A recurring theme that we hear from our LegalMatch member attorneys is that collecting timely payments from clients can often be challenging. Many of these clients are well meaning, hardworking average every day Americans that are struggling to make ends meet.
Others, for one reason or the other, are not good candidates for financing. As the proprietor of your business, you must determine:
- which clients are good candidates,
- what reasonable payment expectations should be,
- and what best practices are to ensure compliance.
Vetting Willingness and Ability to Pay
During an initial telephone consultation, you should be listening empathetically to the client’s explanation of their legal and factual position. If you fail to impart empathy and concern, discussion of legal fees is moot, since that client will likely be looking in another direction for someone they feel is trustworthy and cares about their case.
But during that conversation, you could ask questions that lead you to an informed conclusion of a client’s willingness and ability to pay. Many clients are seeking free legal advice. While answering a few basic questions may be warranted, oftentimes the best advice is that you need to pay a lawyer to engage your matter as an advocate on your behalf. Getting a client to make the leap from acknowledge this reality, to actually signing a retainer agreement and hiring you, can be made easier when you have the confidence of knowing you have affordable payment options for clients who need them.
Part of the process of converting an opportunity into a closed engagement is a frank discussion, generally during a follow up in person consultation, that outlines what the client needs, what you are offering to do for the client, and what expectations are with regard to compensation.
Most clients are unable to write a check for thousands of dollars in retainer, on the spot. And some clients that are able to do so, are not willing to do so because it exposes them to the possibility that they may be tethered to an lawyer they no longer wish to do business with, because they have exhausted funds allocated for legal services by paying for work not yet completed up front.
Once you and a client who needs or wants financing have agreed to move forward, you can go the extra step of asking for a credit report in order to provide you with a greater sense of comfort before offering financing to a potential client.
In a recent article published by The Lawyerist, written by experienced criminal law attorney Russel Hilton, “I am not aware of any ethical problem with a client voluntarily bringing in payments, and I have not found a problem with arranging a fair auto-drafting payment plan. Just make sure everything is disclosed to the client in writing.” The New York State Bar ethics committee recently issued an opinion clarifying that lawyers may enter into arrangements whereby clients give advance authorization to charge their credit cards. However, once a bill is disputed, an attorney may not thereafter charge the credit card. In short, while all signs point to automatic credit card processing as being a viable and ethical option to consider, always check with your local bar.
Legal Services Credit Card Processing Companies
That being said, don’t be surprised if you find your state bar is already partnering with a legal services credit card processing company. LawPay alone purports to partner with 40 state bars. There are others as well, including PaySimple, Chargify and Fusebill, but only LawPay seems to have established relationships with various State Bars.
Payments and Interest
Payment plans should be reasonable and affordable. Asking a client to over extend themselves is a recipe for disaster and opens the doors for having them potentially default. Keep their income and expenses in mind, and charge an amount you mutually agree that they can afford to ensure compliance.
Russel Hilton charges 10% interest on any amount financed, to compensate for the risk of financing and delayed payments. But you could choose to charge less, or even nothing at all. 0% interest financing would be a great incentive for potential clients.
Without question, most attorneys would like to see their full service charges paid up front before any work begins. In the real world, most people are either unable or unwilling to do so, for a variety of reasons. This is nothing more than a safe approach to closing potential business that you would have previously had to turn away, for lack of having a structure in place to accommodate them.
Having a payment plan process in place, and engaging a service provider to assist you in your automatic payment acceptance initiatives will save you from having to chase clients around every month, begging for payments on work already performed. Many businesses offer some method of financing, rather than turn away clients and business. In this regard, the business of practicing law is proving to be no different.
Authored by Cesar Gomez, LegalMatch Marketing Manager