I’m not what anyone would call “young.” But you know what I don’t use anymore?
I write one per month: to my homeowner’s association. I pay my other bills via online payments options tied to my bank account or credit card. If I owe anyone money, I either (a) buy them a beer and say, “let’s call it even;” or (b) send it via Venmo or PayPal after they question my definition of “even.”
I expect that this will be controversial: I hope that the conduct rules are never interpreted or applied to prohibit lawyers and law firms from accepting payment – including retainers – via services like Venmo and PayPal.
As alluded to in the opening paragraph, it’s a question we need to resolve. An ever-growing number of consumers of legal services do not use cash or checks. I think lawyers need to consider whether not having, say, a firm Venmo account will cost the firm a potential client who asks “to Venmo” the retainer.
I’m aware of only one advisory opinion directly on point. It’s the South Carolina Bar’s Ethics Advisory Opinion 18-05. (Note: this post is NOT about credit card payments or the numerous advisory opinions on credit card payments.)
Cutting to the chase, here’s the conclusion reached by the SC Bar:
- “Accordingly, Lawyer may elect to establish a dedicated trust account via an online payment service provider, but funds received into that account are likely to be nominal or short-term, thus requiring in turn a transfer of those funds to an IOLTA account. Lawyer should be aware of an elevated risk of non-collection under these circumstances in making the individual determination as to whether he is willing to receive funds belonging to third parties via an online payment service
provider, PayPal or otherwise.”
Makes sense to me.
Remember: “trust account” is a term that gets thrown loosely. There’s a difference between a “trust account” and a “pooled interest-bearing trust account.”
If a lawyer represents me and is holding money in connection with the representation, there’s no question that the money must be held in trust. The only question is this: are the funds reasonably expected to earn net dividends or interest?
If the answer is “yes,” the money must be held in a trust account.
If the answer is “no,” which it most often is, then the funds must be held in a “pooled interest-bearing trust account in a financial institution in Vermont that has been approved by the Professional Responsibility Board.” This latter scenario involves what all of us refer to as “IOLTA accounts.” The interest generated by the “pooling” of my funds with funds that belong to my lawyer’s other clients is paid to the Vermont Bar Foundation.
With both this and the South Carolina opinion in my mind, I see no reason why a lawyer or firm can’t create a Venmo account to accept fees that are paid in advance. Of course, all the other rules apply. For instance,
- the account must include a record-keeping system that complies with Rule 1.15A(a);
- records of funds held in the account must be maintained for 6 years following the termination of a representation;
- the account is subject to the compliance reviews and audits authorized by Rules 1.15A(b) and 1.15A(c) or audit; and,
- the lawyer or firm cannot deposit its own fees into the account, except in an amount necessary to pay service charges or fees on the account.
Then, on a regular basis, the lawyer or firm must (1) transfer earned fees to the operating account; and (2) transfer to a pooled-interest bearing trust account (“IOLTA”) at an approved institution funds that otherwise would be deposited into the IOLTA if received by check, cash, or credit card.
In short, I’m on board with the SC opinion and think that the existing rules allow lawyers to accept advance payments via methods like PayPal and Venmo. Of course, others might disagree with me. That’s fine. If I’m wrong, we should change the rules and expressly allow lawyers and their clients to transact business in a way that society has deemed commercially reasonable.
One final note: if you or your firm has a Venmo account, you might want to suggest to clients who use it that they change their privacy settings. I can imagine a few friends of mine reacting uncomfortably when confronted by spouses who saw a payment to a law firm on their Venmo feeds.