Opinion #117 – 10/30/1969 (11-69)
bank, credit card, legal fees, intermediary
Topic: Professional fees paid through intermediary; use of bank credit card plan
Digest: Improper for lawyer to use bank charge plan subscribed to by both attorney and client for payment of professional fees
Canon: Former Canon 35
Is it ethical for an attorney to join a charge plan arranged by a bank under which bills to clients are turned over to the bank which pays the attorney and collects from the client?Upon joining the plan, the attorney pays to the bank an initial fee of $25.00 and a fixed membership fee thereafter of $20.00 per year. The bank charges the attorney 5% for its services, which percentage and cost is reduced as the dollar volume of the attorney’s services increases, so that if fees clearing through the bank exceed $40,000 per year, the annual net cost to the attorney is 2-1/2%. After the attorney joins, he advises his clients that if the clients also join the plan and receive credit cards, the attorney would be willing to have his fee paid through the plan.
Within proper safeguards, bank charges plans may be used for payment of professional fees. (See Legal Service Financing Plan approved by the County Bar Association of Erie County). Any approved financing plan should reserve to the attorney the right in the attorney to recapture the loan in the event that the client fails to pay the loan before the bank brings suit thereon, thereby entitling the attorney to determine whether or not to proceed to sue. In such case, of course, the attorney would be required to pay to the bank whatever might be due if in fact he wishes to proceed directly against the client.Further safeguards under a permissible plan would include, but not be limited to the following: The contract with the bank should provide that neither the attorney nor the client would be compelled to divulge the nature of the services rendered; that arbitration before a Bar Committee be provided in order to protect the client against an improper fee; that the client still retains the right to take his case to court if he chases not to arbitrate; that the bank and its transferees agree not to raise the defense of a holder in due course; that if the client is successful in court the attorney is bound to make good the award of the court in favor of the client; that the bank and the attorney agree that the client may raise against the holder in an action to collect an obligation, all defenses which the client might have had against the attorney. (See Maine Bar Bulletin May 1968, p. 16 for discussion of ABA Ethics Committee approval of Legal Services Financing Plans, citing detailed discussion in “The Practical Lawyer”, March 1968, p. 14; New York Law Journal, October 21, 1967, “Paying for Legal Services under Installment Plan” by Copal Mintz.)
However, a fair reading of the plan under review, including the Affiliation Agreement as amended, leads one to the conclusion that this plan is principally suitable for and intended to be used in connection with the sale of goods. The plan does not contain the essential we consider appropriate for payment or financing of professional services, guidelines for which are set forth in the above citations.It is the opinion of this Committee that the proposed action of the attorney would be unethical, as violative of Canon 35.