December 01, 2014

Senate clears IOLTA bill for president

During the final days of the 113th Congress, the Senate cleared ABA-supported legislation for the president that assures that IOLTA accounts set up at credit unions receive the same level of federal insurance protection that banks provide ($250,000 per person per institution).

The legislation, which was signed by the president on Dec. 18, was needed because the National Credit Union Administration (NCUA) has not provided insurance coverage if the funds are held on behalf of a client who is not a federally insured credit union member.

H.R. 3468, sponsored by Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.), will ensure that client funds are protected regardless of whether an IOLTA is in a credit union or in a bank. Sen. Angus King (I-Maine) led the effort to pass this legislation in the Senate.

The revenue from IOLTAs is a significant source of funding for programs providing legal services to the poor in all 50 states, the District of Columbia and the Virgin Islands, and credit unions often yield higher interest rates than banks.

 “IOLTA programs provide funding for critically needed legal services which allow the poor to have access to justice,” ABA President William C. Hubbard said after the vote. “This law potentially creates additional revenue for these important programs and benefits lawyers and their clients by providing additional protection for client funds,” he emphasized.

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