[Congressional Record Volume 156, Number 154 (Tuesday, November 30, 2010)]
[House]
[Pages H7727-H7728]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   REQUIRING FDIC TO FULLY INSURE INTEREST ON LAWYERS TRUST ACCOUNTS

  Mr. DOGGETT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 6398) to require the Federal Deposit Insurance Corporation 
to fully insure Interest on Lawyers Trust Accounts, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 6398

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. INTEREST ON LAWYERS TRUST ACCOUNTS.

       (a) In General.--Section 11(a)(1)(B)(iii) of the Federal 
     Deposit Insurance Act, as added by section 343 of the Dodd-
     Frank Wall Street Reform and Consumer Protection Act (Public 
     Law 111-203), is amended--
       (1) by redesignating subclauses (I), (II), and (III) as 
     items (aa), (bb), and (cc), respectively, and adjusting the 
     margins accordingly;
       (2) by striking ``means a deposit'' and inserting the 
     following:
     ``means--

       ``(I) a deposit'';

       (3) in item (cc), as so redesignated, by striking the 
     period at the end and inserting ``; and''; and
       (4) by adding at the end the following:

       ``(II) a trust account established by an attorney or law 
     firm on behalf of a client, commonly known as an `Interest on 
     Lawyers Trust Account', or a functionally equivalent account, 
     as determined by the Corporation.''.

       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on December 31, 2010.

     SEC. 2. DETERMINATION OF BUDGETARY EFFECTS.

       The budgetary effects of this Act, for the purpose of 
     complying with the Statutory Pay-As-You-Go Act of 2010, shall 
     be determined by reference to the latest statement titled 
     ``Budgetary Effects of PAYGO Legislation'' for this Act, 
     submitted for printing in the Congressional Record by the 
     Chairman of the House Budget Committee, provided that such 
     statement has been submitted prior to the vote on passage.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Texas (Mr. Doggett) and the gentlewoman from Illinois (Mrs. Biggert) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Texas.


                             General Leave

  Mr. DOGGETT. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks on this legislation and insert extraneous material herein.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  Mr. DOGGETT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I thank the chairman and ranking member of the Financial 
Services Committee, Mr. Frank and Mr. Bachus; my colleague and member 
of the Financial Services Committee, Mrs. Biggert; as well as Leaders 
Hoyer and Boehner for their assistance in expediting the consideration 
of this measure.
  When an attorney receives funds for use on behalf of a client, those 
funds are usually deposited in a trust account at some financial 
institution.

[[Page H7728]]

Many years ago, leaders in the legal community across America 
determined that interest could be earned on such accounts and applied 
to finance legal services for those who otherwise might have no access 
to our justice system. They recognized, as we do today, the wisdom of 
Judge Learned Hand's writing: ``If we are to keep our democracy, there 
must be one commandment--thou shall not ration justice.''
  For decades, revenue from these Interest on Lawyer's Trust Accounts, 
or IOLTAs as they are commonly referred to, have provided a key funding 
source for the disadvantaged in all 50 States. Before coming to 
Congress, I served as a justice on the Texas Supreme Court, which sets 
forth the rules and oversees the operation of such IOLTA accounts in my 
State.

                              {time}  1930

  I saw firsthand the benefits of these programs in ensuring access to 
justice for those who otherwise might be unable to secure justice. Some 
of those who need legal assistance the most--veterans who have served 
honorably, domestic violence victims, and persons with disabilities--
are too often the least able to obtain it. In some States, IOLTA funds 
are also used to reduce litigation by encouraging conflict resolution 
outside of the court system.
  After hearing a few weeks ago from Terry Tottenham, who is the 
president of the State Bar of Texas, and after hearing from a number of 
other local leaders, I introduced this bill to assure continued full 
FDIC protection for these trust accounts. This protection, which exists 
today under existing law, would otherwise have expired for these 
accounts at the end of this year, when the existing law is to be fully 
replaced by the extensive new Wall Street reform law. Today's 
legislation simply extends existing Federal Deposit Insurance 
Corporation protection into the future.
  At a time when interest rates are at an all-time low, it is 
particularly important that there be a complete government-backed 
guarantee against any loss on these trust accounts. Such protection 
also ensures that small, independent banks are on a level playing field 
with their larger competitors in securing these trust fund deposits. 
This bill is supported by a broad range of groups, including the 
Independent Community Bankers of America and the American Bar 
Association. I urge my colleagues to approve it.
  I reserve the balance of my time.
  Mrs. BIGGERT. I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 6398, which would extend the 
current Federal Deposit Insurance Corporation's, or FDIC's, guarantee 
of Interest on Lawyer Trust Accounts, also called IOLTAs, for another 2 
years.
  I would also like to thank my colleague from Texas (Mr. Doggett) for 
introducing this corrections bill to amend the Dodd-Frank Act.
  The IOLTA program represents a significant source of financial 
support to civil legal aid programs for the poor. These programs 
operate in all 50 States. In 37 States, including my home State of 
Illinois, they are mandatory. IOLTAs contain client funds held by a 
lawyer for a short period of time. Interest generated from these 
accounts is paid to charitable organizations, not to the lawyer or the 
client.
  In 1978, Florida was the first State to establish an IOLTA program. 
Illinois became the 11th State to establish IOLTAs, and in 1983, the 
Supreme Court of Illinois required that the interest from these 
accounts be collected and administered by the Lawyers Trust Fund, a 
not-for-profit corporation created in 1981 by the Illinois State Bar 
Association and the Chicago Bar Association. Since then, these funds 
have supported civil legal assistance to the impoverished in Illinois.
  When State legislatures and State supreme courts created IOLTA, the 
FDIC carved out an exception to Regulation D that allowed the payment 
of interest on these demand accounts.
  The current Term Asset Guarantee program, or TAG program, under which 
the FDIC guarantees the total amount of client funds maintained in 
IOLTAs, expires December 31, 2010. The Dodd-Frank Act creates an 
equivalent program, running for 2 years beginning January 1, 2011, but 
makes several changes, including a more narrow definition of a 
``covered account.'' In what appears to have been a drafting error, 
IOLTAs were not covered under the new program established by the Dodd-
Frank Act. This bill corrects that inadvertent omission so that IOLTAs 
are fully insured.
  If the current guarantee were allowed to lapse, attorneys in the 37 
States with IOLTA mandates, acting in accordance with their fiduciary 
duties to maintain the security of the client funds, might be forced to 
transfer IOLTA accounts from local community banks to larger, safer 
institutions, and attorneys in the other jurisdictions might be forced 
to transfer funds from IOLTA accounts to non-interest-bearing accounts 
to qualify for unlimited FDIC coverage. If the coverage for these 
accounts is not extended, a critical source of civil legal aid might 
unnecessarily and inappropriately shrink. In addition, according to the 
Independent Community Bankers of America, the ICBA, ``without this 
coverage, potentially hundreds of millions of dollars will be withdrawn 
from IOLTAs, adversely impacting liquidity in the banking system with a 
disproportionate impact on community banks.''
  This bill is supported by the ICBA and the American Bar Association. 
The Congressional Budget Office has determined that, although the bill 
costs $15 million over a period of 5 years, the bill would raise $2 
million over a 10-year period.
  I again urge support for the legislation, and I yield back the 
balance of my time.
  Mr. DOGGETT. Mr. Speaker, our colleague from Illinois has provided 
further explanation of the nature of this bill. It is a clean proposal. 
If we do not get this into law before the end of December, there will 
be some problems presented. So I would hope not only that we would 
approve it here but that the Senate would act promptly to approve this 
narrow bill without attaching any other extraneous matter to it.
  In closing, I would also extend my thanks to both the Democrat and 
Republican staffs on the Financial Services Committee for working with 
us to see that this measure is promptly approved.
  I would move adoption of the bill.
  I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Texas (Mr. Doggett) that the House suspend the rules and 
pass the bill, H.R. 6398, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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