MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2002-23
Acceptance of credit card payment as retainer
You have requested an opinion of the Maryland State Bar Association Committee on Ethics regarding the acceptance of credit card payment by Maryland attorneys for a retainer or deposit for legal services to be rendered. Specifically, you ask whether under the Maryland Rules regarding trust accounts (Maryland Rules 16-101 through 16-612) and the Rules of Professional Conduct it would be appropriate to arrange to have such credit payments deposited in the attorney's account and to have any credit card charge-back debited from the attorney's operating account. We believe that the arrangement you propose is appropriate.1
In your inquiry, you point out that the Committee has previously addressed credit card payments for fees in several opinions. Specifically, in Ethics Docket 97-14 and 2001-15 we addressed the potential problem of a client who having made a credit card payment for a retainer subsequently exercises a "right of recission" resulting in a "charge-back" to the attorney's trust account. In Ethics Docket 97-14 we concluded that as long as such a contingency exists the funds must be held in the trust account. You point out that leaving earned fees in escrow for such a period is impractical. In addition, we note that leaving earned fees in a trust account seems to disregard the requirement of Maryland Rule 16-607.b.2 that "[funds] belonging to the attorney or law firm shall be withdrawn promptly when the attorney or law firm becomes entitled to the funds…" However, we believe that as long as the possibility of a charge-back exists the protection of other clients' funds takes priority over any requirement that earned fees not be commingled with trust funds or any impracticality suffered by the attorney.
In Ethics Docket 2001-15, we attempted to clarify an attorney's responsibility with respect to charge-backs from credit card payments for retainers. We state that the attorney would be obligated to deposit sufficient funds to cover such a charge-back and that deposit could be made from the attorney's operating account. We also pointed out that the trust account rules permit an attorney to enter into an agreement with a financial institution to have any fees or charges related to a trust deducted from an operating account maintained by the attorney. It is the Committee's opinion that the charges contemplated by those rules include charge-backs.
To summarize, clients may pay retainers with credit cards and those payments be deposited into a trust account. As long as the potential for a charge-back to the trust account exists, those funds must remain in the trust account to avoid the possibility that such a charge-back would encumber funds belonging to other clients. Alternatively, as suggested by the trust account rules, an attorney may make arrangements with the financial institution to debit any such charge-back from the attorney's operating account.
1This belief is, of course, subject to the fact that credit card payments or cash advances against a credit card account may not be taken from a client who the attorney reasonably believes may seek to discharge the obligation to pay the credit card company in a bankruptcy proceeding or otherwise fraudulently attempt to avoid such payment.