Jan. 27, 2015 – President Barack Obama has enacted new legislation that will give attorneys the ability to house their interest-bearing client trust accounts in credit unions.
HR 3468, or the Credit Union Share Insurance Fund Parity Act, grants attorneys far more leeway in choosing where to keep their Interest on Lawyers’ Trust Accounts (IOLTA), which generates funds that are used to support civil legal services in the state.
Before the president signed the bill, attorneys were unable to keep IOLTA accounts in credit unions, because more often than not, their client was not a member of the credit union where his or her funds were being stored. And funds stored in a credit union by a non-member are not federally insured, so if the credit union fails, those funds are lost without chance of recovery. However, accounts held in federally recognized low-income credit unions are federally insured up to $250,000, regardless of whether the client is a member of the credit union.
Under the new law, all IOLTAs will be treated as credit union member accounts – as long as the attorney is a member of the insured credit union in which the funds are held.
In Wisconsin, attorneys are required by supreme court rule to set up a trust account and hold certain funds for their client, such as settlements or unearned attorney fees. The onus is on the attorney to store and protect the client funds related to the representation.
The interest generated through a client’s trust account is then pooled and used to provide civil legal services to indigent clients throughout the state.
These funds could rise under the new law as traditionally credit unions often pay higher rates of interest to their members than banks pay to their customers.
In Wisconsin, the funds generated by IOLTA are managed by the Wisconsin Trust Account Foundation Inc. (WisTAF), which provides grants to legal aid agencies around the state.