New York: IOLA Regulations Would Boost Funding For Civil Legal Aid

State funding for New York's civil legal aid organizations could increase dramatically if new regulations governing Interest on Lawyer Account (IOLA) funds are adopted.

The new regulations were proposed by the Board of Trustees for the state-run IOLA Fund on May 31, and would require banks to pay interest rates on IOLA accounts commensurate with rates paid on similar accounts.

According to a press release issued by New York Governor Eliot Spitzer, the top 80 banks handling IOLA funds currently pay an average interest rate less than 1%. Under the new regulations, banks would pay interest rates closer to 2.7%.

"The increased revenue from the amended IOLA regulations will provide poor New Yorkers with greater access to civil legal services," said Governor Spitzer. "This initiative...will go a long way toward supporting civil legal services programs that help prevent homelessness and assist victims of domestic abuse and discrimination, and ensure that families can access health care and other necessary services."

The new regulations do not require legislative approval, but are subject to a 45-day comment period ending July 15.

Efforts to increase interest rates on IOLTA accounts have succeeded or are underway in other states. The Illinois Supreme Court has required banks to increase their rates, and the Minnesota State Bar Association has asked their state's Supreme Court to adopt similar requirements. The District of Columbia Bar Foundation has increased IOLTA returns through an initiative aimed at getting banks to voluntarily increase their interest rates on IOLTA accounts.

To read Governor Spitzer's press release, click here.