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IOLTA: Funding Legal Services in New Mexico
THE NEW MEXICO ACCESS TO JUSTICE COMMISSION, as a commission of the New Mexico Supreme Court, sets priorities for civil legal providers around the state, makes recommendations to the Supreme Court to improve court services, and troubleshoots legal service issues statewide as they arise. The ATJ Commission does not directly fund any civil legal service providers.
■ Use your IOLTA account to make a difference
As attorneys, we are morally, ethically, and professionally obligated to do pro bono work and make financial contributions when possible. However, there is another easy way to help that does not add to our workload or stretching our wallets. We can actually help serve those in need through a mechanism that many of us already have set up as a part of our practice, our IOLTA Accounts.
■ History of the IOLTA Program
IOLTA Accounts or “Interest on Lawyers Trust Accounts” are specialized accounts for lawyers to hold their client’s money. When client funds cannot practically earn income for the client, the funds are deposited in a pooled IOLTA account. The income generated on the pooled funds is used for civil legal aid and other programs that support access to justice for low-income people. New Mexico’s rules governing our professional conduct set forth strict requirements regarding the holding of our client’s funds, see Rule 16-115 NMRA, and the rules governing the New Mexico bench and bar also specifically outline the strict requirements and regulation of attorney trust accounts or IOLTA Accounts. See Rule 24-109 NMRA. Like a regular bank account, the account will earn interest based on the amount of money held in the account. However, the interest on the IOLTA Account does not belong to the attorney, law firm or to an individual client in the pooled trust account. So where does this interest go? In the 1980s, the American Bar Association proposed an IOLTA Program, where the interest accrued by these accounts would be used to fund law-related public service activities. New Mexico adopted the proposed IOLTA Program. The accrued interest from lawyers’ IOLTA Accounts is collected by the State Bar of New Mexico and deposited into the Access to Justice Grant Fund, which provides yearly grants to organizations that provide free or low-cost civil legal services to New Mexicans.
■ How do IOLTA Accounts work?
Rule 24-109 NMRA sets out the special rules governing IOLTA Accounts and how banks must administer them. Pursuant to this rule, the banking institution holding the IOLTA Account must pay the same interest rate as it would on any other equivalent account. However, banking institutions may agree to pay a higher rate To identify such institutions, the State Bar has formed a Leadership Circle comprised of those institutions who opted to pay an interest rate equal to 55% of the Federal Funds Target rate OR 0.35%, whichever is higher.
■ What banking institutions are in the Leadership Circle?
The following banking institutions have agreed to go beyond the eligibility requirements for IOLTA Accounts:
Enterprise Bank & Trust Wells Fargo Century Bank of Santa Fe Pinnacle Bank BMO Harris
■ How is the interest on IOLTA Accounts used?
The need for civil legal services in New Mexico is tremendous. Through our civil legal service providers, IOLTA funding keeps people sheltered, employed, and supporting their children. The organizations using these funds handle cases involving eviction, foreclosure, child custody, guardianship, consumer debt, immigration, and restraining orders against an abusive partner.
For example, when Wells Fargo committed to the higher interest rate and joined the Leadership Circle in 2019, the interest rate it paid on the IOLTA Accounts went up from 0.2% to 1.0%. This resulted in an increase of approximately $30,000 per month to the IOLTA Program to fund civil legal services. Changing your IOLTA Account to one of the banks identified in the Leadership Circle is a direct and painless way to substantially increase funding for organizations providing free civil legal services to people in our state.
■ What can I do?
One of the biggest ways an attorney or law firm can impact the IOLTA program is by ensuring your IOLTA Account is with one of the banks in the Leadership Circle. These are the banks that have committed to paying a much higher interest on IOLTA Accounts than is otherwise required.
■ Why should I act now to help with this effort?
The answer, unsurprisingly, is COVID-19. As a result of the pandemic, we are at a moment where access to the civil justice system for those without the ability to pay for a lawyer is critical. With a projected rise in evictions and foreclosures, once state and federal stays and moratoria are lifted, and an increase in domestic violence during the pandemic, the safety and stability of many New Mexicans depends on civil legal help. Changing your IOLTA account is a simple way to provide some of this much-needed help.
