Proponents of reinstating mandatory IOLTA as a tool to raise money for legal aid appear to have stumbled at the first step.
The Supreme Court of Virginia approved mandatory IOLTA, the acronym for Interest on Lawyers’ Trust Accounts, on a 4-3 vote in 1993, much to the consternation of state bankers.
Two years later, the bankers prevailed in a lobbying battle by winning the adoption of Virginia Code § 54.1-3915.1, which banned the program.
Since then, lawyers with trust accounts have been required to affirmatively opt out of participating in a voluntary IOLTA program.
With the ban in place, the first task was to get the legislature to remove it. Del. William H. Cleaveland, R-Botetourt, and A. Donald McEachin, D-Richmond, sponsored repeal legislation, House Bill 1571 and Senate Bill 817.
Cleaveland’s bill died in the House Courts of Justice Committee on a 10-12 vote, but the Senate version squeaked by Senate 22-18. That sent the concept to the House, but the Courts committee there failed to report it to the full House yesterday on an 11-11 vote.
As we reported last month, just how much money the proposal would generate, at least in the near term, is very much in question. The amount collected through the program dropped from $4.6 million to $700,000 as the economy tanked and interest rates on the accounts dropped to near zero.
Moreover, no one knows how much of the money that might be generated by a mandatory program is already being collected by the opt-out program. About 5,100 trust accounts participate in the program, compared with roughly 23,000 attorneys with active practices in the state. But some of the accounts cover entire law firms, and many lawyers don’t have practices with a need for a trust account that would generate revenue for legal aid.
And, as the 1993 vote suggests, getting the endorsement of the Virginia State Bar and the approval of the Supreme Court for the program was by no means a certainty.