Practice Management

FDIC Announces Inclusion of IOLTA in Unlimited Deposit Insurance

Admittedly my most recent post about FDIC insurance limits and IOLTA accounts was overdue. This one is as timely as it gets, folks. In a statement posted to the ABA site today, President H. Thomas Wells Jr. announced and applauded today’s FDIC decision.

We applaud the Federal Deposit Insurance Corporation for clarifying the Temporary Liquidity Guarantee Program to include Interest on Lawyer Trust Accounts. Consistent with its mission to ensure stability in the banking community, the FDIC has acted to protect client funds and assure continued funding for programs that provide legal aid to poor people when economic uncertainties make the need for legal guidance most critical.

As a result of today?s FDIC action, an individual client?s funds deposited in IOLTA are fully insured regardless of the amount.

The ABA, working with state and local bar associations and individual lawyers nationwide, made a persuasive case to the FDIC why IOLTA funds must be included in the expanded insurance program. Had the FDIC failed to expand full coverage for IOLTA, lawyers would have had to consider abandoning IOLTA for fully insured non interest bearing accounts or moving IOLTA funds from community banks to the larger ?too big to fail? banks. Abandoning IOLTA would have been catastrophic for IOLTA programs in all 50 states, which provide funding for legal aid for the poor. Moving the accounts to larger banks would have defeated the FDIC?s purpose in creating the TLGP.

The leaders of the House Financial Services Committee and the Senate Banking Committee, more than 20 U.S. senators, members of the House Judiciary Committee and many individual representatives urged the FDIC to include IOLTA in the TLGP. This bipartisan effort by members of Congress, plus the efforts of state government officials, community banks, consumer groups, bar associations and foundations, law firms and individual lawyers nationwide, all emphasized to the FDIC the importance of IOLTA programs as the second largest source of funding for legal services to the poor. With today?s action by the FDIC, IOLTA programs can continue make a real difference in the lives of low-income Americans.

The final rule for the Temporary Liquidity Guarantee Program was approved by the FDIC Board of Directors on November 21, 2008 and is available on their site here. This is certainly a wonderful statement, a solid FDIC decision, and very good news for lawyers and firms nationwide. [Of course, it just wouldn’t be me if I didn’t point out that the ABA needs a good proofreader in the web support department. ]

Wells is a member of the Alabama State Bar Association. Words of congratulations and a big nod of appreciation were posted in a memo to the members of their bar association. It states, in part:

The support of Alabama?s Senators and Congressmen was also instrumental in gaining protection for client funds in excess of $250,000 held in lawyers? IOLTA accounts. More than half of the 750 comments the FDIC received regarded IOLTA, proving once again how much lawyers care about access to justice.

Although I haven’t heard anything specific yet, I’m fairly certain that the legislative department of the Pennsylvania Bar Association was key to mobilizing support from Pennsylvania attorneys as well.

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Full post as published by Law Practice Management on November 21, 2008 (boomark / email).