LTRC Roundtable Discussion: Payments

This month, we asked our panel to tell us about changes in payments.

Our Panelists:

Dennis Kennedy (DK), Sofia Lingos (SL), Reid Trautz (RT), Lance Johnson (LJ), and Julie Bays (JB)

What payment method does your firm accept?

LJ: Wire transfer, mailed check, e-check, credits (thru LawPay), and PayPal.

DK: I want to make it as easy as possible for people to pay me. I’m willing to work with people on ways to pay but prefer credit and debit cards and checks (including e-checks).

SL: Our firm accepts checks, wire transfers, and credit cards. Upon engagement, the client checks a box to indicate payment preferences and if they wish to make a secure online payment they are directed to pay the flat rate or retainer via LawPay. LawPay is integrated with Clio so payments are automatically associated with the client.

JB: I advise mostly solo and small firms and I am amazed at how many of these firms still do not accept credit card or ACH payments. Many practice management applications now have credit card processing built into their platform and even if a solo or small firm does not want to use a practice management application, there are still credit card and ACH payment processors that are specific to lawyers’ needs such as LawPay. These companies make it easy for lawyers to handle funds between their trust and operating accounts.

Have you noticed any trends over the past 2-3 years with respect to client preferences for payment options?

LJ: Yes. I am attracting more individuals, small businesses, and foreign-based clients since I started to accept credit card payments. I don’t add a surcharge to the bill for the minor processing fee because I find the practice personally annoying when it’s done to me. It makes the merchant look overtly greedy and insensitive to the negative experience that they create with a card surcharge. How much would you pay to have your clients pay your invoice early (within 2-10 days of your bill) and enjoy the process when they realize (or are told) that they can get their reward points for paying with a card? That was an easy question for me in my solo practice that relies heavily on valuable personal referrals and word-of-mouth endorsements. I prefer (and practice) having a billing rate that can accommodate the <1.5% processing fees without presenting a surcharge on the invoice. Everyone wins.

DK: I had the unique perspective of working at Mastercard for many years. The statistical decline of the use of checks for payments is stunning and unprecedented in the history of money. There’s also been a growing interest and adoption of credit card payment options by small law firms. Clients appreciate that option. I’ve noticed a substantial growth in entry of payments processing companies into the legal space and practice management and related tools are incorporating card payments as a feature.

SL: Ninety-four percent of our bills are now paid electronically. Clients have the ability to use a debit card or bank info to make an electronic payment, not just credit cards. Very few clients pay ongoing engagements via check and those that do usually have them set up as part of their internal payroll and they are automatically generated. A few clients do still pay the initial retainer via check. I am very grateful for the option to deposit checks directly from my banking app and I do not miss going into the bank (though I think the kids may miss the little lollipops).

RT: Clients want electronic payment options but many are not as responsive to emailed bills as we’d like. Texting payment links to individual clients seem to get a quick response especially as a follow-up to unanswered emails. For business clients, emailed bills with direct payment links help firms get timely paid. Payment apps like Venmo are gaining popularity but mostly, it seems, for clients under 30.

JB: According to a couple of recent surveys, consumer clients prefer to make their payments by credit card or ACH. One of the most interesting trends is the increase in inquiries as to payment by peer-to-peer applications such as PayPal and Venmo. A solo or small firm should ensure that they are handling these types of payments properly.

What type of diligence do you conduct with respect to a possible payment option before making that method available for client use?

LJ: I contacted others who had been accepting such payments and got a handle on their experiences. I also checked in with the information available at the LTRC.

DK: I prefer card payments for this reason. I’m not sure how much due diligence it’s realistic to do. Lawyers have largely accepted client checks without diligence for many years. To a large extent, I would assume that a practice management tool that incorporates a payment processing service has done a much better job on diligence than I can do on my own. Realistically, you will be going through your bank or a known payments service like Stripe if you set up payments on your own.

SL: Since I do collect retainers I utilize LawPay to ensure that the fees are treated properly within my IOLTA account. With the integration between LawPay and Clio, I am able to ensure accuracy as the amount paid is automatically credited to the client’s account within Clio and when bills are sent I can apply those funds directly. For your international clients, you do need to call LawPay and have the specific country from which you are expecting payment added to your account as an added layer of protection.

RT: Each payment option has different regulations to recover funds if the payment process goes awry. I would not accept payment apps like Zelle and Venmo until I knew my increased cash flow from accepting them outweighed my possible losses if I got burned. Hopefully, these apps will improve those security functions much like PayPal has done, although I still like credit cards better.

JB: The first thing a solo or small firm should do is make sure they fully understand the terms of the agreement with a credit card processor. They need to know how charges are being made to their account and whether these fees will be debited against their trust or operating account. Under the ABA Model Rule of Professional Conduct 1.15 (b), a lawyer may keep a small amount of their own funds in their trust account to cover bank charges and fees.

A bigger issue for lawyers is if they decide to use a peer-to-peer application such as Venmo. Many jurisdictions have not issued ethics advisories or opinions on these types of payments. They need to check their local rules. The lawyer needs to diligently make sure that their client’s confidentiality is secure. They also need to understand that they can’t deposit funds into an account that is not a trust account if the funds are not earned. They should also know how these companies handle payment disputes. These companies are constantly making changes to their platforms, and therefore lawyers need to do their due diligence and understand the complexities of these types of payments before they offer these options to clients.

Are there payment methods that you do not currently accept but are contemplating and/or aware of other attorneys accepting?

LJ: Nope. I don’t understand Bitcoin and the related digital currencies enough to take that leap and wade through the pertinent local ethics opinions on the issue. None of my clients have asked to pay in digital currency, so I’ll cross that bridge when I get an actual request.

DK: I’m definitely not contemplating cash. Bitcoin, Ethereum, and other cryptocurrencies interest me for many reasons, but not as a way for people to pay me. I’ll let others be the pioneers on that.

SL: LawPay has two features that we are not currently using but that are interesting. The first is scheduled payments. You can make a plan with your client, have their credit card on file, and there are reoccurring automatic withdrawals made at the intervals you select. In early 2022 LawPay will begin offering a new buy now, pay later option for legal clients, ClientCredit. The amount of interest is unclear, but the firm receives payment in full and the credit contract is between LawPay and the client. This may be a better option for some as opposed to credit cards.

RT: Bitcoin acceptance is just starting in firms, so I’d wait a bit to see their experiences. I’m fine with firms experimenting here but are they gaining any broad advantage by accepting crypto now?

Have you encountered any issues with implementing payment options that you have learned from and would share with others?

LJ: A couple.

1) Check with the processor and make sure that you are authorized to receive payments from anywhere in the world if you have foreign clients. We had to address a number of declined transactions from foreign clients trying to pay a retainer before I got to the bottom of the reasons.

2) There is a highly personalized way to craft/send a credit card payment link with your invoice or retainer request that is slow and time-consuming (link with a specified amount and recipient that you fill in) as well as a fast way that takes virtually no effort on your part and that clients don’t mind (link to a blank payment form that deposits the payment into your operating account). I messed around with the personalized way for way too long before I found the fast way.

3) PayPal used to have a hold on the funds paid because they used to treat payments made to attorneys like an eBay transaction that had to be held in case of fraud. This policy really messed up my cash flow in the early days. I went thru several rounds of explanations and had to threaten to cancel the account before someone at PayPal actually saw the light. Now, there is no hold. Lesson: Find out if the payment processor is going to hold your funds, for how long, and why.

DK: My background at Mastercard probably makes me biased in favor of the card payment system. (Laughs) I do want to mention that moving to card acceptance gets firms out of the business of collecting payments and financing slow-paying clients, which is not a core strength of firms I know. Nor should it be.

SL: Sometimes there is a delay between when payment is made and when it shows up in Clio, and since our engagement does not begin until funds have been received I will check LawPay directly if I am expecting a payment. I have heard stories of people who used PayPal having Clients dispute the payment and having the fees locked up during the dispute resolution for more than six months.

RT: There used to be a website called Paypalsucks.com that tracked terrible user experiences with Paypal. I think sites like that helped (or forced) PayPal to get more serious about resolving transaction disputes. We now see Facebook groups for people who hate payment apps. I’d explore their usefulness and security, but wait until these apps got better and more private before widely accepting them in a law firm.

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