D.C. Becomes a Mandatory IOLTA Jurisdiction

The Blog of the Legal Times reports:

The D.C. Court of Appeals has approved a change to the D.C. Rules of Professional Conduct that requires all members of the D.C. Bar who receive IOLTA-eligible funds to participate in the IOLTA program. Before the court’s March 22 order, lawyers could opt out of the program.

Washington’s IOLTA program, like others across the country, takes the interest collected on client funds that are either small in amount or held for a short period of time and allows the D.C. Bar Foundation to distribute it to legal service providers in Washington. Katia Garrett, the executive director of the D.C. Bar Foundation, said that to date, 41 other states require participation in their IOLTA programs, and 31 require banks that participate in the IOLTA program to provide comparable rates to non-IOLTA accounts.

Those who are unfamiliar with IOLTA programs may not know that they are critical funding sources for civil legal services providers throughout the country.  IOLTA programs are administered on a state-by-state basis.  There’s much to learn on the IOLTA.org website.  Some of the info on there is a little bit dated, but it provides the basics:

Interest on Lawyers Trust Accounts is a unique and innovative way to increase access to justice for individuals and families living in poverty and to improve our justice system. Without taxing the public, and at no cost to lawyers or their clients, interest from lawyer trust accounts is pooled to provide civil legal aid to the poor and support improvements to the justice system.

A lawyer who receives funds that belong to a client must place those funds in a trust account separate from the lawyer’s own money. Client funds are deposited in an IOLTA account when the funds cannot otherwise earn enough income for the client to be more than the cost of securing that income. The client – and not the IOLTA program – receives the interest if the funds are large enough or will be held for a long enough period of time to generate net interest that is sufficient to allocate directly to the client.

…and some history…

IOLTA programs were first established in Australia and Canada in the late 1960s and early 1970s to generate funds for legal services to the poor. In the late 1970s, The Florida Bar and other organizations filed a petition to establish the first U.S. IOLTA program in Florida. After legislation permitted the establishment of interest-bearing checking accounts in the early 1980s and the Florida advocates obtained important tax rulings from the IRS, the Florida Bar Foundation launched the first IOLTA program in 1981. Shortly thereafter, California, Idaho and Maryland followed suit.

Today, all 50 states, the District of Columbia, and the U.S. Virgin Islands operate IOLTA programs. Thirty-six jurisdictions require lawyers to participate in IOLTA. Lawyers can opt out of participation in 14 others, and participation is voluntary in two others.

During the economic recession, IOLTA programs have been positively battered, straining the budgets of legal services programs in states throughout the U.S., including in Connecticut, New York, and Maryland.

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