Can Client's Pay Fees and Retainers Using PayPal?

by Shelley A. Ajax

I opened my solo practice in July of 2005 in the Tri-Cities, and have been weaving and wandering down the road of professional responsibility with a fine-tooth comb. Since I run a general practice, I was faced with the dilemma concerning the multitude of ways to receive payments from clients. All of my work experience for the past 10 years had been based on contingent fee agreements. When I started doing family law, I found out that many clients want to use a credit card! For some, it is the only means to obtain representation. For me, it meant doing my research.

I considered buying a credit card machine, and set out to find the best deals around. But the cost was excessive for my one-person firm, and I was not particularly fond of having that clunky old machine on my desk. While trudging through the various options, I heard about Pay Pal.  PayPal is an on-line service where others can pay you using their credit card on the internet. It is commonly used for internet purchases, such as those made on e-bay. When you open an account with PayPal, you can link your bank account. When payments arrive, the account owner receives an e-mail message from Pay Pal indicating there are funds in the account. The account owner can then access the PayPal account and transfer the funds to the proper bank account.

So this gives rise to an ethical question: Can I receive payments from clients through PayPal? At first, I thought the answer was wholly "no." So, I held off, contacted the WSBA ethics line, and received a speedy response. The ethics line did not know either. Apparently, this question had not been asked before.

Deciding to take this further, I wrote the Rules on Professional Conduct Committee. My question was submitted and I received a rather rapid response. Albeit, the response is Informal Opinion #2108, which means it is the opinion of the committee and not necessarily the WSBA. It appears that a lawyer can accept credit card payments through PayPal for funds "belonging to the lawyer." To me, this means if the funds are eligible to be placed in the general account, then it is okay to use PayPal. If the funds are supposed to be placed in the trust account, then you cannot use PayPal to accept payments. I would surmise the reasoning behind not being able to use PayPal for funds headed to trust is because the funds would essentially be "parked" in the account for a short period. Makes sense to me.

The Opinion explains the conditions for using PayPal for funds belonging to the lawyer. First, the lawyer must explain to the client how the service works and how the funds will be processed. Second, the lawyer must investigate to ensure the processing of payments is "reliable and secure." Third, all fees required by the service must be paid by the lawyer. Finally, PayPal must be an option for the client and not a requirement by the lawyer. Obviously, different facts may change the opinion of the Ethics Committee.

For more information on the inquiry and facts submitted, see Informal Opinion #2108. My specific request to the Ethics Committee is also available to bar members by request to the Washington State Bar Association.

Shelley A. Ajax. is a WYLD associate editor and solo practitioner at Ajax Law Firm. She can be contacted at 509-735-5055 or shelley@ajaxlawfirm.com.