Bar promotes banks supporting legal aid through higher interest

The State Bar is already slated to distribute a record amount of legal aid funding next year, but the agency is hoping to generate additional dollars to support low-income Californians in future years through a new initiative.

The bar's Leadership Bank program is designed to encourage financial institutions to boost the interest rates they offer for Interest on Lawyers' Trust Accounts, known as IOLTA.

Banks that agree to pay at least the established compliance rate on the accounts -- and waive fees and charges -- will be highlighted on the bar's website. The inaugural list of Leadership Banks will be published in January, the bar said.

The bar will also encourage attorneys to use those institutions for their client trust accounts.

Meanwhile, the banks will be allowed to advertise their Leadership Bank designation in their own marketing materials to demonstrate their support for civil legal aid. In addition, the banks' participation could help them fulfill their Community Reinvestment Act obligations, according to the bar.

"Financial institutions in California hold nearly $5 billion in IOLTA accounts, the interest on which goes to support legal aid," State Bar Executive Director Leah T. Wilson said in a statement. "We are excited to highlight banks that choose to be a leader in supporting this work, recognizing and leveraging their tremendous economic power to do good for the neediest in the state."

The bar announced earlier this fall that it planned to distribute a record $55.6 million in IOLTA funds next year. That figure is a 400% increase from two years ago.

The bar attributed the large jump in funding to an improving economy that has boosted interest rates, as well as the agency's efforts to get banks to maximize interest.

For example, the bar said its negotiations with the bank that is the largest holder of IOLTA accounts in California resulted in an interest rate increase that has the potential to generate an additional $5 million annually. The bar identified that bank as Wells Fargo.

Despite the agency's successful efforts to boost legal services funding, the bar said many civil legal needs still go unmet.

Low-income Californians reported having an average of four civil legal issues in their households in the past year, but 70% of them did not seek or receive legal help for those problems, according to the bar's Justice Gap Study.

"Meanwhile, legal aid organizations are able to fully resolve only 30 percent of the cases brought to them, with insufficient resources being a major limiter," the bar said in a news release.