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IOLTA bill killed for 2013 session

A compromise bill to remove barriers to automatic use of attorney trust accounts to generate funding for legal aid cleared a House of Delegates Courts Committee only to be killed by its sponsor on the floor of the House.

House Bill 1544 would have removed a ban on requiring the use of interest on lawyers’ trust accounts (referred to as IOLTA) for legal aid, but would have mandated an opt-out provision for lawyers and law firms.

The committee vote was 10-to-6 to report the measure, which had the support of bankers and even a skeptical delegate.

The end came Jan. 25 when bill sponsor Del. G. Manoli Loupassi took to the House floor to move that the bill be “passed by indefinitely.” Later, he said in an email that he killed the bill at the request of Mark D. Braley, executive secretary of the Legal Services Corporation of Virginia.

The amended version of the IOLTA bill said any rule requiring client money to be placed in accounts providing interest payments to legal aid must include an opt-out form.

As amended, the bill also included language saying the Supreme Court would not be able to dictate that banks had to offer IOLTA accounts. Bruce T. Whitehurst, president and CEO of the Virginia Bankers Association, said that change was “to make sure the Supreme Court is not attempting to regulate banks in its regulation of lawyers.”

Among those voting for the bill was Del. Rob Bell, R-Charlottesville, who questioned whether money allocated through the LSCV was being used to support certain advocacy efforts by the Legal Aid Justice Center of Charlottesville.

Legal aid funding has taken a hit in the past four years, Braley reported recently. Voluntary IOLTA funding has almost dried up with low interest rates, income from filing fees has “declined significantly” and additional cuts in federal funding are expected, Braley told members of a Senate subcommittee Jan. 15.

Legal aid offices around Virginia have lost 33 attorney positions and 25 support staff jobs since 2009, Braley said.

Braley urged approval of a budget amendment offered by Sen. Tommy Norment that would provide an annual $3.25 million with a $4 increase in the legal aid filing fee in circuit and district courts.

Braley did not immediately respond to requests for further comment on the withdrawal of the IOLTA bill.

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