State Bar of Arizona Ethics Opinions

89-10: Confidentiality of Information; Conflict of Interest; Professional Independence of Lawyer

It is ethically proper for a lawyer or law firm to accept credit cards for the payment of legal fees and retainers. The acceptance of credit cards does not infringe upon the confidential nature of communications between an attorney and a client, nor does it represent a conflict of interest or an interference with the attorney's professional independence. The lawyer and the client must enter into an agreement as to which party will bear the lender’s discount; the client must fully understand the terms of this agreement.


The inquiring attorney, managing partner of a private practice law firm, asks about the ethical propriety of the use of credit cards by clients for payment of legal fees and/or retainers. The term "credit card" refers in this context to a card issued by a financial institution which evidences a line of credit extended by the lender to the cardholder. Various business establishments are authorized by contract with the lender to create charges against any cardholder's line of credit when the cardholder charges goods or services to the credit account. The card-issuing lender is bound by the contract to purchase the paper created by the transaction at a predetermined discount rate. The lender then collects from the cardholder the entire amount of the bill in a lump sum or in periodic payments with interest. When a law firm accepts a credit card for payment, credit is extended to the client by the card-issuing lender, and not by the law firm delivering services.



May a lawyer or law firm ethically accept credit cards for the payment of legal fees and/or retainers?



It is ethically proper for a lawyer or law firm to accept credit cards for the payment of legal fees and retainers. The acceptance of credit cards does not infringe upon the confidential nature of communications between an attorney and a client, nor does it represent a conflict of interest or an interference with the attorney's professional independence. The lawyer and the client must enter into an agreement as to which party will bear the lender’s discount; the client must fully understand the terms of this agreement.




ER 1.6.           Confidentiality of Information

(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragrap[h]... (d)....


(d) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client....


ER 1.7.           Conflict of Interest: General Rule


(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation....


ER 1.8.           Conflict of Interest: Prohibited Transactions


(f) A lawyer shall not accept compensation for representing a client from one other than the client unless:

(1) the client consents after consultation:

(2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; and

(3) information relating to representation of a client is protected as required by ER 1.6.



ER 1.15.         Safekeeping Property


(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.


ER 1.16.         Declining or Terminating Representation


(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as... refunding any advance payment of fee that has not been earned....


ER 5.4.           Professional Independence of a Lawyer

(a) A lawyer or law firm shall not share legal fees with a non-lawyer….


(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services.



ER 6.1.           Pro Bono Publico Service

A lawyer should render public interest legal service. A lawyer may discharge this responsibility by providing professional services at no fee or a reduced fee to persons of limited means or to public service or charitable groups or organizations, by service in activities for improving the law, the legal system or the legal profession, and by financial support for organizations that provide legal services to persons of limited means.


ER 7.1.           Communications Concerning a Lawyer's Services

A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it:

(a) contains a material misrepresentation of fact or law, or omits a fact necessary to take the statement considered as a whole not materially misleading;



ER 7.2.           Advertising

(a) Subject to the requirements of ER 7.1 and ER 7.3, a lawyer may advertise services through public media, such as a telephone directory, legal directory, newspaper or other periodical, outdoor, radio or television, or through written communication.




Arizona Committee on Rules of Professional Conduct:

Opinion No. 197 (July 21, 1966)

Opinion No. 279 (April 18, 1969)

Opinion No. 70-20 (August 17, 1970)

Opinion No. 71-34 (November 4, 1971)

Opinion No. 72-25 (November 29, 1972)

Opinion No. 74-27 (September 18, 1974)

Opinion No. 78-27 (August 1, 1978)


ABA Committee on Ethics and Professional Responsibility:

Informal Opinion 998 (August 26, 1967)

Informal Opinion C735 (May 19, 1964)

Formal Opinion 320 (February 19, 1968)

Formal Opinion 338 (November 16, 1974)



The American Bar Association Committee on Ethics and Professional Responsibility first addressed the ethical propriety of a legal fee financing plan in Formal Opinion 320 (1968). In that opinion, the ABA Committee analyzed possible ethical problems under the then-controlling Canons of Professional Ethics and concluded that the legal fee financing plan was not unethical.

This committee has previously addressed the issue presented by this inquiry on several occasions. In our Opinion No. 279 (1969), we recommended that a special committee of the State Bar be appointed to formulate, in cooperation with the banks, a credit card financing plan and service agreement within the framework of the applicable Canons as outlined and discussed in ABA Formal Opinion 320.

A special committee was appointed and the plan it presented to this committee was approved in our Opinion No. 70-20, as were the restrictions recommended by the special committee:

(1) No placards will be issued by the banks or used by participating attorneys;

(2) There will be no publication of any kind of a list of lawyer participants;

(3) The plan should be open to all lawyers for participation subject only to the rejection by the bank of a particular attorney based upon sound reasons or misconduct under the plan; [and]

(4) The paper should be without recourse, but with the attorney retaining the option to repurchase from the bank if he so desires.

In our Opinion No. 71-34 (1971), we approved a modified professional services agreement that limited a lender's control of collection of charge slips and an attorney's option to repurchase slips from a participating bank to those slips owned by the card-issuing lender involved. The committee then reiterated its analysis of division of fees set forth in Opinion No. 70-20.

The ABA Committee on Ethics and Professional Responsibility, in its Formal Opinion 338 (1974), held that the use of bank credit cards for the payment of legal expenses and services is permitted under the Code of Professional Responsibility; likewise this committee affirmed, in our Opinion No. 74-27 (1974), our approval under the Code of the use of credit cards for the payment of legal fees.

In 1985, Arizona adopted the Rules of Professional Conduct. We are now asked to analyze the ethical propriety of credit card financing of legal fees and retainers under those Rules. We do so by discussing each possible ethical problem in turn.


Confidentiality of Information

Ethical Rule 1.6(a) prohibits a lawyer from revealing information relating to representation of a client. The use of credit cards for payment of fees may infringe upon the confidential nature of communications between an attorney and his client because the lender must be informed of the nature of the services rendered which give rise to the debt. The client should be informed that the lender's records will indicate the general nature of the consultation or work completed. Unless the attorney's disclosures to the lender include matters communicated to him in confidence, his disclosure of general information for this purpose is not professionally improper. These disclosures may be characterized as impliedly authorized under ER 1.6(a) in order to carry out the representation.

ER 1.6(d) allows an attorney to reveal information regarding representation to the extent he reasonably believes necessary to establish a claim for fees against a client who refuses to pay for services rendered. Such disclosures could possibly be made to the lender if the lender brings an action against the client to collect the charged fees and the client defends by claiming that the services were not delivered as billed. It may be wise to give the client notice in the retainer agreement of the possibility of disclosure of otherwise confidential information if the client disputes the attorney's bill.


Professional Independence of Attorney

A. Third-party payment of fees.

Under a credit card financing plan, the attorney would receive at least part of his payment directly from the card issuing lender rather than from the client, who would then be obligated to repay the lender. Ethical Rules 5.4(c), 1.7(b), and 1.8(f) allow third-party payment of fees so long as (1) the client consents, (2) there is no interference with the lawyer's professional judgment, and (3) confidential information is protected.

The mere fact that the attorney is actually paid by some entity other than the client, however, does not affect the professional relationship between the attorney and the client, so long as the lawyer is selected by and is directly responsible to the client. Under a standard credit card financing plan, the card-issuing lender would have no voice in the selection of the attorney by the client, nor would it have any interest in or control over the litigation. The loyalty of the attorney would remain fully with the client, as the relationship with the lender would be merely financial. Consent of the client is apparent from the use of the credit card for payment.

Previous Arizona ethics opinions required that approved agreements between law firms and lenders provide that the lender's acquisition of the paper be without recourse against the attorney. See Opinions Nos. 70-20 and 71-34. The attorney would thereby be relieved of any obligation to reimburse the lender upon the client's failure to pay the lender, thus avoiding any conflict of interest. This remains the recommended form of credit card agreement.


B. Division of Fees.

Ethical Rule 5.4(a) prohibits a lawyer from sharing legal fees with a non-lawyer. Use of credit cards for payment of fees does not, however, constitute a division of fees with the lender, as the lender acts merely as a collection agency for the attorney's fee. The ABA Committee held in Formal Opinion 320, supra, that similar financing arrangements did not amount to a division of fees under Canon 34, the predecessor of ER 5.4(a). In that Opinion, the ABA Committee quoted from ABA Informal Opinion C735:

There does not appear to be anything inherently unethical in an arrangement under which a collection agency in effect extends credit to its customer by advancing and paying for the account of the creditor the fees of an attorney who performs legal services for the creditor in connection with a claim, if the agency is fully reimbursed by the creditor for fees paid to the attorney in the exact amount of such fees and at the time of reimbursement the amount of fees is separately identifiable or segregated from amounts paid by the creditor to the agency for its own services as distinguished from the attorney's legal services.

ABA Formal Opinion 320 at 35. This committee agreed with this analysis in our Opinions Nos. 70-20 and 71-34.


Fee Agreements

A lawyer or law firm that accepts a credit card for payment of fees must enter into a fee agreement with the card-holding client that explicitly states which party will bear the creditor's discount. A lawyer who makes a statement to his client that the client will receive a certain amount of legal time for the charged fee may not reduce the amount of legal time in order to cover the discount. ER 7.1(a) prohibits a lawyer from making such a false or misleading communication. Neither may the lawyer remain silent about which party will bear the discount; again, this would be an omission of fact in violation of ER 7.1(a). The client must be made to understand the terms of the fee agreement as to the discount.


Furtherance of Pro Bono Service

Ethical Rule 6.1 acknowledges that the legal profession has a duty to make legal services available to those who need them. The responsibility for providing legal services for those unable to pay rests with the individual lawyer.

An attorney who provides clients an opportunity to use consumer credit to finance fees makes legal services available ta some people who would otherwise be unable to afford a lawyer. The use of credit cards may help accomplish this desirable objective. See ABA Formal Opinion 320, supra, at 34.



Despite our previous approval of credit card financing of legal fees, this committee, in our Opinion No. 70-20, listed restrictions designed to curtail advertising of and competition between law firms. See the third paragraph of this Opinion, supra.

The United States Supreme Court's opinions in Bates v. State Bar of Arizona, 433 U.S. 350, 97 S. Ct. 2691, 53 L. Ed. 2d 810 (1977), and Shapero v. Kentucky State Bar Association, 486 U.S. 466, 108 S. Ct. 1916, 100 L. Ed. 2d 475 (1988), and the amendment in Arizona of Ethical Rules 7.1 and 7.2, effective August 1, 1989, have modified the restrictions that may be placed upon attorneys. As long as the material is not false or misleading, the State Bar cannot prohibit the use of placards or other materials which advertise that the attorney accepts certain credit cards for payment of fees.

See ER 7.1. Likewise, the firm name may be published in a list of firms which accept such cards.


Credit Card Financing of Retainers

Retainers likewise may be charged with a credit card. How the attorney must handle the funds received from the lender depends on the type of retainer requested. Two types of retainers are traditionally charged by attorneys. The type of retainer charged in an individual case should be clearly defined in the retainer agreement with the client.

The first type of retainer is a fee paid to retain the services of the firm for a case or series of cases. It remunerates the firm for making itself available to handle the case and for refusing conflicting employment. It is earned when paid and does not constitute compensation for services to be delivered in the future. Baranowski v. State Bar of California, 24 Cal. 3d 153, 593 P.2d 613, 618 (1979). This type of retainer may be charged to a credit card and the proceeds thereof may be placed in regular operations accounts.

The second type of retainer is an advance fee deposit; that is, an advance payment by the client which secures the firm's agreement to serve and compensates the firm for services to be provided in the future. This type of retainer creates an account against which the hourly fees or costs of legal services are charged as they are earned by the firm. See ABA Informal Opinion 998 (1967); Arizona Opinions Nos. 72-25 (1972) and 78-27 (1978). In the Arizona Opinions, the committee indicated that, under the ethics code then in effect, this type of retainer must be placed in a trust account; the funds may be withdrawn when due unless the client disputes the fees charged. Ethical Rule 1.15(c), although less clear than its predecessor, DR 9-102(A) (2), also directs the attorney to place the retainer in a trust account until earned.

Ethical Rule 1.16(d) directs the attorney to refund to the client any unearned portion of the retainer upon termination of representation. A “credit” to the client's card account would accomplish the refund.

The exact nature of any payment made in advance of services rendered should be addressed in fee agreements. The use of the term "retainer" without elaboration may easily result in misunderstanding.


Participation in Credit Card Financing

Although it would be desirable for financial institutions to act fairly in deciding which lawyers may participate in credit card financing, the State Bar cannot require that each institution allow all lawyers to participate. Several governmental agencies police illegal discrimination in the policies and procedures of financial institutions; the State Bar is not one of these agencies.

This committee does not believe that the State Bar should require individual attorneys to ensure that a credit plan is open to all attorneys before they may participate in that plan, nor do we believe that the Bar should approve or disapprove of the financial institution's operations in advance of attorney participation.



The payment of legal fees and retainers by credit card, if administered in accordance with the Rules of Professional Conduct as interpreted in this opinion, is ethically proper.


Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.

© State Bar of Arizona 1989

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