Legal Foundation of Washington Launches Fall Bank Campaign

For the second year in a row, the IOLTA income used to fund legal services has decreased. The Legal Foundation of Washington, which administers the IOLTA program, projects that funding available for legal aid in 2004 will dip to about $5.4 million. Grant awards to programs in 2003 totaled $6,235,000. The Legal Foundation distributed nearly $6,562,000 in 2002.

“Last year was difficult for the legal aid community, as we had less money to distribute than the previous year,” said Barbara Clark, director of LFW, noting that at the end of 2002, most programs saw their grants decrease and some programs could no longer be funded. “The future of IOLTA is much more secure this year, but our short term projections show that grant funds will likely be reduced this year, too.”

So what ails IOLTA? The Legal Foundation of Washington says the culprit is the steep decline since 2000 in interest rates that banks pay on IOLTA accounts. “We’re also seeing an unprecedented increase in fees charged on IOLTA accounts,” noted Clark, citing the example of one bank that recently increased its monthly maintenance fee from $8 plus minor activity charges to $20. RPC 1.14, the rule that created IOLTA, allows for “reasonable fees” to be assessed on IOLTA accounts.

Grassroots Campaign is a Short-Term Strategy to Protect Grant Funds

The Legal Foundation of Washing-ton and its grantees are tying their hopes to a short-term grassroots campaign to stem the tide of further IOLTA interest rate cuts and increased bank fees. The goal of the campaign is for IOLTA account holders at low-yield banks to contact their banks and ask them to increase the interest rates on their accounts, or to reduce or waive all together the monthly maintenance fees and activity charges.

Information packets on the campaign have been mailed to county bar associations across the state, which are asked to recruit their members to contact their banks. A list of banks operating in each county, as well as the interest rate and list of fees charged by the bank on its IOLTA accounts, is included in each packet. The target banks are not the biggest financial institutions, which have managed to pay interest rates that are equal to or greater than other business checking account products offered to non-IOLTA customers. Rather, the campaign will focus on regional banks that are paying less than .75% interest on IOLTA accounts and/or charging more than $10 per month in fees.

The Legal Foundation of Washington hopes that bar members will let their banks know about the good work that IOLTA accomplishes in their communities and across the state. “We understand that banks have a bottom line to consider,” Clark said. “But we think there is enough of a profit margin in these accounts for the banks to make them a win-win product for themselves and for the community.” n