Banks, lawyers team up for $28m partnership
Twenty-eight million dollars isn’t small change. That’s how much has been raised for legal services for the poor and law-related education programs over the past 30 years in New Hampshire through the Interest on Lawyers Trust Accounts program.IOLTA is a collaboration involving banks, lawyers and the New Hampshire Supreme Court that enables lawyers to put clients’ deposits that are small amounts or will be held for a very short time into a pooled, interest-bearing account. Avoiding the creation of a separate account for each of these transitory deposits allows the bank to save some administrative cost, and at the same time the pooled amounts can earn some interest on accounts that otherwise would not earn interest.These small or short-term deposits, when pooled, can add up. IOLTA has become the major funding source for legal services programs serving the poor in New Hampshire. (Loan principal amounts are not affected.) For many years, the principal recipients have been New Hampshire Legal Assistance and the New Hampshire Bar Association Pro Bono Referral Program.Jack B. Middleton, a director of the McLane, Graf, Raulerson & Middleton law firm, brought the idea to New Hampshire after hearing about it at an American Bar Association meeting in the early 1980s. He successfully petitioned the New Hampshire Supreme Court to enact enabling rules allowing the pooled accounts with the proceeds to go to charitable purposes, through the vehicle of the New Hampshire Bar Foundation. New Hampshire was the second state to set up an operational IOLTA program, he said.At oral argument on his petition, Middleton recalls being asked by a justice how much he thought could be raised. Middleton’s initial estimate was $50,000 in a year for all accounts statewide. In less than two years, IOLTA was earning more than twice that amount.”I think it was great that New Hampshire jumped on this as quickly as we did,” said Middleton.Enhanced recognitionAs New Hampshire’s economy has cycled through its ups and downs, annual IOLTA revenue has fluctuated, affected by both interest rate variations and transaction volume.Annual IOLTA revenue soared as high as $1.7 million five years ago, propelling the Bar Foundation into the key role it plays as a major funding source for civil legal services for the poor and for law-related education programs.Due to the continuing decline of interest rates and the slowdown in business activity, IOLTA revenues are now hovering at about $1 million per year. The challenges for IOLTA grantees are greater than ever, both due to demand for their services and other sources of funding diminishing as well.Despite prevailing low interest rates, many of the state’s banks continue to offer higher-than-market rates for IOLTA accounts. The amounts paid are contributions to the community, bankers say, and are often reported in their Community Reinvestment Act reports.For the past few years, the Bar Foundation has provided special recognition of the banks offering the highest interest rates. IOLTA Leadership Banks, which provide at least 2 percent on IOLTA accounts, are listed prominently in all of the Bar Foundation’s IOLTA information and receive special recognition at the Bar Foundation’s annual dinner in the spring.This past year, the foundation, in collaboration with the Bar Association, has begun an enhanced recognition effort that includes a public presentation of a Leadership Bank plaque, messages sent to attorneys about the Leadership Banks, and other efforts to recognize these banks’ special contributions.There are currently 13 Leadership Banks, and none is a large bank. Although a number of larger banks continue to pay above-market interest on IOLTA accounts, they are not offering IOLTA accounts yielding at the 2 percent-Leadership level.Joseph Reilly, CEO of Centrix Bank, said the IOLTA approach fits well with his bank’s mission as a community bank with a focus on professional accounts. “We became involved with IOLTA at the leadership level from the start — it is one more way for us to be socially responsible, and it meshes with how we work with our customers,” he said.Paul C. Rizzi Jr., president of Merrimack Savings Bank, views the program similarly.”We appreciate the extra value IOLTA funds contribute towards providing legal services to those with the greatest need. Participating as a Leadership Bank supports our objective to contribute to the health and wellbeing of our communities.”Dan Wise is editor of the New Hampshire Bar News.