After months in limbo, a bill passed by the U.S. Senate Thursday will extend insurance coverage for IOLTA accounts.
Capitol Hill’s upper chamber approved the Royce-Perlmutter Credit Union Share Insurance Fund Parity Act Dec. 11 which will give the funds in Interest on Lawyers Trust Accounts the same deposit insurance protection regardless of whether they are held at a credit union or a bank.
The American Bar Association supported the legislation and heralded its approval.
Charles Dunlap, executive director of the Indiana Bar Foundation, which oversees the IOLTA program in the state, compared the change to “inside baseball” but said it will make a difference.
“It’s kind of technical correction,” Dunlap said. “It eliminates a strange little quirk (in the law).”
The adjustment impacts attorneys who place their clients’ trust money in a credit union. Currently, only the accounts of clients who are members of that credit union get protection, although it is less than that provided in banks. The bill changes that.
The Royce-Perlmutter Act will allow IOLTA funds at credit unions to have a level of protection equivalent to the $250,000 per account that the Federal Deposit Insurance Corp. gives to banks.
Although Indiana was among the states that permitted lawyers to put IOLTA money into credit unions, Dunlap said only a minority of attorneys in the state use credit unions for these funds. Still, not having the same insurance coverage was worrisome.
The bill, named after Reps. Ed Royce, R-Calif., and Ed Perlmutter, D-Colo., passed the House of Representatives May 6 on a voice vote. ABA President William C. Hubbard submitted a letter to the Senate Banking Committee in September in support of the act.
Now the bill goes to President Barack Obama for his signature.