Has anyone heard of IOLTA accounts receiving CRA credit?!? (Since the interest earned goes to the state, for the purpose of helping low-income individuals with legal education or representation.)

Our state justice foundation is encouraging banks to increase the interest paid on IOLTAs, and are using CRA credit as an enticement.

I've haven't heard of this before, but it seems to make sense. Any thoughts?

They're saying pay more interest and take CRA credit? How about making a donation to the cause instead of tying it to a product line. The service of providing the IOLTA is just that, a service, in the eyes of CRA. Are they trying to get you to take investment credit for the interest increase? I can't take it for charging less interest on a loan...I'm not sure I could take it for providing more. You'd be better off making a donation to the cause and taking that as a nice clean investment.

Waived revenues are not eligible for investment credit. An increase in the interest rate would seem to be a stretch in my eyes. It would be more a business decision to encourage IOLTA accounts, which again, isn't going to qualify.

I just don't see the value. I try a lot of goofy stuff but this one I wouldn't try to get past my examiner as anything more than a service. If I shot for anything else, he'd be smart enough to ask if I raised the rate to increase the business How would you answer that?

The IOLTA Fund of the Bar of New Jersey is encouraging this as well. Here is a link to their guidelines for financial institutions.

http://www.ioltanj.org/objects/IOLTAguide.pdf

See page 4 for a discussion of CRA credit.

I do not know how the federal regulators view this.

Again, it's still just a service. Additional interest paid would be for marketing purposes, but I don't see a CRA swing to them. I suppose if you're desperate for services you might try to be the only bank to offer IOLTA's at a very high rate, but if you're that desperate...there are other ways to boost your service test that weigh more heavily on your exam than high interest on IOLTA's.

I don't see an investment connection. If you can't deduct the interest paid as a charitable contribution there isn't much more you can do than take service credit and call it a day.

Higher interest on IOLTA's may or may not be valuable for marketing purposes. I used to handle the professional practice banking for a large bank. We had to offer IOLTA's, but frankly the attorneys didn't care if it was super high rate, since they didn't benefit. They wanted the convenience of having their IOLTA's at the same place as their general funds, but other than that, they were pretty non-committed to the return on the fund.