TEAJF demand

TEXAS
EQUAL ACCESS
to JUSTICE
FOUNDATION

P.O. Box 12886
Austin, Texas 78711-2886
800-252-3401 in Texas only
512-320-0099
512-4690112 Fax
www.txiolta.org

February 19, 2002

MR. HUGH W. LINDSAY
412 TARROW ST
COLLEGE STATION, TX 77840-7811

RE:

IOLTA Negative Account:
Account Name: HUGH W. LINDSAY ESCROW ACCOUNT
Account Number: XXXXXXXXXX at XXXXXXXXX
Amount Lost: ($63.73)

Dear Attorney:

We need your help. IOLTA accounts that earn less interest than the fees the bank charges are expected to cost the Texas Equal Access to Justice Foundation (TEAJF), the organization that administers the IOLTA Program in Texas, approximately $1,000,000 in 2001. You are probably unaware that your account is contributing to this loss in revenue. We need you to take action today to prevent additional losses in funds for civil legal services for low-income Texans.

Interest rates on IOLTA (Interest on Lawyers' Trust Accounts) accounts have declined steadily in recent years - resulting in less money for the provision of civil legal services for low-income Texans. As of July 2001, the average interest rate paid on IOLTA accounts in Texas was .80%. The effect of low interest rates has been a significant reduction in funding for much-needed legal aid. Legal aid helps families stay in their homes; individuals with disabilities keep their jobs; place children in safe and stable homes; women reach safety from abusive relationships, and older Texans receive much-needed health care. In 1992 TEAJF awarded over $10.7 million to legal services organizations. For 2002, less than $5 million is available for grant awards.

In addition to declining interest rates, bank service charges for IOLTA accounts have risen sharply. These high service charges combined with decreasing interest rates have resulted in a substantial number of negative IOLTA accounts - accounts where the service charge is greater than the interest earned resulting in a negative balance - which means TEAJF owes the bank money. In the first six months of 2001, over 9,500 of the 18,000 IOLTA accounts were negative.

According to our records, your IOLTA account has a negative balance that cost the Foundation $63.73 in 2001. Like many attorneys, you may believe that the rules require you to maintain your IOLTA account. In fact, Rule 4B reads as follows:

Licensed attorneys who maintain client trust funds that are nominal in amount or are reasonably anticipated to be held for a short period of time must attempt in good faith to locate an interest hearing account that would generate interest greater than service charges. If such an account cannot be located, the attorney must notify the Foundation during the annual IOLTA compliance process. Such attorney is required to maintain a non-interest bearing client trust account for such funds.

As you can see, this rule requires Texas attorneys to make sure their IOLTA accounts are generating net interest if possible by making a good faith effort to find a bank that will provide an IOLTA account that will generate net interest. TEAJF will continue working directly with Texas banks to get them to waive service charges, and/or increase the rate of interest they pay on their IOLTA accounts. But in the meantime, your action right now is the key to preventing a further reduction in critical civil legal services funding for low-income Texans. Please help low-income Texans get the assistance they need by complying with IOLTA Rule 4B. The steps you need to take to comply are:

1.

Talk to your bank about waiving any minimum balance requirements, service charges assessed to TEAJF and/or raising the interest rate so that your account is no longer "negative".

2.

Move your IOLTA account to a bank in your area that does not charge TEAJF a monthly service fee on IOLTA accounts.

3.

If the solutions above -do not work close your IOLTA account and open a non-interest bearing account, for the -'placement, of short-term and/or nominal clients' funds. Please make sure that you do not use the Foundation's Tax ID number on any non-interest-bearing account(s) that may open.

For more information regarding Rule 4B and these suggested action steps, contact Joyce Lindsey, Associate Director of TEAJF at (512) 320-0099 x 17. Thank you for working with us to ensure access to justice for all Texans.

Respectfully,

Richard L. Tate
Chair

1.	Talk to your bank about waiving any minimum balance requirements, service charges assessed to TEAJF and/or raising the interest rate so that your account is no longer "negative".
2.	Move your IOLTA account to a bank in your area that does not charge TEAJF a monthly service fee on IOLTA accounts.
3.	If the solutions above -do not work close your IOLTA account and open a non-interest bearing account, for the -'placement, of short-term and/or nominal clients' funds. Please make sure that you do not use the Foundation's Tax ID number on any non-interest-bearing account(s) that may open.