Despite New Policy Mandating Participation in DC IOLTA Program, Revenue Remains at “Historic Lows”
Legal Services E-lert
Bibliographic Info:
Author: Catherine Ho
Source: Washington Post, “Low interest rates leave less money for legal aid groups”
Date: August 21, 2011
The Washington Post writes: “A year after a judge began requiring members of the District of Columbia bar to put certain client funds in pooled interest-bearing accounts aimed at generating money for legal aid groups, revenue from the funds remains near historic lows. The lack of growth has less to do with the new requirement, and more to do with the fact that interest rates hover near zero percent, making it difficult to generate gains from the deposits. Until last year, members of the D.C. bar could opt out of the Interest on Lawyers Trust Accounts program, which pools the interest generated from the accounts to be distributed to civil legal services providers in the District. But a D.C. Court of Appeals judge approved a rule change making participation mandatory as of Aug. 1, 2010. Since then, the number of IOLTA accounts has grown more than 9 percent (from 2,070 in June 2010 to 2,269 in June 2011). And the revenue in interest generated from those accounts crept up from $541,917 in June 2010 to $550,637 in June 2011 — a 1.6 percent increase, according to the most recent figures collected by the D.C. Bar Foundation, the charitable arm of the D.C. Bar that distributes IOLTA funds to legal aid providers. Still, 2011 revenue is down dramatically from the $2.4 million in IOLTA funds generated in 2008. That’s largely because participating banks, which until mid-2008 had been paying interest rates of up to 4 percent, are now — with a few exceptions — paying no more than 0.25 percent, in accordance with the federal funds target rate. ‘The interest rates are the big factor now,’ said Katherine Garrett, executive director of the D.C. Bar Foundation. The Federal Reserve has indicated it expects to keep interest rates low until at least mid-2013, leaving D.C. legal aid groups scrambling to find funding sources that don’t depend on interest rates.”