IOLTA and Account Analysis

I am looking for any feedback on including an IOLTA in account analysis. Do other banks allow this? My state's bar association was not of any particular assistance, they kept wanting to make sure we understood we could not charge fees to the account so I am reaching out to the group here. Any assistance would be appreciated.

If you are not allowed to charge fees for an IOLTA account, I am a little at a loss as to why you think you should put an IOLTA account on account analysis. To what end????

state bar associations can't prohibit a bank from charging fees, but they can prohibit an attorney from having the fees being paid from an iolta account...nothing prevents you from putting an iolta account on analysis and linking the iolta account for fees to the main account of the attorney...and charging the parent account for the fees.

Happy - IOLTAs are not one size fits all. You need to refer to State law and regulations before making such a broad statement that covers all 50 States.

Although that may be the case in Mongolia

Randy - my point is that a state bar association does not write or enforce laws, there is a legislative body that does that. There may, in fact, be a state law that covers it. A bar association may prevent their members (attornies) from doing it. But a state bar association, on their own, can't tell a bank what fees to charge or not charge.

Like I said, without knowing what State we are dealing with, who is to say.

Let me clarify a bit. The attorney would like to utilize the IOLTA and his other account accounts for account analysis purposes to create a higher earning credit in order to offset the fees associated with his other accounts, not his IOLTA.

There has been discussion around the ethics of doing this since the funds in the IOLTA do not belong to the attorney, yet he is using these funds to offset fees.

Again, any thoughts/assistance would be appreciated.

Thank you.

If you're also paying interest on the IOLTA there are no available balances to provide a credit on the analysis.

I concur with Califgirl. Plus, typically in most States, you pay a premium on IOLTA accounts to begin with.

I can almost see how a senate member can set fees (by court of public opinion) but I can not see how a trade association can set the fees that a bank charges.

NYS has regulations that have been passed by the state legislation (§ 497. Attorneys fiduciary funds
; interest-bearing accounts.) but I can not see how a bar association can determine fees.

Back to the question at hand -- I can't imagine allowing an attorney to use IOLTA account balances to his benefit in account analysis. As noted earlier, they aren't his funds, and it would probably be an ethical breach for the attorney to benefit in any way from those funds.

Well in PA the State legislation has delegated that authority. I don't know what that authority has to say about fees, but it is there in the law.

Rule 1.15. Safekeeping Property.

Pay a rate of interest or dividends no less than the highest interest rate or dividend generally available from the Eligible Institution to its Non-IOLTA customers when the IOLTA Account meets the same minimum balance or other eligibility qualifications, and comply with the Regulations of the IOLTA Board with respect to service charges, if any.

You guys can argue a moot point all day if you want too. This was not even the question after clarification from the original poster. Such bold statements without knowing the laws and regulations in every one of the States is just not a wise thing to put your name behind - IMHO.

in the past at a previous bank we had an attorney who did it backwards from what is stated by us and we could not charge any additional fees due to state law. Since there was interest paid we did not use any IOLA balances for earnings credits (and it was not his funds), but this attorney insisted on getting bank checks for all his transactions and instructed the bank to take the fee out of his regular attorney operating account. This was a manual transaction for us but it may be possible under a different core system to make it work as analysis for the OP. (I am thinking that this may be the answer to the original post)

§ 81.107. Service Charges on IOLTA Accounts.

(a) Eligible Institutions may impose reasonable service charges for the administration of IOLTA Accounts. An Eligible Institution may not deduct service charges from the principal balance in an IOLTA Account. Reasonable service charges, as well as regular account maintenance fees and transaction charges, can be deducted against the total amount of income to be paid on the IOLTA Account to which the service charges apply.

(b) All costs associated with check printing, overdraft charges, charges for a temporary extension of credit and similar bank charges shall not be assessed against the principal balance in or income earned or accrued income earned on an IOLTA Account. The lawyer maintaining the account shall be responsible for these costs.

(c) Costs for services such as overdrafts on deposited items, stopped payments, certified checks, and wire transfers at the request of the lawyer or a Third Party Owner shall not be assessed against principal balance in or income earned on an IOLTA Account. The lawyer or the Third Party Owner shall be responsible for these costs.

(d) Charges imposed by an Eligible Institution to file reports required by Pa.R.D.E. 221(m) shall be paid by the lawyer maintaining the Trust Account.

(e) As a general rule, a lawyer may not co-mingle the lawyer’s own funds with Rule 1.15 Funds. However, the lawyer may deposit funds in an IOLTA Account in order to cover costs which may not be charged to the income or principal held in the IOLTA Account. The lawyer must maintain accurate records regarding those funds.

http://www.pacode.com/secure/data/204/chapter81/s81.107.html

Whew - One down 49 to go.

I was just responding to



However it a group of lawyers (or any group) got together and decided what bank fees that they would pay I am sure it would be covered in federal collusion statutes.

The state bar association or other IOLTA coordinator makes rules that apply to participating attorneys. One of those rules could be that the IOLTA must pay interest at the highest rate available at the depositary institution and that no bank fees may be assessed against the IOLTA account or the interest earned on those accounts.

The attorneys will be subject to those rules and will be directed to remove their IOLTA funds from an institution that doesn't play ball.

That's how the banks get told what to do. Play by our rules or we take the football home.

Please research this at your state level, Getting_Grayer. I would absolutely suggest contacting your local bankers association. In the state of IL our notice regarding Lawyer Trust Accounts came from the Illinois Attorney Registration & Disciplinary Commission as a result of the IL Supreme Court's amending of rule 1.15 of the Illinois Rules of Professional conduct, that the lawyers must follow.

More info can be found here:
http://www.state.il.us/court/SupremeCourt/Rules/Amend/2011/070111_Rule_Amendments.pdf

And here:
http://www.iolta.org/

More information on the Lawyers Trust Fund in Illinois is here - http://www.ltf.org/

In my state, if a bank wants to be listed as participating, they have to follow the rules here - http://www.ltf.org/financial-institutions/iolta-account-instructions/

The rules apply to the lawyers in our state. But if the banks want to bank the lawyers, and thus be featured on the page linked above, we had to jump through the hoops.

And call the phone number listed on this page for your state, they should have the answer - http://www.americanbar.org/groups/intere...a_programs.html

As all have stated, each state may have differing rules and that needs to be researched to know the answer based on your locale.

In the three states we operate:
*The bank is permitted to deduct certain permissible charges defined by the state from the interest remittance.
*No charges can be assessed directly to the IOLTA, however other charges incurred based on account activity can be collected from the attorney.
*The IOLTA cannot be grouped with the attorney's other accounts to inflate the earnings credit or in any other way permit the attorney from benefiting from the funds.

As a result, we DO analyze our IOLTA accounts, but omit from analysis the state-specified permissible charges (that are deducted from interest remittance). We then set the analysis to charge the attorney's operating account for any additional charges we cannot collect from the remittance.

I'm certain he would, right up to the point where you note 1) califgirl's pesky point and 2) that your current account analysis does not incorporate the direct expenses from manual process you have to go through to remit to the interest to the bar foundation. Note that when you adjust for that, there will be an increase the fees he pays elsewhere. Granting his request will be to his financial detriment. There's no reason to ask the bar foundation anything.

IOLTA accounts are loss leaders; banks tolerate third party ( bar foundation) interference because they are making money from the rest of the law firm's accounts.

Prior to realizing that Ed had a real citation to statute, I would have said that the Rules of Professional Conduct in each state are a function of that state's Supreme Court Rules, not legislation. (In its original form Rule 1.15 is a citation to the ABA Model Rules of Professional Responsibility, not a statute.) However, inspired by Ed's citation, I did a little reading and determined that in a minority of states (including rlcarey's Texas) these same rules actually have been converted to statutory form. In those states only, the bank would some responsibility for compliance.

However, in the vast majority of states, (including QCL's Illinois, John's Massachusetts, and Califgirl's California) Happy's right, it's the attorney, not the bank who is subject to these rules. The bar foundation could tell attorneys who place these accounts with you that they are personally responsible for your fees! The bar foundation could even write you a nasty letter over that fee you subtracted! You in turn, could tell the bar foundation to go flip sand.

But the real response to the original question is, if the attorney wants some gravy on his taters, just laughingly pat him on the back and say he already got it when you agreed to open the account. It's his compliance responsibility, not yours.

IOLTAs can be assessed stop payment, wire fees, check order charges, return deposit fees however they cannot be charged directly against the IOLTA account (in PA). You would have to bill the attorney or charge another one of their accounts. We routinely bill the attorneys for any wire fees (incoming/outgoing). They reimburse us by check drawn on a different account. Our branches are supposed to bill them for check orders but can't remember when that last happened.

The only fee that can be taken directly from an IOLTA account is the monthly maintenance fee. All other fees are considered fees the attorney is responsible for.

See post #1967705 above.