Dear Attorney, Stop Using Zelle as a Payment Type

Welcome to Accountants LawPod, where accounting professionals and law firms converge. Hosted by Lynda Artesani, Sarah Prevost, and Stephen Libhart.

Hello everybody. Welcome back to the podcast and good morning, Sarah. How are you?

Good morning, my dear. I'm pretty well. Getting my first cup of coffee in.

I keep forgetting you're a time zone behind me. I've already had coffee almost halfway through the day.

It's like, yeah, yeah, you're halfway through your morning. And meanwhile, I just got back from the gym not that long ago.

Oh, good for you. I'm proud of you. Proud of you.

Every day.

Every day. So we're recording right after July 4th. I think Lynda's gone on a little break and hope she's having a good time. Sure. Yeah. So we have a really fun subject to talk about today. An important one. And it's attorneys accepting Zelle as a payment from their clients for trust accounts and operating accounts and all those sorts of things. And, and so I'm really glad that you brought this one up, Tiara. This is a great subject to talk about because a lot of times attorneys set something like this up and then find out there's lots of pitfalls with it.

Yeah.

As an example, a lot of the state bars don't allow peer-to-peer, I think is what they call it, P2P transactions, because they can't access the trust account to deposit trust money into. And so it ends up going to their checking account, which then causes commingling of funds and different things like that. And there's no dispute resolution system with Zelle either. So you're stuck when you're stuck.

They have all those warnings on the backend, Steve, when you're in your bank, because Zelle for a while was on its own. It was similar to like how the Venmo— it was, wasn't it? Yeah, and then it, um, and then it moved to this business to, to business— or not business to business, it moves to like the banking to banking style thing in the back end. And most businesses use it, which I can understand in operating, but for the law firms, when it comes to the trust account or the way that your jurisdictional trust account is allowed to move. Like, some people can't do retainers out of operating, and they do, um, for safety, and I understand, but Zelle seems to be an option, and that's a problem by itself is when you're sending those funds back like that. So it's—

well, and you know, one of the things that worries me about a law firm using Zelle is a scenario where Let's say a client were to transfer or offer up a payment, for better wording, of $10,000 for a retainer, and Zelle can't deposit it in the trust account, but it goes over to the operating account.

Yep.

Okay, fine. So there it is at the operating account. However, what if the originator of those $10,000 suddenly wants it back? They decide not to retain the attorney. You've got all the accounting between all the trust and the operating and all that to get the money back to them. And how are you going to get it back to them? And it can turn into a spaghetti very easily. It's a danger zone. I say danger when I see Zelle.

So yeah, I mean, it happens all the time in business. Not that it's meant for that. However, um, it just it just feels like a slippery slope to what you were just saying, is because once it's gone, it's gone. Like, that's it. Like, you type in the wrong phone number, you don't verify it. Even just for us, like, do a $1 wire. It sounds dumb, but just to make sure the bank account information— I'm not saying that you have to do that with everything, but when you're using these types of platforms find some verification, but you're doing it through your operating or some sort of safeguarded account is what I would do it from, just so that it's, it's easy. But it is, it's not something that, um, to, to what you're saying, Steve, this example, it's not something that you just— we see it all the time, not that it's right, you just do, and then it's— you just pray that it's going to be fine and no one's going to complain about it. I, I see it as a problem. Like, if you, Steve, if I gave you money through an ACH format and then you as the law firm tell me the only way you can give me my money back is through Zelle, I would have a big problem with that as a client.

Well, it seems to me I saw in the news a few months ago that Zelle, I think it was Zelle, was hacked. I could be wrong. Um, but there, there are challenges with any of those, those P2P systems. Um, the nonprofit that I'm a treasurer for used PayPal.

Yeah.

And it got hacked.

Yeah.

And they froze $19,000 of our money for about 6-7 months. It took that long to get it back. And fortunately, this nonprofit had enough money to cover that lack of cash flow, if you will. But there just doesn't seem to be as much protection in my mind's eye when you use something like Zelle as there is if you do an ACH transfer or, you know, one of those other platforms that's a little more secure.

Some, some of it is. I think it— I guess maybe what you're bringing up in my mind is the protection buyer beware protocols, seller buyer beware. But it also is just about Maybe how you accept money, because obviously when money leaves in that form of a payment, if you have no payment processor to help dispute it like a PayPal— and PayPal, obviously Venmo is in that thing, and PayPal, a lot of doors. I feel like PayPal itself is plus and minus in a lot of ways. So I totally agree with you. I just feel like it's a little bit of a black hole sometimes. I'm like, well, Am I at the business side? Am I on the personal side? It feels very messy to me.

Yeah, that's a good way to describe it. I mean, let's use this scenario where, again, let's use $10,000 as our number and I pay you as the attorney via Zelle, $10,000.

Yeah.

And you do the, the jumping through the hoops to get it out of the operating over to the trust account right away and all of that. And you've done everything right. And then you work for the client and this happens. And then they grieve you for some reason and you need to try to get that money back to them, or you need to— you don't have Zelle backing you up, I guess is what I'm saying. There's just no backup.

No, there's no protection there.

And if something went— let's forget about the grieving side. Let's say they just have a problem with the Zelle transaction for some reason. They're going to blame anybody they can blame generally because they just forked out $10,000 and it went through Zelle. And you know who's going to feel the brunt of it? The attorney. The onus falls on them to handle that money and somehow get it back to them.

And well, I'll tell you, I learned my lesson years ago with Zelle, and I've always had a bad feeling about it. I was purchasing something and I sent the Zelle money only to realize as soon as I did, I was like, huh, this seems wrong. And I wrote down protocols of like filing the complaint and working with the bank. And it was years ago, and I was so frustrated, and I've been very cautious ever since. And I feel like that's the thing, is everyone thinks it won't happen to them. And this was on my personal side, of course, and it was something I was doing personally. And you don't think it will happen to you, and then it becomes important once it does. And you just want to scream from the rooftops when it happens. And I feel like the story there and why I kind of lean so heavily into the beware kind of analogy is those mediums, like, you buy something with your credit card. If you need to dispute it, you can go through it. Now, people dispute things unjustly, and that's not right. That's not the point of it. And you're going to ruin it for the rest of us if you keep doing that. But if you were unjustly charged, and you need to dispute it, then yes, that you should be able to have that ability. You don't have that. There's no one to go to. When I called the bank, I got routed to the fraud department, then I got routed to some other thing. I had to file something with the federal government. And it was like, I mean, there's so much scams out there. We just did our security scam thing. It was all about deepfakes.

Well, you know, one of the things that Zelle markets itself as is a very convenient platform, you know, Do that money quick, make that transaction happen, it's done. You just got that beautiful new vase that you Zelle— paid by Zelle at the flea market or whatever. But it isn't worth the compliance risk for attorneys. It really is not. You know, that, that fast payment of money to get to work on a case or whatever the reason is to make it happen so quickly through Zelle just isn't worth the compliance risk.

And well, doesn't it feel Like commingling?

It does. And you know, it's, if you are insisting that Zelle is fine, think about if you're audited, what are the auditors going to look at? Because the transaction lists in Zelle and their general ledger, if you will, yeah, this doesn't have the documentation that you would normally need to provide. It just doesn't look right. It costs a lot more to jump through that hoop going backwards than it did going forwards.

Well, the other thing too, in my experience, uh, for myself even just personally, like if it's hooked up to one bank account and you inadvertently are in a different bank account and you want to use that particular product, it does have some weird banking restrictions because it's— it used to be a standalone product and then it somehow became Which I don't understand.

I think it— I could be wrong. I think it was part of Bank of America for a while. I don't remember, but—

well, yeah, now it's in like a banking product, like you use it at the bank level. It's not like Square Cash or Venmo. It's on its own. It's part of this like little space, right? Okay, so that to me, what I noticed is if you used it on one, you couldn't connect it to like, say, if you were going to use it like I don't know, Chase Bank or some other bank. I don't know. It's something. So you lose the historical data that you were saying, and it doesn't actually show up always in the right places.

Right.

So I'm very confused by how it ultimately is seen on the banking side, but also why the draw is the question I have. If you're a law firm, And sure, yeah, it's easy, but why do it? Is that the only way?

The only reason I can think of is they, they want a fast transaction. I, I think of maybe a personal injury attorney might be a good example where they have to lay out a lot of cash in advance.

Okay.

Which they normally recover when the settlement happens, but sometimes they will request money up front to do court filings and expert witnesses and things like that on behalf of a client. And so I could see that scenario being where a Zelle would be attractive because it's fast cash to get to work on the personal injury case. Now, I could be all wet here, but that's the first example that comes to my mind. But it's not worth, again, the compliance exposure.

What if— okay, this I've seen happen where, you know, you send the test out or you send a certain amount out. I've seen this before where a Zelle goes out and then it goes out to the same person a few times. And I'm kind of like, is this Is this a mistake?

Is this real?

Yeah, it's a limit problem. But then one of those, you know, your agreement and time of settlement and everything's supposed to go out. What if one of them doesn't go out because the bank maybe flags it or something? Now you're— you have a problem with your client. Now that you owe the client that money, who's following that?

And that's the point. No, that's the point I was trying to make a while ago. Then you have the exposure of an upset client. Yeah, who is going to grieve you or really cause— excuse me, I have something in my eye— who's really going to cause a problem. Yeah, with the whole transaction with you because of this one little piece being broken. It just, it just isn't right. And I think that it's wrong. It's just, there's, there's not— just like everything else, like software, there's not a one-size-fits-all. Same thing with Zelle. There it is, not the quick, easy, done and done platform that works well for attorneys at all. And that's why so many state bars, I mean, do your research out there and look at your state bar and see what they have to say. Look at the payment platforms you use like Confido or LaPay or whatever its latest version is. You know, be careful, be careful out there because if somebody's been burned once, somebody else has been burned again with a payment platform like this in this type of environment. Now again, using the example of if I go to a flea market and I just have to have that lamp that's sitting there, I might sell and pay for it and walk away with that lamp. But that's not a legal transaction where the funds have to be protected and followed through on. And do you follow me?

That's, I do follow it because that's what I was saying. It happened years ago. It was on the personal side. And yeah, I was upset and I went through and filed all the complaint stuff at the time. But it's the same thing at that point. I mean, I'm owning it on my personal side, but I do often think, Steve, like you're saying, it's— you're a law firm. And to me, the perception of that interaction with your client, is that the first perception you—

exactly. With that in mind, with that in mind, I would highly recommend, or we should recommend, yeah, that in your fee agreements you clearly spell out each and every platform of payment that you will accept, every method you will accept, and every method that you cannot accept. And just spell that out so it's clear up front, you know.

That's a really good point. And given where we are, I mentioned this earlier, we do monthly— Tira has our, our team on a cybersecurity training, and we do a monthly thing. And this month was about scams, email scams, deepfakes. It's as simple as, you know, someone with your voice, right, or asking for money. And it's always in a quick-tick fashion, right? And I think you're right in that if it's— maybe that's a spot in your engagement where you're telling your client, these are my things, this is what I'm okay accepting, initial here. Only for the simple fact of you're taking that extra ethical precaution of saying that this is how you— because people love to say, okay, now I sign up, I just want to pay you like this. Yeah, no, that's not how I get paid.

As an attorney, I want to protect my client. Yeah, I want to protect their money. I want to make sure that there's no uneasiness with the platform that I'm using, no potential exposure like what could happen with a Zelle transaction. It just doesn't fit the legal industry, and that's again why So many state bars are talking about it these days.

You know, you know, it's interesting to see when I think about it, we— you're midsize. Well, I don't want to say midsize, boutique size. Let's say you're of a certain— you're not right. Like the big, the big law firms, right? You're in this stage of size and dealing with clients and so forth. And when you think about the larger law firms, I have to wonder, ones that are built out pretty big, you've got like 300, 400, 500 attorneys, that's probably not the form of payment acceptance that they're taking. So why is it acceptable on the other side of it?

I think probably, and this is not picking on small firm or boutique attorneys, but they have that extra bit of excitement in wanting to get that client and take care of them right away and retain them in their firm. I think that's an answer for that. It's, it's that, again, that quick fix. Oh, let's just do it, let's get going, and without thinking through the ramifications of it. That's really how I feel about it. Whereas a big firm you know, the great big firm of America that has 50 attorneys or whatever has probably already been through some of this in their growing pains and they know better.

Well, Zelle wasn't then back then, right? Like, I mean, Zelle's been around for a bit, but it's— yeah, the evolution of peer-to-peer, like you said, of payment platforms, it is changing.

You know, this is in the news all over. In fact, there was in a local Denver paper this weekend a huge article on what I'm going to talk about next. And I've talked to you guys about it, and that's the bank merger that just happened between FirstBank and PNC Bank. Oh my goodness. There's lost money. There's people, there's people that have been sitting in the lobbies for hours trying to find their money and all kinds of stuff going on. What would happen with a Zelle transaction in that type of environment? It would just get lost because it wouldn't be a big priority compared to somebody's CD or, you know, their $30,000 checking account balance. And it'll get worked out. I mean, these are big banks, they'll get it worked out.

But well, shoot, we had that one big bank that went under.

Yeah.

And that left everyone in a bad place. Yeah. So I guess that, yeah. Anyways, I mean, Zelle, it's not a bad product, I guess. It's just for legal, the legal niche, this is not the format for it in this.

Not what we would recommend at all. Please be careful.

Yeah. I mean, your contractors, I mean, we see it all the time. People pay them via Zelle. I understand. Okay.

Oh yeah. You know what? I had, I had an electrician. That I found on Thumbtack come to my home. And he's like, I take Xal, I remember that now. Yeah, I was like, no, I'll write you a check.

Yeah, but just even paying contractors, like people— and that's— I understand, but even still, I take the precaution, having years ago gone through my little snafu, um, on my personal side. But just making sure, because you're— you don't get the money back once it's gone. Those are the exact words. Once it's gone, it's gone. That's it.

Yeah.

There's no recourse. There's no support. People get mad at the banks for that, and it clearly states in the disclaimers. That's it. So—

I don't— I just don't understand how, as a consumer paying an attorney, if I was like, okay, let's say you're the attorney and I just hired you over the weekend, and I sent you that $10,000 this morning by Zelle, and then I've decided to go with somebody else, or I'm not going to proceed with my claim or whatever, and I want that money back. And the attorney says, well, no, you retained me, you signed my agreement. You know, that create—

oh my gosh, even if it's $800, like, I see it. Yeah, I see it on invoices presented to clients as a form of payment. I'm like, that's worse.

It puts both both sides, if you will, in a really kind of weird position. Yeah, to work through.

Yeah.

Um, uh, do you get our drift? Don't do it.

I think they nailed it. No, I'm kidding.

I think we nailed it.

Yeah, I think we nailed it.

Yeah, kind of a, kind of a short podcast or a short subject today, but a very important one. I'm glad we talked about it.

Yeah, given like what we're all going through with currently, you know, with the number of increases of scams and issues and And they're getting— I don't want to say more craftier, but they're getting more, um, scam artists are getting more, um, diligent about how they're going about it. So it feels more to the nerve, like you feel like, oh my God, that's so intrusive how, how you knew this information about me, or how you knew to figure out that I do X, Y, and Z shopping, or whatever.

I was in New York City and I had a credit card that I was using that had a high credit limit on it.

Yeah.

And I don't know, still don't know how I got scammed, but I did. And the people who scammed me even had one of those backroom boilerplate sort of phone bank things, and they were buying equipment like pumps and computers and all these things and shipping them overseas and using my credit card. And of course, when I disputed it, it all got stopped on that credit card. And I found the jurisdiction that was investigating these scammers in New York, and I told them this happened to me, this is who I am, you know, I'd like to be a part of this, helping you with the information. They're like, oh no, we're, you know, we're not going to pursue this one. And they got away with, you know, who got burned there? I guess the credit card company, I don't know, or the merchant that took the payment.

That's the hard part. When you're the only ones, right, like you feel alone in it. When you're having these issues. And that is the hardest part, is how to handle and navigate this space. There's so much about, you know, like, okay, this is going to happen, this, or this has happened, now what? But you are like literally peace feeling and learning how to handle it.

And then on your own, on your own, right?

And, and you're out all of this time, money, expense And, and not to mention, it does feel like a burglary in a big, big way.

A vulnerability, sure.

Yeah. So, and, and in that situation, you had protections with an actual car.

Thank goodness. But in Zelle, do you?

I mean, no, you don't. I mean, you don't. I know from my own experience.

Exactly. That's the question.

I had to get a hold of like the federal— I forget the name of the department, but I had to go on and fill out a form and write a documentation and use the case number from the bank and We're talking like not that much money, but it was a great lesson for me. And I've been ever since turned off and very cautious about how I proceed to do those things. So, uh, yeah, not fun.

Take it away, Tiara.

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Well, Steve, I have to tell you, the more you've got me thinking through an audit on this topic is more frightening than ever.

Yeah, I just, you know, I'm glad we're getting the word out on this one. Again, like you said, Xel is not a bad product. We're not bashing it here. It's just not a fit in our opinion for the legal industry. And again, with so many of the state bars are saying don't do it.

Yeah, exactly. Well, thanks for this today. It was good.

Yeah, thank you. Thanks everybody. We'll see you next time. Bye-bye.