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Senator: Restore mandatory IOLTA

Peter Vieth//December 30, 2015

Senator: Restore mandatory IOLTA

Peter Vieth//December 30, 2015//

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A state senator who practices law in Loudoun County is proposing to bring back mandatory designation of interest on lawyers’ trust accounts for legal aid programs.

Sen. Jennifer T. Wexton, D-Leesburg, has introduced a bill that would repeal Virginia’s 20-year-old ban on mandatory IOLTA legal aid funding. Virginia lawyers currently may choose to place client money in interest-bearing accounts that help legal aid, but are not required to do so.

The decline in interest rates has largely dried up that voluntary source of income for legal aid programs, and legal aid supporters have sought additional funding sources. Restoration of mandatory IOLTA has been one goal to address the shortfall.

Wexton said she advanced the idea of her own accord.

“This has really been sticking in my craw for a long time,” Wexton said. “I just think that it’s time to bring it back.”

Wexton said she now hopes to gather stakeholders to support the measure.

The existing voluntary IOLTA program allows any lawyer or title company to place client trust funds into a commingled, interest-bearing account. The interest earned on such an account is paid directly by the participating financial institution to the Legal Services Corporation of Virginia. The trust accounts remain under the lawyer’s control, the LSCV says on its website.

Each IOLTA account is opened in the name of the law firm or lawyer or title company with Legal Services Corporation added to the account name as third-party beneficiary of the interest generated on the account, according to the LSCV.

Although financial institutions are not required to participate in the IOLTA program, over 108 financial institutions offer IOLTA accounts to their attorney customers and are approved by the Virginia State Bar, the LSCV said.

A 1995 agreement among legislators, bar leaders and legal aid officials brought an end to mandatory IOLTA. The General Assembly enacted a statute, Va. Code § 54.1-3915.1, directing the Supreme Court of Virginia not to require interest payments to anyone other than the client.

With approval of the VSB Council, the Supreme Court changed its rules accordingly.

Wexton’s Senate Bill 73 would repeal that statute. The bill has been referred to the Senate Courts of Justice Committee.

The Virginia State Bar has not taken any position on the restoration of mandatory IOLTA, according to VSB executive director Karen Gould.

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