City Bar Formal Ethics Opinion: Charging Disputed Legal Fees to a Client’s Credit Card

The New York City Bar Association’s Committee on Professional Ethics has issued an opinion (2014-03) stating that when a client has granted an attorney advance authorization to charge the client’s credit card for legal fees, but the client later disputes all or part of a particular bill, the attorney may not then charge the client’s credit card for the disputed portion of the bill. It is now well established, notes the opinion, that attorneys are permitted under the New York Rules of Professional Conduct to accept payment by credit card, as long as they comply with various ethical requirements, including protecting confidential information, as required by Rule 1.6, and avoiding excessive legal fees and expenses, as required by Rule 1.5.

As the committee explains, Rule 1.15 contains various provisions designed to protect “client funds” and other “property,” making it clear that these protections arise from the lawyer’s role as the client’s “fiduciary.” Therefore, “a lawyer who has been entrusted with a client’s credit card information, along with authority to make charges against the credit card account, holds that information as the client’s fiduciary. As a general matter, charging the client’s credit card account after the client has disputed the fees violates this trust.”

Such a practice, states the opinion, is analogous to a lawyer taking possession of disputed funds being held in escrow for the client’s benefit, which is explicitly prohibited under Rule 1.15(b)(4). “If the lawyer is not permitted to withdraw disputed funds from escrow, it follows that the lawyer may not charge disputed amounts against a client’s credit card account, which is sensitive information belonging to the client that the lawyer holds in trust and which provides the lawyer with access to a client’s personal funds.”

Therefore, under the New York Rules of Professional Conduct, an attorney may not charge a client’s credit card account for any disputed portion of a bill, even if the client has previously given advance authorization.

The opinion can be read here: http://bit.ly/1s5BGN1