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Letters to the Editor

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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