FDIC Extends Rule Affecting Insurance on IOLTA Accounts

On September 1, 2009, the FDIC amended the Temporary Liquidity Guarantee Program (TLGP) and extended the Transaction Account Guarantee Program (TAG) for six months, until June 30, 2010. Under the final Rule, funds in IOLTA accounts will continue to be fully guaranteed by the FDIC, without limit, for participating financial institutions. Read more...

Recent IOLTA Rule Changes

The Kentucky Supreme Court has recently approved amendments to the state’s IOLTA rule which include mandatory IOLTA and interest rate comparability provisions. The amendments will become effective on January 1, 2010. With this change, Kentucky will become the 41st state to adopt mandatory IOLTA and the 28th state to adopt comparability.

West Virginia and Wisconsin have adopted IOLTA interest rate comparability. The West Virginia Supreme Court issued an order approving the rule change on March 17th, and the new rule went into effect on April 15, 2009. The Wisconsin Supreme Court issued its order approving a rule change on July 1, 2009, and the new rule will go into effect on January 1, 2010. Interest rate comparability is a revenue enhancement strategy that requires that lawyers place their IOLTA accounts only in a financial institution that pays those accounts the highest interest rate or dividend generally available at the institution to other customers when IOLTA accounts meet the same minimum balance or other qualifications.

The Rhode Island Supreme Court and the Tennessee Supreme Court have each issued orders adopting both mandatory IOLTA and interest rate comparability. The Rhode Island rule change was adopted on December 11, 2008 and the order required compliance with the rule change on or before March 11, 2009. The Tennessee rule change was adopted on July 8, 2009, and Tennessee lawyers will have until January 1, 2010 to comply with the order.

IOLTA programs provide funding critical to maintaining and improving access to the justice system in communities across the United States. Depending on the state, IOLTA dollars go to support civil legal assistance for poor people, efforts to improve the administration of justice by our courts, initiatives to educate the public about legal issues, and scholarships and clinical instruction for law students.

Here are some recent stories about the organizations and initiatives funded by IOLTA programs:

• IOLTA at work in West Virginia: Opening the Door: the West Virginia Fund for Law in the Public Interest(Summer 2009)
• IOLTA at work in New Mexico: Enlace Comunitario - Giving a Voice to Immigrant Victims of Domestic Violence (Spring 2009)
• IOLTA at work in Hawaii: Multi-lingual Radio Program for Legal Education and Outreach in Hawaii (Winter 2009)
• IOLTA at work in Oklahoma: Oklahoma Low-Income Tax Clinic (Fall 2008)

Constitutional challenges in the federal courts have ended in the wake of the U.S. Supreme Court's decision in Brown v. Legal Foundation of Washington (PDF), 538 U.S. 216, (2003), which found that Washington State's IOLTA program did not violate the Fifth Amendment. The long-standing cases against the Texas and Washington State IOLTA programs were dismissed in late 2003 and early 2004.

In October 2004 the Supreme Court declined to hear a case involving a Fifth Amendment claim brought in Missouri state court against that state's IOLTA program. That decision left standing a March 2004 appellate court decision to dismiss the claim against the IOLTA program.

Read a detailed analysis of the Brown decision or learn more about the background of the litigation.