Bank
closed an IOLTA account without warning
I've recently encountered difficulties with my bank and my
IOLTA Trust Account. I had an IOLTA account for about 20 continuous
years. It often was at zero balance. In fact, the rules regarding
IOLTA accounts require us to pay out monies that are due to experts, clients
and to ourselves, promptly, and to not let money sit in our accounts for long
periods of time. I do a lot of pro bono cases. I helped several clients
this year against lawyers who defrauded them in the mortgage crisis and
scandal. There was no money from those cases to go into an IOLTA account,
no pay for me, but there were plenty of hours that I worked without more
compensation than the satisfaction of helping clients and burnishing our
professional reputations as lawyers by proving that we're not all
crooks. But my IOLTA account went to zero for more than 30
days. Without notice, the bank closed my IOLTA account. Without
notice. In order to help a new client whose money needs to be deposited
into an IOLTA account, I now need to open a new account. That will take
time traveling to the bank. I have to open a Quicken register with new
numbers and print new checks. The bank’s "policy" is to never
reopen an account once closed.
We need a rule change that prohibits a bank from closing an
IOLTA account without notice to the attorney and without 60 days' notice to
the State Bar. That would give the State Bar time to contact the lawyer
and find out what the reason is that the lawyer has had an inactive IOLTA
account. If the inactivity is due to the lawyer's retirement or
appointment to the bench or death, by all means, close the darned
account.
My business as a sole practitioner requires me to be able to handle client
accounts properly, in accordance with the rules governing IOLTA
accounts. As a solo, I can't just hire someone to go to the bank and set
up a new account a few times a year. I see no way to stay within the foul line
of the rules if the statute regulating IOLTA accounts permits banks to
summarily close my inactive IOLTA account without notice to me and the State
Bar.
Timothy Lee Davis
San Diego
Editor’s note: The State Bar recommends that attorneys
who are concerned about closure of inactive accounts check with their bank. Attorneys
may use their own funds to maintain a minimum balance in an IOLTA account. For
more information, see the State Bar’s IOLTA
guidelines.
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and complete address. Send letters to
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