Questions About the New IOLTA Rules
- Q. What changes did the new IOLTA Rules make?
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The DC IOLTA Rules that went into effect in August 2010 changed the DC IOLTA program from “opt out” to “comprehensive,” meaning lawyers with DC IOLTA eligible funds must hold those funds in an interest-bearing IOLTA account. In addition, the 2010 IOLTA Rules made two general changes that will affect how banks can offer DC IOLTA accounts: (a) DC IOLTA accounts must provide “comparable rates;” and (b) DC IOLTA Accounts can only be assessed reasonable fees as defined in the Rules.
- Q. What does my bank have to do to offer DC IOLTA accounts under the new IOLTA Rules?
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Your bank needs to become an “approved depository” under the new rule. This means you will need to sign a new undertaking (agreement) with the DC Board on Professional Responsibility. One new step in securing that undertaking is that your bank must receive approval from the DC Bar Foundation of your rate comparability status. Download the Financial Institution Toolkit here.
- Q. Do the new IOLTA Rules set interest rates for DC IOLTA accounts?
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No. The new rules require that rates be “comparable.” Your bank has two choices in proposing an interest rate under the DC IOLTA Program. Your bank can provide the documentation outlined in the comparability toolkit, demonstrating that your proposed IOLTA rate is comparable with similar products AT YOUR INSTITUTION. Or your bank can elect the DC IOLTA benchmark rate. More information is in the Financial Institution Toolkit.
- Q. How was the IOLTA benchmark rate set?
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The benchmark rate was set based on a market analysis of products offered by DC IOLTA participating banks. The average rate of such products was taken and forms the basis for the benchmark.
- Q. Our bank has been a DC IOLTA Prime Partner Bank. What happens now?
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Over the years, many banks have increased the value of their partnership with the DC IOLTA program by paying higher yields on IOLTA accounts to support the legal services safety net in the District of Columbia, through the DC IOLTA Prime Partner Bank Program or IOLTA Honor Roll. Now banks can accomplish the same important goal by becoming a “DC IOLTA Prime Partner.” Prime Partners are banks that choose to go above and beyond the eligibility requirements of the revised Rule to support the DC IOLTA program in its mission to ensure that low-income people in the District of Columbia have access to critically needed legal aid. Download the Prime Partner materials from our website for more information.
Questions from Non-Participating Banks
- Q. What is IOLTA?
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IOLTA stands for Interest on Lawyers Trust Accounts. IOLTA programs operate in every state, DC, and the Virgin Islands. Established by courts or legislatures, the programs allow lawyers to place nominal or short-term client funds in a single interest-bearing account. Interest is remitted to a designated program – here the DC Bar Foundation.
- Q. Should our bank offer DC IOLTA accounts?
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No bank is required to offer IOLTA accounts, or to participate in an IOLTA program. However, many financial institutions offer such accounts as a convenience to their lawyer or law firm customers.
- Q. We would like to offer IOLTA Accounts to DC lawyers. Can we just start offering it?
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No! DC lawyers can only hold trust accounts, including DC IOLTA accounts, at financial institutions that have been approved by the DC Board on Professional Responsibility. Download the Financial Institution Toolkit from our website.
- Q. How do we become a DC approved depository?
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The DC Board on Professional Responsibility handles the approval process. As part of that process, the DC Bar Foundation will need to review and approve the rate(s) your bank proposed to offer for DC IOLTA accounts. Your institution will also need to complete an undertaking (agreement) with the DC Board on Professional Responsibility. A copy of all the forms you need is available here.
Questions from Participating Banks
- Q. We have been approved. What’s next?
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Download the DC Bar Foundation’s Guidelines for Financial Institutions. That will contain all the information you need to get started and to submit reports and remittances to the Bar Foundation. If you have any questions, contact: iolta@dcbarfoundation.org or Amanda Gay at 202-467-3750 ext 11.
If you haven’t already signed up as a DC Prime Partner this is the right time to do so.
- Q. What do we need to know about account titles?
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All DC IOLTA Accounts must include both the name of the lawyer/law firm and the phrase “IOLTA” or “Trust Account.”
- Q. What Tax ID Number should be on the accounts?
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Every DC IOLTA account uses the DC Bar Foundation Tax ID Number: 52-1109547. That is because the DC Bar Foundation is the owner of the interest earned on every DC IOLTA account.
PLEASE NOTE: The DC Bar Foundation does not own the IOLTA accounts, it only owns the interest.
