Enhanced Funding for civil legal services in New York is an Association priority. We are delighted that Governor Spitzer agrees.
Last week we were presented with an opportunity by the Governor to weigh in with regard to new regulations proposed by the Board of Trustees of the Interest on Lawyer Account Fund (IOLA). Here is a link to the press release that was issued on May 31.
The IOLA program requires attorneys to deposit funds received from clients either in interest bearing accounts for the benefit of clients or in interest bearing IOLA accounts. The interest is pooled and managed by the IOLA Board of Trustees to fund non-profit civil legal services.
Currently, the top 80 banks handling IOLA funds pay a lower interest rate than is typical for accounts of similar size and characteristics, meaning that revenues used to provide civil legal services for indigents and underprivileged are reduced. The new regulations, if adopted, would significantly boost that interest rate resulting in considerable new revenue to pay for civil legal services programs in NYS and provide our most vulnerable population with greater access to civil legal services.
The IOLA fund was created in 1983 with the strong support of the New York State Bar Association for the express purpose of providing additional financial support to civil legal service organizations that were decimated by federal budget cuts. Access to justice is fundamental. We have a proud tradition of rendering millions of hours of pro-bono services to the poor. We applaud Governor Spitzer for making civil legal services funding a priority.
Please let me know your opinions on this vital issue.
Comments (2)
If I was the client, and my funds were put into a non interest bearing account, and the interest that accrued on my money went to the state for any resason, I would immediately sue for taking my property without a hearing in Federal Court. Though it is a noble gesture to fund victims and legal assignment this way, it violates the rights of the client's whose interest on their money is taken from them without his or her consent, or a hearing (lack of due process).
Posted by Mace H. Greenfield, Esq. | June 18, 2007 5:03 PM
Posted on June 18, 2007 17:03
Here's how it works. If a client's funds are large in amount or are expected to be held for an extended period of time, the funds can be expected to generate interest when deposited into a bank. In that instance, the lawyer should open a separate interest bearing trust account for the benefit of that client, with the interest accruing to that client. By law, such funds are not to be deposited into an IOLA account.
However, where the client's funds are small in amount or not expected to be held for an extended period of time, it is not practical to open a separate trust account for that client, as the administrative costs and service charges would more than offset any interest income. These are the funds that are to be deposited into an IOLA account.
The funds are then pooled in that account generating what can be appreciable interest. That interest income is forwarded to the IOLA Fund by the bank, and the IOLA Board of Trustees applies those funds by awarding grants to legal services providers. No individual client has lost income, because their funds individually would not have generated any income if deposited into a separate account.
In BROWN v. LEGAL FOUNDATION of WASHINGTON, 538 U.S. 216 (2003) the US Supreme Court upheld the constitutionality of the Washington IOLTA program, finding that there was no financial loss to those whose funds were held in IOLTA accounts, no "just compensation" was due to those individuals under the Fifth Amendment.
I hope that clarifies the issue for you.
Posted by Kate Madigan | June 20, 2007 12:52 PM
Posted on June 20, 2007 12:52