Wells Fargo decision expected to raise $4M for legal aid

Wells Fargo's decision to offer a higher interest rate on the Interest on Lawyers' Trust Accounts it holds is expected to generate an additional $4 million annually in California legal aid funding, according to the State Bar.

The bank, which is the largest holder of so-called IOLTA accounts in the state, said its strong support for legal aid was part of its "broader commitment to servicing and supporting the communities in which we do business."

"We have a strong, long-standing partnership with the State Bar of California, which provides meaningful access to justice for low-income Californians through its California Legal Services Trust Fund Program," said Jeff Dean, a Wells Fargo senior vice president.

Hellen Hong, director of the State Bar's Office of Access and Inclusion, said the agency was thrilled with Wells Fargo's commitment to strengthening legal services funding through its IOLTA account policies.

"It's a great example of the impact that banks can have to maximize one of the biggest sources of legal aid funding in California, where the needs far outstretch legal aid resources," Hong said. "That is why the State Bar has been working diligently to ensure that banks offer IOLTA account interest rates comparable to those paid to other similarly situated depositors, as required under statute."

In addition to committing to pay at least the Established Compliance Rate (ECR) on IOLTA accounts, Wells Fargo also agreed to waive fees and charges on all those accounts regardless of size. As a result, Wells Fargo has taken the necessary steps to become a State Bar-designated Leadership Bank.

The bar's new Leadership Banks initiative is aimed at providing recognition to financial institutions that step up to support legal aid through interest rate increases, which it hopes will prompt other banks to follow suit.

The bar plans to publish an inaugural list of Leadership Banks in early 2020, and it will encourage attorneys to use those institutions for their IOLTA accounts. In turn, banks will be permitted to advertise their Leadership Bank designation in their own marketing materials.

"We are very supportive of the Leadership Banks program," said Dean of Wells Fargo. "It provides California lawyers and law firms with visibility into which banks will help maximize the funds available for the Legal Services Trust Fund Program's philanthropic initiatives."

Hong said Wells Fargo was the first financial institution to agree to become a Leadership Bank, which highlights the bank's "commitment to access to justice along with their corporate social responsibility work."

Hong said she was hopeful other banks among the nearly 170 IOLTA offering IOLTA accounts would follow Wells Fargo's lead.

"Chase and Bank of America are already providing the Established Compliance Rate, and we hope that they will elect to become Leadership banks," Hong said.

The bar's launch of the Leadership Banks program comes as it is slated to distribute a record amount of legal aid funding next year, including nearly $56 million from IOLTA accounts.

The bar has said the 400% increase in IOLTA funds being disbursed compared to two years ago is largely a result of two factors: the bar's efforts working with banks to maximize interest revenue, and an improving economy that has boosted interest rates.

Silvia Argueta, executive director of the Legal Aid Foundation of Los Angeles, praised the bar's efforts to increase funding for legal services. She said she was hopeful the additional money could help organizations like hers counteract the challenges they are facing in the recruitment and retention of attorneys.

"We are thrilled there is going to be an increase in 2020, and it would be our goal and our wish that that continues into 2021 and beyond," Argueta said.