Cross posting here and on another thread about the ntomsw karmas.
Many people have asked about using PayPal for donations to ntomsw's legal fund. Unfortunately this is not advisable.
Legal defense funds are treated the same as retainers and other advance payments. These funds belong to the client and the attorney holding these funds is acting as a trustee. While some states around the U.S. have modified their attorney professional conduct rules to allow for advance payments via credit card or PayPal, Massachusetts has not directly addressed the issue, and the Office of Bar Counsel strongly discourages the practice. There are many reasons why this would not be advisable.
1. Rule 1.15 of the MA Rules of Professional Conduct requires that attorneys who hold client funds for work to be performed must, among other things, deposit the funds into an interest-bearing bank account. Subject to certain accounting requirements, for small amounts to be held short-term, attorneys may deposit funds from multiple clients into a single account. However, when the amount is not nominal or short-term, a separate bank account for that particular client must be opened and the account must be located in the Commonwealth. A question thus arises whether an attorney violates this rule by holding client funds, even temporarily, in a PayPal account which is not interest-bearing nor located in Massachusetts.
2. Payments made by both credit card and PayPal are subject to chargeback. That is, the person making the payment can dispute the payment with their credit card or PayPal and those entities may withdraw the funds from the attorney's account. This could be particularly problematic with a client trust account. For example, assume that an attorney successfully completes a case and withdraws all of the advanced funds as payment for her fees. Should the client later dispute the payment, PayPal could withdraw the disputed funds from the attorney's trust account. Since the attorney had already withdrawn that particular client's funds, the funds PayPal withdraws would be funds of other clients held in the same account. In this circumstance, the attorney may be deemed to have breached their obligations to protect those clients funds.
3. The PayPal User Agreement states that they may “close, suspend, or limit your access to your Account” if, in their “sole discretion, [they] believe[] that you may have engaged in any Restricted Activities.” Should PayPal get suspicious about a large number of incoming deposits, they may put a hold on the account while the investigate. An attorney may be in violation of the rules of conduct if they are unable to access or deposit client funds during this investigation.
4. Payments via PayPal for services are subject to fees that the seller (the attorney in this case) would pay. PayPal fees are are currently 2.9% plus $0.30 per transaction. If 100 people give $20 each, the $2,000 in payments would incur $88 in fees. Some may argue that these payments should be considered a gift, and thus exempt from fees. See number 3.
While PayPal may be a convenient way to transfer money in certain circumstances, it is not a good, nor advisable option for a legal defense fund here in Massachusetts.