The short answer is maybe, but probably not. See below for details.
When it comes to credit and debit card processing for lawyers and law firms, the fees can be expensive. From several dollars for an ACH transaction to as much as 3% for some credit cards, these fees are significant. Still, credit and debit cards are an increasingly popular way people pay for anything today, and legal services are no exception. How can a law firm balance the costs associated with accepting credit cards while preserving the convenience to clients? Here we outline two ways a lawyer or law firm can pass the cost of processing on to the client, or at least share the cost with the client. These strategies are known as surcharging and discounting.
In this document, we provide an overview of both surcharging and discounting. Then we examine the three sets of rules that should be understood prior to implementing these strategies: card brand rules, state laws and state rules of professional conduct. At the end, you will find a guide outlining relevant ethics rules and state laws.
In surcharging, firms expose the cost of processing credit cards to clients and let them choose what payment methods to use. Many lawyers assume that charging clients an additional fee for payment processing is unethical or at least slimy. But the truth is that large card brands like Visa and Mastercard don’t want consumers to know the actual cost of their airline miles, cashback rewards or vacation points. For years, consumer advocates have been fighting the card brands to allow businesses to expose the true cost of credit cards and help consumers make more informed decisions about which payment methods they use.
Another strategy for offsetting credit card fees is to provide the client with a discount if they pay with means other than a credit or debit card (ACH for example). While this strategy can be economically similar to surcharging, it is viewed more favorably by the card brands, under state laws and by the rules of professional conduct.
Rules and Regulations
There are three sets of rules firms should be familiar with prior to implementing either surcharging and discounting: card brand rules, state laws and the state rules of professional conduct.
Card Brand Rules
The card brands (Visa, Mastercard etc.) permit surcharging and discounting but they have some rules that merchants must follow. These rules are generally uniform across all states, and so we’ve provided them below, along with some best practices.
Surcharging Rules and Best Practices Regardless of State
Firms intending to surcharge must notify Visa and Mastercard 30 days in advance of beginning to surcharge
Surcharging is limited to credit cards only; the practice is not allowed on all debit cards even if they have a Visa/MC logo
The amount of the surcharge must not exceed the amount it costs to process that card (Note: This rule makes it difficult to implement surcharging when firms are paying different amounts to process certain types of credit cards)
In no case, may the surcharge exceed 4%
Clearly notify clients of the surcharge at the time of payment, in a fee agreement and with signage at the firm’s offices
Use a payments system that calculates the total amount of the payment after the surcharge is added; do not simply provide a surcharge percentage and require the client to do their own math
Provide a receipt with the surcharge amount clearly identified
Discounting Rules and Best Practices Regardless of State
The discount must be displayed as an actual discount from the full price of the services
In the eyes of the card brands, a discount is not a service fee or other additional fee charged on all services and then removed for those paying by means other than cards (Note: Firms can accomplish this by displaying two prices on an invoice: a credit price and a check/bank transfer price)
Clearly notify clients of the discount at the time of payment, in a fee agreement and with signage at the firm’s offices
Discounting may be applied to both credit and debit cards
While discounting is permitted in all states, some jurisdictions have passed laws limiting how businesses (not just law firms) implement surcharging or whether it is allowed at all. Below we provide links to reference materials on states where surcharging is limited.
Rules of Professional Conduct
Unsurprisingly, bar associations also have a say in how these strategies are implemented. There are only a few ethics opinions or rules or professional conduct that take the anti-consumer position of prohibiting the exposure of processing fees to clients. Most other states permit it explicitly, haven’t taken a position, or allow legal-sector-agnostic state laws and court decisions about merchant best practices to govern. Below we provide links to rules and opinions that have limited the practice of both discounting and surcharging.
To see more details on the rules and regulations specific to Indiana, download our state-by-state guide