Drew Wilson
The Senate has approved a bill that could significantly impact legal aid funding in Florida.
SB 498, which passed mostly along party lines, would change the formula for calculating interest rates paid to bank accounts in the Interest on Trust Account (IOTA) program.
The Florida Bar requires nearly every lawyer in the state to maintain an IOTA account to house client funds and settlements pending distribution. Interest accrued on money held in IOTA accounts is passed along to the Funding Florida Legal Aid program, which in turn funds legal aid for indigent individuals and other justice system improvement programs, such as legal education.
The interest rate for IOTA accounts is set by the Florida Bar and approved by the Florida Supreme Court. The current rate-setting formula, enacted in 2023, is a tiered system tying the IOTA rate to the Wall Street Journal Prime Rate.
Currently, the WSJ Prime Rate is 7.5%, and the rule stipulates that banks must pay IOTA accounts an interest rate of at least 40% of that amount, or 3%. Banks are not required to offer IOTA accounts and, for those that do, the formula guarantees them a healthy cushion no matter the WSJ Prime Rate.
Still, some institutions argue the current rule is untenable and have advocated for the change passed by the Senate.
SB 498 would tie the IOTA rate to the Federal Funds Effective Rate (FFER), requiring interest payouts of at least 0.25% if it’s at or under 4%, or at least 0.5% if the FFER is higher than 4%. It also stipulates that banks “must pay the highest interest rate or dividend generally available from the institution to its comparable business or consumer accounts or nonmaturing deposit accounts.”
The Florida Civil Legal Aid Association has been fighting the change and on Wednesday issued a statement via its President, Bethanie Barber, expressing disappointment in the bill’s advance.
“Florida is one of only two states in the nation that does not fund legal aid with taxpayer dollars. A robust IOTA program, combined with significant pro bono hours and monetary contributions from practicing attorneys throughout the state, makes that possible. The legislation passed today would undo the progress that has been made over the last two years to better fund legal aid, giving a windfall to banks at the direct detriment of Florida’s victimized and working poor,” she said.
“We remain confident that our differences can be solved outside of the legislative process with the right people in the room focused on reasonable solutions. We welcome an opportunity to continue working with the bill sponsor and all the stakeholders to develop a solution to our common problem.”
SB 498 now heads to the House, which has yet to take action on a similar bill (HB 173) sponsored by Rep. Robbie Brackett.
