Lawyers may maintain IOLTA accounts only at financial institutions that meet the criteria to be eligible under Rule of Professional Conduct 1.15:
This rule provides that:
- Financial institutions that want to be eligible to hold any client trust accounts must agree to report trust account overdrafts to the Attorney Registration & Disciplinary Commission (ARDC). This ensures that the ARDC, which regulates Illinois lawyers, is aware of mishandling of trust accounts that may indicate other problems with a lawyer’s conduct. To meet the requirement, financial institutions must submit a Trust Account Overdraft Notification agreement to the ARDC. This requirement is contained in Rule 1.15(h). More information is available on the ARDC’s web site.
- Financial institutions that want to be eligible to hold IOLTA deposits must offer IOLTA accounts that meet the interest rate comparability requirements of Rule 1.15(f). These requirements and the procedure for certifying compliance with them are detailed below.
Rule of Professional Conduct 1.15 states that attorneys and law firms can only hold IOLTA accounts at financial institutions that meet the following criteria:
- Comparable rates are paid on IOLTA and non-IOLTA accounts with similar balances and requirements (see Rule 1.15(f)(2-4))
- The financial institution can assess only allowable reasonable fees on IOLTA accounts. (See Rule 1.15(f)(5) and (i)(2))
- The financial institution cannot engage in “negative netting.” No fees charged in excess of the earnings accrued on an individual account may be deducted from the earnings accrued on other IOLTA accounts. (See Rule 1.15(f)(5))
To be certified as an eligible financial institution under these criteria, a financial institution must submit one of the following forms to the Lawyers Trust Fund of Illinois:
The current safe harbor rate on IOLTA accounts is 1.40%. The Lawyers Trust Fund will review submissions from financial institutions as received. Financial Institutions submitting Form A and paying the “safe harbor” rate are automatically determined to be in compliance with the interest rate requirements of the revised rule. Financial institutions submitting Form B will be evaluated based on their other product offerings, and additional information and documentation may be required prior to final approval.
Financial institutions that meet the interest rate comparability and ARDC overdraft notification requirements are included in the eligible financial institutions listed on the web site of the Lawyers Trust Fund.
If you have questions about becoming an eligible financial institution please contact LTF Director of Banking Terri Smith at 312-938-3001.