Arkansas Access to Justice Report

A Higher Interest Rate For Your IOLTA Account - Supreme Court Revises IOLTA Rule to Include Comparability. By: Susie Pointer, Executive Director, Arkansas IOLTA Foundation

The Court revised Arkansas Rule of Professional Conduct 1.15 “Safekeeping Property and Trust Accounts” in November 2006 to become effective February 1, 2007. The revised rule provides for—among other things—“comparability” in the amount of interest that banks pay on IOLTA accounts versus other types of bank products. Comparability is a hot topic nationwide due to the potential to increase funding to IOLTA programs and their grantees throughout the country.

NEW BANK PRODUCTS AVAILABLE
One change to the rule states that attorneys can now use other types of bank products that will generate more interest. In the past, only NOW or Super-NOW checking accounts were allowed to be used as IOLTA accounts. With the rule change, money market accounts and sweep accounts may be used. This change will allow attorneys to select a bank product that will provide more interest to the Arkansas IOLTA program and its grantees. While discussing new bank products, the attorney may find additional bank products for the firm’s various other accounts.

Section (c)(1)(iii) of the Rule was added to provide that:

“Interest or dividend-bearing trust account” means a federally insured checking account or an investment product, including a sweep product and a daily (overnight) financial-institution repurchase agreement or an open-end money market fund. Read the definitions of these types of accounts by clicking here.

WHAT SHOULD I DO?
Section (c)(2)(iii) of the Rule was added to provide that:

Eligible institutions shall maintain IOLTA accounts that pay the highest interest rate or dividend generally available from the institution to its non-IOLTA account customers when IOLTA accounts meet or exceed the same minimum balance or other account eligibility qualifications, if any.

Under this section, attorneys have an obligation to ensure that the financial institution in which they deposit their IOLTA account no longer pays a much lower interest rate on IOLTA accounts than they pay on other types of bank products used for similar balances as in the attorney’s IOLTA account. Attorneys should check with their banks to inform them of this change in the rule and obtain an interest rate increase for their IOLTA Now or SuperNow checking accounts OR ask if another bank product with a higher interest rate is available.

PROPER HANDLING OF IOLTA ACCOUNTS
Attorneys have an obligation to deposit all unearned fees into their IOLTA trust accounts. Attorneys who charge flat rate fees should consider using their IOLTA accounts until those fees are earned. IOLTA accounts are to be utilized by attorneys for client trust funds that are nominal in nature or are to be held on a short-term basis.

Section (b)(2) provides:

A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.

Questions about the rule change may be directed to Susie Pointer, Executive Director, Arkansas IOLTA Foundation, Inc. (501) 682-9421 or pointersusie@yahoo.com.

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