Hello all...

Does anyone have any comments regarding whether banks can assess service charges/ maintenance charges to IOLTA accounts?

I have a new account that was upset they received a $2.00 RDI charge on their statement. We have since waived those fees due to customer relations, but we've never had this issue come up.

I have a call into the state foundation and waiting for an answer. Just thought I would go fishing for others interpretations.

Have a good one!

In Michigan, we have the authority to deduct 'reasonable' service charges from the interest paid. This may be different in your state - I hope your call to the state foundation is answered.

IOLTA programs vary from state to state and your inquiry to the Bar Foundation is where you will get the best answer. (Most have a publication they would love to send you).

In general, when you open an IOLTA you implicitly agree that any fee you impose will come out of the interest paid on the account. That's becasue none, not a single dollar, of the funds belongs to the law firm - it all belongs to their clients and they must account for it. The Bar Foundation, however, does not want you to take any fees from the interest because they intend to use the money for charitable purposes! They cannot prohibit you from charging fees however and some will even give your bank a dandy little certificate if you do not!

Personally, I think it's a rip off that is simply too small for most clients to notice; the bar foundation uses interest earned off other people's money for charitable purposes. I do know of a bank in Tampa that literally specializes in IOLTA's as a loss leader to get the other accounts of the big law firms.

As Ken points out, the funds in an IOLTA do not belong to the attorney(s) but are being held in trust for the client(s). It would be unethical for an attorney to have an IOLTA account if any service charges were deducted from client funds. I was formerly in private practice and my bank waived service charges on my IOLTA account. Had they not done so, I would have found another institution who would.

Amy,
In NJ, we waive the fee on the account, but deduct
the appropriate charges from the interest before
we cut the check to IOLTA, the forms in NJ
specifically show how much we keep from the
interest for account servicing.

Ditto Massachusetts

We service several IOLTA accounts and we reduce the interest earned by the amount of the service charge and then submit the difference. We disclose this procedure to the customer when the account is opened. We have also in the past manually billed the company for the service charge or posted it out of one of their other operating accounts.
The ability to reduce interest earned may be an issue that is driven by each State's law however.