NEW Wisconsin IOLTA Program Changes - Effective Jan. 1, 2010

Over the last 23 years, WisTAF has granted more than $33 million to agencies that provide civil legal services to Wisconsin’s low income population. From Superior to Milwaukee, funds generated via the Interest on Lawyers’ Trust Accounts (IOLTA) program have enabled legal service providers to help meet the increasing needs of low income families in the areas of housing, medical care, employment, and domestic abuse, among others. This feat was made possible through the dedicated partnership between Wisconsin’s bankers and lawyers.

The commitment of banks, credit unions and savings & loans to the communities they serve is reflected in their participation in the IOLTA program. In addition to paying competitive interest rates on lawyers’ trust accounts, many financial institutions have chosen to waive fees on IOLTA accounts, resulting in a direct increase in the dollars available to help fund legal services.

On July 1, 2009, the Wisconsin Supreme Court issued an order amending the trust account rule pertaining to IOLTA accounts, SCR 20:1.15, effective January 1, 2010. The changes to the rule relate primarily to interest requirements for IOLTA accounts, which are incorporated in a number of newly created sections, including SCR 20:1.15(a)(1m) and (7m), and SCR 20:1.15(cm). Under the new rule, an IOLTA account must be held at an “IOLTA participating institution.” [See SCR 20:1.15(cm)(2)c] WisTAF will be required to annually publish on its Web site a list of the financial institutions that it has confirmed to be “IOLTA participating institutions.”  WisTAF is already working with the various financial institutions at which IOLTA accounts are currently located in order to compile the list.

What is the reason for the change?
When the initial IOLTA rule was crafted more than 20 years ago, the banking landscape was quite different. IOLTA accounts were established as NOW accounts since other higher yield options did not exist. The rule change acknowledges that a greater number and variety of banking products now exist, and requires higher rate options for qualifying IOLTA accounts – those that are similarly situated to other types of accounts offered at the same institution. Financial institutions do not have to create new products if the higher rate products are not already available to their other customers.

What does the rule change mean for attorneys and financial institutions?
Most IOLTA accounts will not be affected. De Ette Tomlinson, WisTAF Executive Director advises attorneys not to take any actions on their trust accounts unless contacted by WisTAF. "Based on other states’ experiences and our talks with the Wisconsin Bankers Association and Community Bankers of Wisconsin, we anticipate that all financial institutions that currently hold IOLTA accounts will continue to participate in the program and will implement the new trust account compliance requirements with few, if any, exceptions."

Help for financial institutions
Over the next several months, WisTAF will be working with IOLTA institutions to help them bring trust accounts into compliance by January 1, 2010, when the new rule provisions go into effect. Institutions likely to be affected hold high balance IOLTA accounts (generally those with balances consistently above $100,000) and/or pay checking account interest rates based on balance size. Banks do not have to create new products if these are not already offered to other customers. 

Participation in the IOLTA program remains voluntary for financial institutions, however, a lawyer may not keep an IOLTA account at a financial institution that does not participate or meet IOLTA requirements.

• Information for Financial Institutions

Help for attorneys
In most cases, there will not be any need for attorneys to take any action to bring their trust accounts into compliance. WisTAF will contact any attorney who does need to take action directly. Attorneys with questions on the IOLTA trust account rule are encouraged to contact the WisTAF office at (877) 749-5045 (toll free) or send an email to service@wistaf.org.

• Information for Attorneys