Payment Authorization: When Should You Swipe the Client’s Credit Card?
Before you can charge a client's card, you need a reliable payment authorization system in place.
On many occasions you will be charging the client’s credit card at the conclusion of the appointment, swiping their card into the card reader. For those transactions, you will want to be sure to invoice the client promptly, and confirm that the client has authorized the charge. State Bar rules require that you only bill clients for services that have been rendered, unless they expressly agree to an advance charge. If it’s a one-time meeting and the fees are less than $1,000, you don’t need to have a written agreement. Still, it’s prudent to confirm the arrangements in writing with the client, either before or after the meeting.
This same arrangement applies to a series of meetings, where you are charging the client at the conclusion of each meeting. I recommend that where multiple charges are involved, you revise your retainer agreement to confirm that they are authorizing you to charge their card upon the delivery of the legal services. If you ever get into a dispute with the credit card processor—more on this in a bit—or with the state bar, or if a client disputes the transaction with you directly, you want to have some clear evidence that the client authorized the charge.
In most instances you won’t be swiping the card at the time of the meeting, but instead, billing the client at the termination of the assignment or the end of the month. My general rule is that if the work involves a specific task, such as drafting the agreement, I bill the client when the work is completed. If the representation is ongoing, I will bill them at the end of the month, just as I do for all my paying clients. But there are exceptions to these rules. If the agreement or the task is taking much longer than anticipated, or involves a lot of money, I will often charge at the end of the month, even if the task isn’t yet completed. Most clients are fine with your charging them monthly, even if it means multiple charges over the duration of a longer period of time.
It’s also important that you think through the protocol and timing of the billing and charging. Increasingly I send out bills by email. My billing program doesn’t technically allow me to email a bill directly from the program, but I quickly learned that after I format a bill for printing, I can copy and paste that bill into an email—and it preserves its format and all the details. For older individuals or corporate or institutional clients I still mail out the bills, and I always offer a printed and mailed bill when I send it by email. The key requirement is to ask the client to respond with an authorization for me to charge their card—and then have the patience to wait for the authorization.
Obtaining the payment authorization of the client is essential—a rule I learned the hard way last year. The parties to a mediation had agreed to split the fees, and so I had obtained credit card numbers from each of them. They each approved the bill for the accumulated charges at the end of the month, but when I went to charge the fee one of their cards kept getting declined. After several failed attempts at using the new number given to me by the client, I called him and he gave me yet another card number over the phone, and I processed the charge. I thought everything was all set, but a few months later he protested the charge. While I usually am very deferential to clients who complain about a bill—it just isn’t worth it generally to rebuff a client’s protest—this time I was inclined to hold firm. He contested the charge with Square, and they sent me a request for written verification that he had authorized the charge.
While I had received his emailed authorization for all the rejected charges, I had never bothered to confirm the last valid transaction by email, since he gave me the valid number over the phone. The rules of Square assured me that this deficiency wasn’t fatal to my response to the challenge, but my sense is that it could well have resulted in a declination of the charge and a withdrawal of the funds from my account. Remember, they can take money out of your account as easily as they put it in. And so, I reluctantly agreed to not contest the protest and authorized a refund. But the good news is that the other party to the mediation thought I was being treated unfairly and offered to pay the other’s fees, which I accepted. And so, even though I was paid in full, I learned a hard lesson about the risks of not handling the authorization process properly.
Be warned: get your client’s payment authorization by email in advance of processing the charge, just in case something goes awry down the road.
Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.
"The Art of Getting Paid" is a one-year series of blog posts that provides a comprehensive training to lawyers on how to get paid.
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