Offering Clients On-site Access to Financial Brokerage Company for Legal Fee Financing
Adopted: April 20, 2018
Opinion rules that a lawyer may offer clients on-site access to a financial brokerage company as a payment option for legal fees so long as the lawyer is satisfied that the financial arrangements offered by the company are legal, the lawyer receives no consideration from the company, and the lawyer does not recommend one payment option over another.
Inquiry:
Lawyer would like to associate with a financial brokerage company (Company) that would assist clients in obtaining legal fee financing. Company is not a lending institution. Company would act as a broker to find lenders willing to finance the client’s legal fees. Company charges Lawyer an initial setup fee of $1,500 and a monthly fee of $99 for maintaining the payment webpage and administration. Lawyer also pays a merchant fee of 4.99 % on the amount of the financed legal fee. The loan brokerage service would be explained to clients as a "payment option" along with any other options such as credit card, check, cash, etc.
Company provides a loan application for clients who wish to pursue a loan for legal fees. Approved clients receive offers from competing banks, and are free to pick the offer that works best for them, or to decline all offers. If the client accepts an offer, the loan amount is paid from a third-party lender directly to the client. The client pays the fees to Lawyer in accordance with the fee agreement.
The company maintains that the program helps lawyers get paid and also removes the cost barrier for clients who are seeking legal representation.
May Lawyer associate with Company under the proposed arrangement?
Opinion:
Yes, under certain circumstances. Many law firms currently accept credit card payments for legal fees or offer in-house payment plans. In 2000 FEO 4, the Ethics Committee concluded that a lawyer may refer a client in need of money for living expenses to a finance company if the lawyer is satisfied that the company's financing arrangement is legal, the lawyer receives no consideration from the financing company for making the referral, and, in the lawyer's opinion, the referral is in the best interest of the client. The lawyer may not allow his own financial interests to interfere with his duty to act in the best interests of his client. Rule 1.7(a) (concurrent conflict exists if representation of client is materially limited by personal interest of lawyer). For example, in 2006 FEO 2, the Ethics Committee concluded that a lawyer may not refer a client to a company that pays a cash lump sum to a client in exchange for the client’s interest in a structured settlement merely as a means of paying the lawyer for his legal services.
A lawyer does not put his own financial interests ahead of those of his client by providing payment options to a client who requires financial assistance in paying the lawyer’s legal fees. However, given the lawyer’s self interest in being paid in full for his services, the lawyer may not recommend one payment option over another. Therefore, Lawyer may offer clients on-site access to Company as a payment option for Lawyer’s legal fees—along with any other potential payment options—so long as Lawyer is satisfied that the financial arrangements offered by Company are legal, Lawyer receives no consideration from Company, and Lawyer does not recommend one payment option over another.