Banks’ response to IOLTA request called encouraging

Issue March 2009 By Bill Archambeault

Civil legal aid providers struggling to meet surging demand despite a devastating drop in funding finally have some encouraging news, however limited. A strong response by Massachusetts banks agreeing to provide higher interest rates on IOLTA accounts will generate hundreds of thousands of dollars more for legal aid.

In addition to a number of other banks qualified to hold Interest on Lawyers’ Trust Accounts, the Massachusetts IOLTA Committee certified 40 banks as Leadership Institutions and more than 50 banks as Safe Harbor Institutions. The Massachusetts IOLTA Committee encourages attorneys to deposit IOLTA funds with Leadership Institutions or Safe Harbor Institutions to generate the greatest amount of money possible for legal aid programs.

A complete list of approved banks is listed on the IOLTA Web site at

“It certainly has the potential to affect balances and make a huge difference,” said Massachusetts IOLTA Committee Executive Director Jayne Tyrrell. “It’s a wonderful response, and hopefully, the legal community will consider using those banks. It’s a symbolic and practical way that Massachusetts lawyers can assure Massachusetts citizens access to justice.”

In 2006, the Supreme Judicial Court ordered that financial institutions holding IOLTA accounts had to provide interest rates comparable to those they pay to similar accounts, or to pay a safe harbor rate of 55 percent of the Federal Funds Rate.

Leadership Institutions pay a net interest rate on all IOLTA funds of at least 75 percent of the Federal Funds Target Rate, or a 1 percent annual percentage rate, whichever is higher. The current Leadership interest rate is 1 percent. Safe Harbor Institutions apply a rate equal to the higher of either 55 percent of the Federal Funds Target Rate or 1 percent.

The set rates will also give legal aid programs more certainty about how much money will be available as they slash services and cut back on staff and expenses.

“When the rates were fluctuating, it was hard for legal services organizations to plan what their budgets were going to be,” Tyrrell said. “We are now going to be able to forecast what the balances are going to be. I think it’s going to make a difference.”

In 2007, the federal funds rate was 5.25 percent and banks were paying 2.89 percent on IOLTA accounts. That meant large increases in IOLTA funds, but when the economy began its tailspin, IOLTA funds plummeted.

“Never in the history of the Federal Reserve have they lowered interest rates as fast or as low as they are now,” Tyrrell said. “The safe harbor rate was no longer an indicator of what banks were paying. We asked banks to recertify what their comparable rates were. We went through a certification process and reset the leadership rates to 75 percent of the federal funds target rate or 1 percent, whichever was greater.”

Robert Sable, executive director of Greater Boston Legal Services, said the bank response will help bolster rapidly dwindling operating budgets for organizations like his. IOLTA funds make up the biggest portion of GBLS’ budget, and the 55 to 60 percent drop in IOLTA funds has meant a $2 million budget cut.

“I don’t know what the numbers will be, but it’s hard to overstate the potential impact,” he said.

GBLS was about to launch a capital campaign when the cutbacks hit hard, so the campaign was converted into one to help the Boston-based organization stay afloat and bridge the funding gap.

“We think by end of 2010, we’ll be down to the bare minimum of reserves that the board will allow, which will be one month of operating reserves,” Sable said.

GBLS has spent millions in reserves, put in place a hiring freeze, put agreed-upon salary increases on hold and has furloughed employees for one day every other week. Contingency plans have also been made that consider a 5 to 20 percent cut in staff. GBLS’ income is more diversified than many legal aid organizations, but every funding area is seeing dramatic reductions.

GBLS, which received about $2.8 million in donations from law firms in both 2007 and 2008, is anticipating a big drop this year as law firms slash their own budgets and lay attorneys off. “We’re very nervous, as one firm after another lays people off, how we’ll do in 2009,” he said.

And unfortunately, recessions bring increased demand for legal help with eviction, foreclosure, unemployment and domestic violence cases.

“The other side of the equation, in virtually every one of our practice areas, demand is up,” Sable said. “We’re just getting hit from every front.”


IOLTA Leadership Institutions

Leadership Institutions are those that go above and beyond the eligibility requirements of the revised Supreme Judicial Court rule to support the IOLTA program in its mission to ensure that low-income Massachusetts residents have access to critically needed legal aid.

Leadership Institutions pay a net interest rate on all IOLTA funds of at least 75 percent of the Federal Funds Target Rate, or a 1 percent annual percentage rate, whichever is higher. The current Leadership interest rate is 1 percent.

Adams Co-operative Bank
Bank Five
BankNorth (TD Bank)
Bank of Cape Cod
Bank of Fall River
Beverly National Bank
Cambridge Savings
The Community Bank
Cape Cod Co-Operative Bank
Cape Cod Five Cents Savings
Central One Federal Credit Union
Century Bank and Trust Co.
Citizens-Union Savings Bank
Danvers Bank
Framingham Co-Operative Bank
Bank Gloucester
Greenfield Savings
Greylock Federal Credit Union
Institution for Savings in Newburyport
Lee Bank
Leominster Credit Union
Mercantile Bank & Trust Co.
Monadnock Community Bank
Nations Heritage Federal Credit Union
Needham Bank
North Cambridge Co-Operative Bank
North Middlesex Savings Bank
Northern Bank & Trust Company
Randolph Savings Bank
Reading Co-Operative Bank
Rockland Trust Company
Rockport National Bank
Rollstone Bank
The Savings Bank
Sharon Credit Union
South Adams Savings Bank
St. Mary’s Credit Union
The Village Bank
Wainwright Bank & Trust Company
Wellesley Bank
Webster Bank
Westfield Bank

IOLTA Safe Harbor Institutions

The revised IOLTA rule also allows eligible financial institution to apply an index, or “Safe Harbor” rate equal to the higher of either 55 percent of the Federal Funds Target Rate or 1 percent. Institutions choosing the Safe Harbor rate are helping to meet the legal needs of Massachusetts residents by voluntarily insuring their rate maintains a minimum level at all times and increases with other market rates.

Athol Savings Bank
Avidia Bank
Bank of New England
Barre Savings Bank
Bay State Savings Bank
Benjamin Franklin Savings Bank
Berkshire Bank
Beverly Co-Operative Bank
BNY Mellon
Bridgewater Savings Bank
Brookline Bank
Butler Bank
Central Bank
Chelsea-Provident Co-Operative
Chicopee Savings Bank
Citizens Bank of Massachusetts
Clinton Savings Bank
Commerce Bank and Trust
Crescent Credit Union
Dean Co-Operative Bank
Eagle Bank
Edgartown National Bank
Enterprise Bank and Trust
Everett Co-Operative Bank
First Federal Savings Bank
First National Bank of Ipswich
First Republic Bank
Florence Savings Bank
Hampden Bank
Leader Bank
Legacy Banks
Marlborough Savings Bank
Martha’s Vineyard Savings Bank
Medway Co-Operative Bank
Millennium BCP Bank
Monson Savings Bank
New Alliance Bank
Newburyport Five Cents Savings Bank
North Brookfield Savings Bank
North Shore Bank
Northern Trust
Norwood Co-Operative Bank
Salem Five Cents Savings Bank
Southbridge Savings Bank
South Coastal Bank
South Shore Savings
Sovereign Bank
St. Jean’s Credit Union
Unibank for Savings
Walpole Co-Operative Bank
Washington Savings Bank
Weymouth Bank
Williamstown Savings Bank