Kerry Underwood

PAYMENT BY CARD

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AMEX

AMEX automatically deducts the commission from the supplier once payment is made by the client.

Thus if money is paid on account of costs, rather than to discharge an invoice, then the automatic deduction of commission creates a client account shortfall.

Thus £2,000 on account of costs is taken. The money goes into client account. Let us assume 2% commission is taken. That means £40 is removed by AMEX.

If the solicitor tops up that sum from office account, then the client is not losing out, as there is still £2,000 on account being held.

Indeed the client is benefitting in that the solicitor is taking payment by credit card with no charge to the client for that facility, whereas many suppliers make a charge to the customer.

The Solicitors Regulation Authority has been very helpful and its view is that this is not a problem, but that the clients should be told that the commission will be taken straight away, but that it will involve no extra cost to them.

There is a problem if the client does not proceed, as the solicitor would then need to refund the whole sum, which would result in a net loss of £40 to the solicitor.

That could be dealt with in the retainer, that is that there is no credit card charge to the client if the matter proceeds, but they will have to pay it if they do not proceed.

My view, from a marketing and not a regulatory position, is that that may put clients off and also causes unnecessary work in each case, given that it rarely happens.

A firm with a work profile where it does happen frequently could take a different view.

There is a problem in delivering an invoice and then taking payment for it by AMEX, as the money then goes into client account, which is a breach of the Solicitors Accounts Rules, as once a bill has been delivered, payment should go into office account.

I know that solicitors often take the view that putting money into client account is the safe option, but it is in fact a breach in these circumstances.

If a solicitor is dealing with a matter, or a stage, on a fixed fee, or is delivering an interim bill, then there is a practical way around it.

That is to telephone or email the client and explain that the bill is about to be delivered, take payment into client account, immediately deliver a bill and then transfer the money from client account to office account.

At the beginning of a case, this presents few problems as the solicitor can explain the situation to the client and send an email in advance of the bill, guaranteeing that that is the price for the work to be done and there will be no further charges.

This can be set out at the end of the Client Care Letter under a “Next Steps” section, together with costs information.

 

This could read:

Next Steps

To attend you and take a detailed statement from you and advise you at that meeting and in writing concerning your employment matter.

The fee for this work is £300 plus VAT giving a total of £360.”

 

The potential problem arises when a solicitor sends out a bill as the matter goes along and the client then wishes to pay by credit card.

If it is a trusted client, then the solicitor could issue an immediate credit note, take the payment and then deliver a fresh bill and transfer the money.

Where a solicitor has less confidence in the client, it would be possible to raise a credit note for internal purposes and if the client pays, then a fresh invoice can be delivered.

If for any reason the client does not pay, then the credit note need never be sent out.

 

Other Credit Cards

Generally other credit card companies do not deduct commission at source, but send the supplier a monthly invoice, and so that point does not arise, but all of the other points dealt with above in relation to AMEX do apply.

 

Debit Cards

Generally these are not a problem as money can be paid into client account or office account, depending on whether the payment is to discharge a bill, or is a payment on account of costs.

 

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Written by kerryunderwood

August 10, 2018 at 8:10 am

Posted in Uncategorized

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