Leahy Praises FDIC Decision To Give Full Deposit Insurance To Lawyers’ Trust Accounts
Senator Patrick Leahy (D-Vt.) Monday praised a decision by the Federal Deposit Insurance Corporation (FDIC) to protect the Interest on Lawyers’ Trust Accounts program (IOLTA), which helps support legal services for those in need. The rule, which was approved on November 21, provides full deposit insurance coverage to lawyers’ trust accounts under the Temporary Liquidity Guarantee Program (TLGP).
Earlier this month, Leahy joined with 17 Senators, including Senator Bernie Sanders (I-Vt.), to urge FDIC Chair Sheila Bair to provide the insurance coverage to IOLTA accounts. The IOLTA program distributes interest on client funds held in lawyer trust accounts to critical legal aid programs. However, an interim rule threatened to cap insurance for interest bearing accounts, including lawyers’ trust accounts, at $250,000. Many lawyers’ trust accounts contain pooled client funds in excess of $250,000. Leahy and other Senators urged the FDIC to exclude IOLTA accounts from this rule so that lawyers were not compelled to deposit client funds in non-interest bearing accounts.
“Vermont’s IOLTA program has benefited many low income Vermonters in need of legal advice,” said Leahy. “The FDIC’s decision to fully insure deposits to lawyers’ trust accounts across the country is an important step towards preserving the success of this important program.”
The Vermont IOLTA program was first approved in 1984. A 1990 revised rule required Vermont law firms and lawyers to deposit pooled client trust funds in IOLTAs to benefit the Vermont Bar Foundation, which uses the funds generated from IOLTA accounts for legal services for low income Vermonters. Leahy has also been a long-time supporter of the Legal Services Corporation, a government-funded organization that provides civil legal assistance to low income Americans.
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