Like a movie sequel coming out 10 years later, here comes part two of that promised two-part post. (Can you even really call something a two-part post if the second part doesn’t come along until 10 days later?)
The second draft Formal Ethics Opinion put out for public comment by the Board of Professional Responsibility in Tennessee is FEO 2023-F-170 to provide updated guidance on the ability of attorneys to accept credit card payments and first-time guidance on accepting payments through other, more modern electronic payment platforms.
First, and foremost, given that the last ethical guidance the BPR put out on accepting credit card payments dates back to 1982, this is a positive and needed development. This opinion indicates that it would vacate those 40-year-old opinions (82-F-28 and 82-F-28A) which interpret a version of the ethics rules no longer in place in Tennessee.
But there are problems with the draft opinion. Those problems, in my view, fall into two buckets: (1) it gets something quite factually wrong about the ability of lawyers to safely accept monies deposited into trust via credit card; and (2) by deciding to address both a form of payment that has been available and understood for more than 40 years and addressing other payment platforms that are much more in their nascent stage and riskier for use in the same opinion, the Board ends up blurring certain issues such as what a lawyer needs to do to address questions of client confidentiality.
Let’s address the first problem because it really is vital that the Board get this correct. The draft opinion appears to unnecessarily require Tennessee lawyers who want to accept credit cards as a way of allowing clients to make deposits of amounts that need to be held in trust to have to create a third account for that purpose rather than allowing for those deposits to go directly into the lawyer’s IOLTA account.
The rationale is the belief that the way that any chargeback process for credit card payments works is that it is not possible for credit card processing transactions to work in such a manner that a chargeback would not result in removal of other client’s funds from the trust account. In reaching that conclusion, the opinion indicates it is relying upon guidance from Florida. Earlier in the opinion, the Board indicates that both Florida and North Carolina have adopted the use of such “suspense” accounts rather than prohibiting lawyers from accepting credit card payments into trust at all like Oregon does according to the opinion. That all still raises further questions about the guidance because the Oregon opinion was issued more than 18 years ago and the North Carolina opinion more than 25 years ago and, again, how the marketplace works on these issues has changed.
But more importantly, and as something of a staggering error, the Florida opinion that the Board relies upon does not address credit card transactions at all. It was an opinion issued in 2021 that only addressed the newer payment platforms such as Venmo and the like and came up with the suspense account option because banks won’t let those kinds of services link to an IOLTA account at all.
Simply put, there are a number of companies that understand the rules that lawyers have to live by and that provide for credit card payment services that allow deposits into trust accounts from credit cards and ensure that any chargebacks or transaction fees associated with such activity is charged against the lawyer’s operating account. Clio is one such company.
Thus, to fix the first issue, the opinion must, at least, revise the language offered in the paragraph numbered 2 before the Conclusion portion to acknowledge that there are ways to do this so that no third or “suspense” account has to be created. Along those lines, given that the various other platforms have not had the number of years of experience to be counted on yet to understand these issues, I would have no problem with the opinion indicating that you shouldn’t be accepting trust payments through Venmo and the like.
The second problem is that the opinion’s treatment of a necessary issue — recognizing the need to protect confidential information — combines these various services which are not quite alike and leads to (in addition to the error above about applicability of the Florida opinion) both overkill as to what a lawyer should have to do as to a credit card transaction and ignores the real issue of confidentiality that lawyers need to be aware of on the credit card front.
So, unlike payments through credit cards, payments through much newer platforms like Venmo, PayPal, Cash App, and similar services raise real questions of client confidentiality because they are more “open” source services that allow other users of the service, if the consumer is not careful, to be able to see the details of their various transactions such as the fact that they have made a payment to their attorney. Thus, as to such services, the opinion does good work in explaining that if they are to be used: “The lawyer must take reasonable steps to prevent inadvertent or unwanted disclosure of information regarding the transaction to parties other than the lawyer and the client or third person making the payment.”
But credit card payments and credit card companies don’t work that way. Their platforms aren’t open, and a lawyer doesn’t expose any client’s information to the public by letting them pay with a credit card. I cannot go on a Citibank app and see other people’s credit card transactions.
No lawyer in Tennessee should have to, with respect to credit card payments, “advise clients that the use of credit cards … will result in certain information such as the client’s identity being revealed to the credit card company … and the kind of information that is likely to be disclosed.” If you are going to require that, then there is no reason you shouldn’t have to do that when you accept a check since their information is going to be disclosed to your bank.
What lawyers should be advised about though when it comes to client confidentiality and accepting credit cards is what I wrote about back in March 2022: If a client inappropriately starts a chargeback process against you, RPC 1.6(b) does not really give you the ability to disclose information necessary to dispute the chargeback. Thus, lawyers who accept credit card payments should have language in their engagement agreements to permit them to disclose information necessary to prove they actually delivered the services for which the charge was made.
If you want to submit any public comment (including forwarding a copy of this blogpost for example), the deadline for doing so is May 1, 2023.