The $17 billion settlement that Bank of America reached with the Justice Department last week will result in at least $30 million for a program that raises funds for the nation’s providers of civil legal services to the poor.
The settlement — which resolved claims that the bank and its subsidiaries sold billions of dollars of mortgage-backed securities without fully disclosing to investors the quality of the loans — requires Bank of America to allocate $7 billion to consumer relief efforts. Of that portion, at least $30 million will go to the Interest on Lawyers Trust Accounts program, known as IOLTA.
The program, which is run independently in all 50 states, D.C. and the U.S. Virgin Islands, pools interest generated from client funds being held by lawyers in each state, and distributes the proceeds to civil legal services providers in that state.
The program has been hit hard since 2008 because interest rates have stayed low, making it difficult to generate gains from the deposits. Each state’s IOLTA program will receive $200,000, and the remainder of the $30 million will be distributed state by state, based on the percentage of people living in poverty.
“We’re all very happy about it,” said Kirra Jarratt, executive director of the D.C. Bar Foundation, the charitable arm of the D.C. Bar that distributes D.C.’s IOLTA funds to legal aid providers in the District. “Interest rates have been down and programs have been suffering, so this is huge. It’s so much money, and so much can be done with it to help people.”
In the District, IOLTA revenue has fallen from $2.4 million in 2008 to about $709,000 in 2013 mostly because participating banks, which until mid-2008 had been paying interest rates of up to 4 percent, are now paying no more than 0.25 percent, in accordance with the federal funds target rate.
Lawyers often keep client funds in trust accounts, such as when they hold a class action settlement to be paid out over time. If the amount is large or held for a long enough period, it generates interest for the client. But when the amounts are “nominal” or held for too short a time to generate interest, lawyers can place the funds in IOLTA accounts. D.C. IOLTA funds go to 501(c)(3) nonprofits in the District that serve D.C. residents with legal services, including help gaining access to shelter, food and safety.
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