[Congressional Record Volume 154, Number 177 (Thursday, November 20, 2008)]
[Senate]
[Page S10722]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               INTEREST ON LAWYERS' TRUST ACCOUNT PROGRAM

  Mr. LEAHY. Mr. Presdient, last week, I joined Senator Cardin and 
Senators Specter, and others in sending a letter to the Federal Deposit 
Insurance Corporation, FDIC, in an effort to preserve the viability of 
the Interest on Lawyers' Trust Account program, IOLTA. We have asked 
the FDIC to ensure that the Transaction Account Guarantee Program, 
TGLP, through which the FDIC guarantees funds in bank accounts, will 
also cover lawyer trust accounts. The IOLTA program, which distributes 
interest on client funds held in lawyer trust accounts to legal aid 
programs, has been an enormous success in securing legal representation 
for lower-income Americans. All 50 States have IOLTA programs, and many 
States mandate participation by practicing attorneys. This program 
provides funding to important legal aid programs and helps ensure that 
no person goes without legal representation because of a lack of 
resources.
  Our concern stems from the fact that the TGLP Interim Rule concerning 
account insurance issued on October 23 would not extend unlimited FDIC 
insurance to interest bearing lawyer trust accounts, ultimately hurting 
the public benefit generated by these accounts. According to the FDIC's 
proposed rules for the TGLP, noninterest-bearing accounts would be 
insured to protect an unlimited amount of funds. But the insurance for 
interest-bearing accounts would be limited to $250,000. The lack of an 
exception for lawyer trust accounts threatens the IOLTA program because 
it poses a potential conflict for attorneys. Many lawyer trust accounts 
contain pooled client funds, often in excess of $250,000. As a result 
of the FDIC's proposed rules, there is legitimate concern that 
attorneys would move client funds in excess of $250,000 to noninterest-
bearing accounts in order to gain the insurance protection, and in an 
effort to manage client funds as responsibly as possible. This 
potential ethical dilemma could be prevented by a modification of the 
proposed rules.
  Senator Cardin, Senator Specter, and I have suggested to the FDIC 
that it modify its proposed rules to make an exception for lawyer trust 
accounts and provide unlimited insurance on interest bearing accounts 
containing client funds. This would be an important step towards 
preserving the success of the IOLTA program, and would remove any 
potential ethical dilemma for attorneys. Such a modification would 
ensure that the interest generated by IOLTA accounts continues to be 
distributed through local nonprofit organizations in each State to fund 
invaluable legal aid services for low-income families.
  I am hopeful that the FDIC will recognize the national importance and 
success of this program, and will create the exception we have 
proposed. I would like to particularly thank the Vermont Bar 
Association for its advocacy in this regard, as well as the American 
Bar Association for its attention to this issue. Legal representation 
for everyone is an imperative for a fair and effective judicial system. 
The IOLTA program has been successful in helping to ensure legal 
representation for more Americans, and where these goals can be 
accomplished without the use of tax dollars, such a program should be 
preserved.

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