Removing Barriers Blog

Comment letter to the Florida Bar Board of Governors on IOLTA accounts
Posted February 19, 2016 by CUNA Advocacy

Today we submitted comments on the proposed amendments to Rule 5-1.1(g) relating to Interest on Trust Accounts (IOTA) Program and the amendments to allow institutions insured by the National Credit Union Share Insurance Fund.  

In December 2014, Congress enacted H.R. 3468, The Credit Union Share Insurance Fund Parity Act which directed NCUA to provide pass-through insurance paid by certain lawyers administering deposits or shares on any interest on a lawyer’s trust account (IOLTA).  IOLTAs, under the law, are treated as escrow accounts for share insurance purposes and are considered “member” accounts if the administering attorney or escrow agent is a member of the insured credit union.  

Effective January 27, 2016, the NCUA promulgated its amendments to 12 CFR Part 745 implementing H.R. 3468.  With these final amendments, the NCUA now treats IOLTA accounts in an equivalent manner as accounts under the auspices of the Federal Deposit Insurance Corporation (FDIC).  As such, we fully support the Florida Bar Board of Governors’ efforts to amend the rule to allow Florida-based credit unions to accept IOTA accounts.

Our letter noted that some have suggested that credit unions are not as regulated as banks or may not have the capacity to handle the complexities of an IOTA depository account.  We believe this cannot be further from the truth.  Since the inception of the NCUA in 1934 and the establishment of NCUSIF in 1970, not one single dollar of insured deposits has been lost by a member. We assured the Board of Governors that credit unions likewise are able to manage a deposit account subject to the Bar’s regulations.  While we appreciate that the bankers would like to protect their market share, from a public policy standpoint, allowing credit unions to accept IOTA accounts is good for everyone.  Lawyers should have the choice. 

Finally we urged the Board to reach out to Florida’s prudential banking and credit union regulator, the Office of Financial Regulation, which could assure the Board that credit unions operate in a safe and sound manner and are suitable institutions for lawyers to place their trust accounts.