Supreme Court of Texas Requires Attorneys to Put Client Trust Accounts at Eligible Banks.

Interest Generated by Trust Accounts Funds Legal Aid for the Poor

AUSTIN, Texas -- The Supreme Court of Texas has passed a rule requiring Texas attorneys to place certain client trust accounts in "eligible" banks, defined as those that pay interest rates comparable to rates paid on other similarly situated accounts. The new rule is expected to result in more funding for legal aid.

The Interest on Lawyers' Trust Accounts (IOLTA) Program, established in 1984, calls for nominal or short-term client funds to be placed in separate interest-bearing trust accounts. The interest earned on these accounts is given to the Texas Equal Access to Justice Foundation, which grants the funds to legal aid groups statewide. Legal aid organizations use the funds to provide free advice or representation in civil matters, such as family law or housing issues, to low-income Texans.

Early this year, the Texas Equal Access to Justice Foundation embarked on a large-scale effort to persuade financial institutions in Texas to become eligible under the new Court rule. As of June 1 -- the deadline for banks to become eligible -- 535 banks have opted to participate in the IOLTA Program by paying comparable rates. The complete list of eligible banks can be found at www.teajf.org.

Justice Harriet O'Neill, member of the Supreme Court of Texas and the Court's liaison to the Texas Equal Access to Justice Foundation, said, "Legal aid organizations turn away half of all qualified applicants due to a lack of resources. The new IOLTA rule will help to bridge the gap by increasing IOLTA revenue, thus increasing funding for legal aid programs. I applaud the financial institutions that have opted to participate in the IOLTA Program."

The following banks have signed on to the IOLTA Program at the Prime Partner level, which means they pay at least 70 percent of the federal funds target rate on IOLTA accounts:

Amegy Bank of Texas (Statewide); Capital Bank (Houston); Citibank Texas (Statewide); Comerica Bank (Statewide); Compass Bank (Statewide); Coppermark Bank (Plano); Crosby State Bank (Crosby); Dallas City Bank (Dallas); First International Bank (Plano); First National Bank of Bosque County (Valley Mills); First Savings Bank (El Paso); First State Bank (New Braunfels); First Victoria National Bank (Victoria); Liberty Federal Savings Bank (Dallas); Lindale State Bank (Lindale); North Dallas Bank & Trust (Dallas); Redstone Bank (Houston); Security State Bank (Littlefield); State National Bank (Lubbock); Texas Brand Bank (Garland); Town North Bank (Dallas).

Mike McGee, Texas Equal Access to Justice Foundation board member and Dallas City Bank board chairman, praised the Supreme Court of Texas for implementing the new IOLTA rule.

"The Supreme Court of Texas identified a significant gap in the IOLTA Program and acted quickly to address it," McGee stated. "Because of the new IOLTA rule, legal aid organizations will receive more funding and will be able to help more low-income Texans with their civil legal needs. As a representative of Dallas City Bank, I am proud of our decision to become a Prime Partner."

There are more than 20,000 IOLTA accounts in Texas, totaling about $1 billion. Prior to the new rule, IOLTA generated roughly $4 million to $6 million in interest annually. IOLTA revenue could potentially double or triple due to the new rule.

The Texas Equal Access to Justice Foundation (www.teajf.org), created by the Supreme Court of Texas in 1984, is the largest state-based funding source for the provision of civil legal aid in Texas. The organization is committed to the vision that all Texans will have access to the justice system, regardless of their income. The Foundation administers a variety of funding sources, which are earmarked to assist nonprofit organizations in providing legal aid to approximately 100,000 Texans each year.