Should (IOLA) be treated the same as any other business account?

• Author: Zemlicka, Jack

Byline: Jack Zemlicka

A penny saved is a penny earned, but at this time of year that notion is easier said than done. When it comes to legal services for the poor, Benjamin Franklin's proverb rings true as organizations around the nation are re-evaluating regulations for Interest on Lawyer Trust Accounts (IOLTA). Specifically, the requirement of banks to provide IOLTA accounts with interest rates similar to other business accounts. Several states found that banks were offering substantially lower rates compared to other accounts. "Across the nation, the phrase 'interest comparability' has been coined in regards to the belief that IOLTA accounts should be treated the same as any other business account, provided they meet similar criteria," said De Ette Tomlinson, executive director of the Wisconsin Trust Account Foundation (WisTAF). States including Florida and Michigan have revised language in the laws which allow IOLTA accounts to earn interest at a rate similar to other accounts. In some cases the revenue generated for legal services has doubled after the interest rate increase. IOLTA Interest While some states do not have specific laws pertaining to IOLTA interest, Wisconsin does under Supreme Court Rule 20:1.15(e)(3), though wording is vague in regards to interest standards on accounts. It reads as follows: (e) Operational requirements for trust accounts. (3) Interest requirements. An interest-bearing trust account shall bear interest at a rate of not less than that applicable to individual accounts of the same type, size, and duration and in which withdrawals or transfers can be made without delay when funds are required, subject only to any notice period that the depository institution is required to observe by law. "Banks interpret the language in a reasonable manner in that the wording is unclear, and therefore IOLTA accounts are considered unique," said Tomlinson. "Under bank assumptions, those accounts are not subjected to the same interest rate levels." Rose M. Oswald Poels, senior vice president of the Wisconsin Bankers Association (WBA) was unaware of any banks purposely subjecting IOLTA accounts to lower interest rates, but admitted that the WBA does not poll banks on that issue. "Certainly, I know that WisTAF has been...