Three Ways Payment Processors Rip Lawyers Off

We legal folks are hardly unbiased about the good that we think we do in the world but there’s little doubt that lawyers really do play an important role in our society. In fact, one of the interpretations of the famous line from Shakespeare’s Henry VI “The first thing we do, let's kill all the lawyers” is that killing all the lawyers is the fastest way to societal chaos, not societal improvement. Lawyers are the bulwark against tyranny and government overreach and the defenders of the rule of law.

On the other hand, lawyers don’t have the most sterling public reputation. And, some of what lawyers do or are perceived as doing is hard to defend. As just one example, the legal system seems intentionally opaque to much of the general public. And lawyers, who aren’t great at communication and use strange words and reference arcane procedures, don’t help with that.  

That’s why it’s ironic - or, at least, a little funny - that lawyers are the victims of obfuscation, among other things, when it comes to payment processing.

To be fair, lawyers can't and shouldn’t be experts in everything - they’d need to spend a ton of time familiarizing themselves with the ins and outs of an industry that’s fairly arcane itself - but that’s where folks like us come in! Since we know payment processing, we can educate lawyers about the ways payment processors intentionally make payment processing more complicated to their advantage.

Avoid tiered pricing at all costs

The main way that payment processors rip lawyers off is pricing - specifically, a pricing practice called tiered pricing. With tiered pricing processors create different “tiers” of pricing for cards that law firms process. The processor then charges the firm based upon the applicable tier of a given card. This practice lends itself to all kinds of shenanigans. So many, in fact, that we've dedicated an entire post - our companion to this post - on the topic.  Whether it's shady pricing in marketing, arbitrary tiers, additional pass-through fees, or making it more difficult for a firm to lower their costs via shifting processing fees, tiered pricing just plain sucks.

Monthly and recurring fees are a rip-off!

Payment processors also rip lawyers off with monthly fees. Whether it's a monthly fee, some kind of compliance or regulatory fee, or some other kind of fee, these fees are entirely unnecessary. The payment processor is already taking a chunk of the firm's revenue in the form of processing fees. Why does the processor need a monthly fee as well? Monthly hardware fees are a little more complicated. We at Gravity Legal generally think that firms should have a decreasing need for hardware. For all but the highest volume consumer-facing law firms that heavily depend heavily upon face-to-face contact (a fairly specific type of business model whose mechanics the COVID pandemic has, at the very least, called into question) we just don't see why a law firm should have a need for hardware.  So much of payment processing for legal services can be done online. Still, some firms may want to have that card swipe machine. That's fine, but firms should beware that hardware leasing (as opposed to a reasonably priced terminate at-will rental arrangement) is another place that payment processors can manipulate a law firm. We recently heard a story of a small business (not a law firm, to be fair) who was sold a relatively low processing rate but charged hundreds of dollars to lease a simple piece of processing hardware. Over the course of a few years this small business paid thousands of dollars in monthly leasing costs for a machine that could have been purchased for a few hundred. 

Credit cards aren't the only way to get paid electronically

The final way that payment processors rip law firms off is by limiting the payment methods that a firm can offer to clients and when those methods can be used. Many payment processors reference the collections benefits that offering a wider variety of payment options can bring a firm in when encouraging firms to accept credit cards. But processors have a stake in this too. Credit cards are the most expensive type of electronic payment processing for firms.  Not surprisingly, they are often the most lucrative for payment processors too.  Debit cards tend to be a bit less expensive to process than credit cards and eCheck even cheaper than that - but note that the eCheck processing system (known as ACH) is a different one than the system that processes cards.  While there is a development cost associated with integrating ACH into a payment platform it certainly seems that there could be a disincentive for payment processors to invest in making ACH available as a payment method when credit card processing is so lucrative.

Other processors do offer debit or eCheck as options but set up their systems to push law firm clients to expensive credit card payments.  We've seen payments integrated into practice management systems that conveniently omit eCheck as a payment option altogether. This forces firm clients and firms into the more expensive credit card processing.  We've done some integrations ourselves and, if a processor has the modest technical capability to integrate eCheck into their payments system, it's not that much more work to expose eCheck as a payment option through a practice management system. But this rip-off isn't limited to what a firm can do through practice management. If a processor is truly committed to allowing a firm to find the right mix of different payment methods and cost the processor would build greater flexibility for firms to toggle different payment methods - debit, credit, eCheck -  on and off. This allows the firm to find a combination of payment methods that works best for their firm, their clientele, their geography, their practice area, their business model and financial situation, and a host of other variables.  Unfortunately for law firms, most processors just want the firm to add credit cards, or maybe credit and debit. Very few want to give their firms the option of eCheck (let alone something bolder like remote deposit capture or a wire) that would be less expensive for the firm.

Like the law, payment processing can be complicated. But just as legal clients don't want lawyers to use the complication of the law to manipulate them or rip them off, processors shouldn't rip lawyers off simply because processing is complicated.  Lawyers can't learn everything about payment processing to avoid being ripped off but with modest attention to pricing (and avoiding tiered pricing at all costs), monthly and recurring fees, and seeking out other types of electronic payments such as eCheck firms can avoid being taken to the cleaners by payment processors. This leaves them to do the noble work of fighting tyranny and government overreach and defending the rule of law.

“Rip Off+ kingsize” by Ian Burt is licensed under CC BY 2.0.

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