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Accepting Credit or Debit Cards under the SRA Accounts Rules 2011

February 2016

With the continuing demise of the traditional cheque as a means of payment there is no doubt that clients are increasingly likely to look to use their credit or debit card instead - particularly in settlement of their solicitor's bill.

One of the questions we are frequently asked on our SRA Accounts Rules: A Practical Guide to Compliance training course relates to the compliance issues under the SRA Accounts Rules 2011 when accepting credit and/or debit card payments from clients.

If you are thinking of accepting credit and debit cards there are, as ever, a number of potential pitfalls of which you need to be aware. The guidance which follows will help you comply with the SRA Accounts Rules 2011 when receiving client money from your clients via a credit or debit card.

Should I Set Up the Facility on Office or Client Bank Account?

For most, the answer to this question is usually very easy. If you are going to accept credit and/or debit card payments from your clients, this facility will almost certainly have to be linked to your client bank account in order to avoid inadvertent breaches of the SRA Accounts Rules 2011.

It is likely that the majority of clients will look to use a credit or debit card when paying their legal costs. If those costs include unpaid professional disbursements, court fees, stamp duty land tax, Land Registry registration fees or are, in whole or in part, a payment on account of costs, the monies received will include some element of clients' money. Generally, under the SRA Accounts Rules 2011, client money should only ever be paid into a client bank account under Rule 14.1 and it is for this reason that a credit and/or debit card facility will have to be linked to the client bank account rather than the office bank account for most firms.

One of the exceptions to this general rule is where you receive money, paid in full or part settlement of your bill and the payment received includes client money in the form of professional disbursements, incurred but not yet paid. In these limited circumstances, Rule 17.1 (b) allows you to deposit the full amount received in the firm's office bank account provided that by the end of the second working day following receipt, you either pay any unpaid professional disbursements, or transfer an equivalent sum to your client bank account. Significantly, this relaxation only applies to sums received for professional disbursements which have been incurred but not yet paid by the firm. This precludes common items such as stamp duty land tax, Land Registry registration fees, telegraphic transfer fees and court fees being treated in this way as they are not, by definition, professional disbursements.

Does it Matter if My Bill is Purely for Profit Costs?

No. Under Rule 17.1 (c) when you receive payment from a client in full or part settlement of your bill, you always have the option of paying the entire sum into your client account, regardless of the composition of the payment you have received. That is to say, it does not matter if it is client money, a combination of client and office money or just office money. If the money you receive from your client is all office money as it represents payment of a bill for work you have already done, or the bill includes paid disbursements, you will not be in breach of the SRA Accounts Rules 2011 provided that you transfer any office money out of the client account within 14 days of receipt.

What About Credit/Debit Card Charges?

You need to be aware that merchant account providers, known as ‘acquirers’, work in different ways. Some will credit your chosen bank account with the full amount of the payment made by the client and make a separate charge for transactions charges, whilst others will only pay the net amount after deducting the transaction charges. In order to be compliant with the SRA Accounts Rules 2011, you need to use an ‘acquirer’ that pays the full amount and makes a separate charge for the transaction costs.

Naturally, any charges levied by the ‘acquirer’, will have to be debited directly to the firm‘s office bank account as these are deemed to be an overhead of the business and a breach of the SRA Accounts Rules 2011 would arise if they were to be deducted from the firm’s client bank account.

Can I Levy an Additional Charge for Accepting Payment by Credit Card?

It is not unusual for a business, where the facility to pay by a credit card is seen as being a service to clients, such as might be the case for a firm of solicitors, to make a surcharge to cover the additional costs associated with accepting payment by credit card. If you choose to make a surcharge to a client who pays using a credit card you must make it clear to the client, both at the outset of the matter, by means of an appropriate clause in your terms of business, and when the bill is issued to the client, that this will be the case.

Can Clients Pay Sums Other than Costs and/or Disbursements by Credit Card?

The simple answer is: it depends upon the circumstances. Sometimes clients will look to pay, or at least contribute towards the deposit on a conveyancing transaction, using their credit card. Under the Council for Mortgage Lenders (CML) Handbook, most lenders will require the solicitor to ask the borrower how the balance of the purchase price is being provided. If you become aware that the borrower is not providing the balance of the purchase price from their own funds, you will normally be required to report this to the lender with the borrower's agreement. The use of credit cards partly to fund the balance of purchase monies, as described, is viewed as being recourse to further borrowing and, therefore, under Part 1 of the CML Handbook disclosure to the lender is required.

To find out more about the training and consultancy services we can provide to support your firm please contact Richard Lane on 0330 223 5346.

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