All Rights Reserved 2016 Beverly Michaelis]

*Based on a surcharge of 3% per transaction – transaction rates vary.

Doubling Down on Your Bill When the Client Doesn’t Pay

 

We’ve all been there.  Non-paying clients can be incredibly frustrating, especially if you went out of your way to offer a reduced rate or special payment plan.  But before you resort to punitive measures, take a moment to think it through.

  • A literal doubling of your fee is likely to be challenged as excessive.  Review Oregon RPC 1.5.
  • Consider whether the proposed punitive action will make a difference.  Do you truly believe that doubling your fee will motivate the client to pay?
  • Collections can be a landmine of legal traps and pitfalls.

What Should You Do If the Client Doesn’t Pay?

In the case of non-paying clients, it may be appropriate and necessary to withdraw. If so, take care to abide by your ethical responsibilities.  If you represent the client before a tribunal and must file a formal Motion to Withdraw, read and understand Oregon Formal Opinion No. 2011-185 – Withdrawal from Litigation: Client Confidences.  If you have any doubt about what you can or cannot tell the court, seek advice from the Oregon State Bar General Counsel’s office or contact a lawyer colleague who specializes in ethics defense.

You should also consider ordering one (or more) of the free CLEs offered by the PLF on managing law firm finances:

  • 50 Shades of Green: Building a Profitable Solo or Small Firm Practice
  • Building and Maintaining a Profitable and Efficient Law Practice 
  • Increasing Revenue: Updated Strategies for Attracting New Clients and More Effectively Managing an Existing Client Base 
  • Money Matters 

These CLEs will help you to:

  • Banish personal habits that cause you to under earn
  • Identify profitable practice areas
  • Analyze overhead, liquidity ratios, budget, turnover, and realization rates
  • Establish effective billing practices
  • Reduce accounts receivable
  • Develop case and client selection skills to eliminate payment problems

Visit the PLF Website for details.  Select CLE > Past CLE.

[All Rights Reserved 2016 Beverly Michaelis]