What to Know About Surcharges for Law Firms

Many businesses, from gas stations and online ticket vendors to hotels and restaurants, charge their customers a fee for making purchases with credit cards. We’re accustomed to seeing those extra charges on some bills, but clients may not expect law firms to do the same.   

Yet credit card fees, also known as surcharges, can be beneficial for law firms. Recent research shows that, while 80% of Americans rely on digital payment methods, only 62% of large and midsized firms actually accept credit cards.  

The reasons why firms have hesitated to take credit cards and digital payments are numerous, but it doesn’t need to stay that way. Surcharging may help mitigate many of the concerns that are behind the hesitancy in the first place. It may also help law firms get on board with the digital payment revolution without compromising profitability and compliance.  

What is surcharging? 

Any business that accepts credit cards must contend with the fact that there are processing fees for every transaction. Surcharging is simply passing those credit card processing fees on to your clients instead of absorbing them. 

Surcharging is distinct from collecting convenience fees, which merchants can charge for using electronic payment options like debit cards and online wallets. This charge is sometimes applied in situations where electronic payments aren’t the norm. 

Why is surcharging beneficial for law firms?  

Surcharging is a valuable tool for law firms because it allows them to do four vital things to help them grow: 

• Make their services accessible to all clients 
• Attract more clients by accepting more payment types 
• Build trust with clients with transparent pricing 
• Decrease expenses by recouping processing fees 

5 best practices for surcharging 

Surcharging has its advantages, but it’s not a cut-and-dried matter amongst legal experts. Some states prohibit the practice due to ethical concerns. Therefore, if your law firm is considering using surcharging, you must implement it carefully to avoid unhappy clients or compliance violations.  

Below are five surcharging best practices to help you remain in good standing, keep your law firm client-focused, and build trust with every transaction. 

1. Know your state regulations 

Surcharging laws differ based on the jurisdiction in which you practice. Surcharging is currently illegal in Connecticut, Massachusetts, and Puerto Rico, and while a few other states have had surcharging prohibitions, they recently became legally unenforceable. 

In any case, before incorporating surcharging in your fee structure, check your state’s laws. Even if your state doesn’t allow surcharging for consumer businesses, find out whether the same rules apply to law firms. 

2. Understand your processor options 

If you implement surcharging for your clients, you must notify each credit card network (Visa, Mastercard, Discover, etc.) of your intent—in writing—at least 30 days in advance. Once you have sent the proper notification, you must choose a merchant that supports surcharging and verify that they comply with credit card network rules and legal regulations. 

In addition, understand that you must follow very specific rules regarding surcharging.  

For one, surcharges only apply to credit cards, meaning you won’t be able to collect these fees on debit card transactions, even when a cardholder chooses “credit” at a point-of-sale terminal. 

Also, be aware that card networks like Visa and Mastercard allow you to establish either a brand-level surcharge (which applies to all products from a particular network) or a product-level surcharge (which applies to specific credit lines or products). However, you cannot use both. 

3. Communicate your policies clearly  

Payment processors should clearly explain their fee structures, and you must maintain that level of transparency with your clients. Doing so builds trust in the attorney-client relationship and allows your firm to avoid future legal issues. 

With that in mind, notify your clients that you intend to begin surcharging well before implementing the practice. Additionally, your firm must make its surcharge fees clear at every turn, which means placing notices on your website and signage, including them in all fee agreements and invoices, and explaining them to clients at the time of payment. 

Note that in Maine and New York, you must clearly display the difference in cost between a purchase made with a credit card and other forms of payment. In all cases, the surcharge must appear as a separate line item on the receipt.  

4. Keep your fees reasonable 

As surcharging is only supposed to help law firms recoup fees, card networks generally do not permit businesses to implement surcharges beyond the fees they pay.  

That can make surcharging challenging to navigate due to differing rates among networks, which in turn means you’ll have to choose a rate that doesn’t exceed any one network’s fees. Remember that card networks cap surcharge rates at 4% for every transaction, and the state of Colorado caps its rates at 2%. 

5. Work with a legal-specific payment processor 

Credit card processing is a complex issue for law firms, which require strict adherence to laws and ethical codes. A legal-specific payment processor will help you avoid commingling client funds with operating expenses or withdrawing processing fees from a trust account, even in case of a refund or chargeback. 

Streamline surcharging implementation with TimeSolvPay 

Surcharging doesn’t have to be overcomplicated and overwhelming: You can implement the practice efficiently and ethically with the help of TimeSolvPay. 

Our legal-specific platform makes payment convenient for clients while ensuring continued regulatory compliance. You’ll be able to accept credit card and ACH payments with next-day funding that keeps your firm operating smoothly, along with flat processing fees that won’t cut into your bottom line. 

Schedule a free demo of TimeSolvPay today and discover how we can help increase your profits while maintaining peace of mind. 

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