YOUR ABA
EDITED BY JAMES PODGERS / PODGERSJ@STAFF.ABANET.ORG
BIG SAVE
ABA helps convince FDIC to extend banking
protections to IOLTAs
BY RICHARD ACELLO
THE ABA AND OTHER ADVOCATES FOR
improving legal services delivery to
low-income people breathed a collective sigh of relief in November when
the Federal Deposit Insurance Corp.
issued its final rules for a program intended to bolster the banking industry during the current financial crisis.
But perhaps the legal community also was trying Jonathan Asher
to get its wind back after conducting a frantic lobbying effort to make sure the final version of the rules for the FDIC program included interest on lawyer trust accounts.
IOLTAs are a crucial source of funding for legal services programs
around the United States. In 2007, interest from such accounts produced
$212 million in funding for legal services programs. IOLTA programs operate in all 50 states, the District of Columbia and the U.S. Virgin Islands.
The efforts by the ABA, state bar associations, other legal organizations
and individual lawyers paid off. On Nov. 21, the FDIC announced final
rules for its Temporary Liquidity Guarantee Program, which provides
deposit insurance coverage to noninterest-bearing transaction accounts
above the previous limit of $250,000 per account. The final rules extend
that coverage to IOLTAs.
“The FDIC’s decision to include IOLTA in the TLGP is a really big
deal,” says Jonathan D. Asher, executive director of Colorado Legal Services in Denver and chair of the ABA Commission on IOLTA. “And it’s
also an example of the ABA responding quickly and really professionally
from the staff to the highest levels of the organization to a situation that
called for it. I’ve been an ABA member for 37 years and have never been
more proud of the way they rallied during the month for access to justice.”
POWER OF THE PEN
THE LEGAL COMMUNITY HAD ONLY A MONTH TO MOBILIZE SUPPORT FOR
including IOLTAs in the Temporary Liquidity Guarantee Program after
the FDIC issued interim rules in October that excluded them. The ABA
and other IOLTA proponents initiated a letter-writing campaign while
also garnering support in Congress.
In a report published in the Federal Register on Nov. 26, the FDIC said
at least 500 of the more than 700 comments it received on the interim
rules were objections to excluding IOLTAs.
ABA President H. Thomas Wells Jr. underscored the concerns of the
legal community in a Nov. 13 letter to Robert E. Feldman, the FDIC’s
executive secretary.
“Attorneys are fiduciaries and must give the client funds in their care
appropriate protection,” wrote Wells,
a partner at Maynard Cooper & Gale
in Birmingham, Ala. “Those holding significant client funds for a
short time are in a quandary whether to continue to use their IOLTA
or to place their client funds in a
noninterest-bearing deposit transaction account to qualify for the new
unlimited insurance. Alternatively,
lawyers will consider whether to
move their IOLTA from their current financial institution to one
they perceive as among those that
are most financially stable or to a
foreign bank that offers unlimited
account insurance.”
Meanwhile, Sens. Benjamin L.
Cardin, D-Md., and Arlen Specter,
R-Pa., wrote a letter to FDIC Chair
Sheila Bair that was signed by 17
senators, urging full coverage for
IOLTA accounts.
“This was a bipartisan effort by
members of Congress, state government officials, the IOLTA community, community banks, consumer
groups, bar associations and foundations, law firms and individual lawyers nationwide,” Wells says. “The
result will enable IOLTA programs
to continue to make a real difference in the lives of low-income
Americans.”
The Temporary Liquidity Guarantee Program will only be in effect,
however, through the end of 2009.
At that point, unless it is extended,
previous rules governing IOLTAs
and other noninterest-bearing accounts—including the $250,000
cap for insured funds—will go
back into effect.
If another battle ensues to extend
the program at least into 2010, an
important lesson will be worth remembering. “How quickly this issue came up and how quickly it was
resolved,” Wells says, “show how
important it is for lawyers to build
and maintain relationships with
their elected officials.” ■
