Frequently Asked Questions on Comparability
On January 28, 2010, the NC Supreme Court approved revisions to the NC IOLTA Rules that require lawyers to hold their IOLTA accounts only at “eligible” banks that have agreed to pay comparable rates on those accounts (comparability requirement). The revised rule became effective on July 1, 2010.
The comparability requirement in the IOLTA rules requires lawyers to hold their IOLTA accounts only at banks that agree to pay IOLTA accounts the highest rate available to that bank’s other customers when the IOLTA accounts meet the same minimum balance or other account qualifications.
Banks are approved as “eligible” by NC IOLTA upon a finding that they are in compliance with the rule based on the documentation and ongoing reporting submitted. Effective July 1, 2010, lawyers must maintain NC IOLTA accounts only at eligible banks. NC IOLTA maintains a list of eligible banks which is updated periodically. If a bank currently on the Eligible Bank List is no longer in compliance, NC IOLTA will work with the bank to notify attorneys and firms that the bank is no longer eligible.
No. The rule regulates the behavior of attorneys. The decision to offer attorney trust accounts or participate in IOLTA has always been and remains voluntary for banks. Setting such a requirement by rules governing attorneys is similar to other NC State Bar requirements for banks that want to hold attorney trust accounts, such as requiring NSF notification and reporting or record retention requirements.
No. Comparability does not set rates or compare rates between or among banks. Rates are set by each bank for its customers based on the factors a bank normally considers when setting rates. Comparability only requires participating banks to pay interest rates comparable to what it already pays its similarly situated non-IOLTA customers—and, IOLTA will pay any resulting fees attached to the higher rate products.
NC IOLTA worked with each bank to provide technical assistance for implementation and compliance. NC IOLTA is pleased to report that every participating bank with NC IOLTA accounts at the time of the rule change was certified as an eligible bank. Since comparability was implemented, several new banks have been certified and now offer NC IOLTA accounts. Further, a number of banks have agreed to go above and beyond the eligibility requirements to support the NC IOLTA program in its mission to ensure that low-income North Carolinians have access to critically needed legal aid by becoming Prime Partner Banks.
Over the years, the staff and trustees of NC IOLTA worked to improve interest rates on IOLTA accounts in a seemingly never ending cycle. Though some success was achieved with some banks, prior to the comparability rule, the IOLTA rates never reached the higher levels paid on other high balance accounts, and the negotiated rates on IOLTA accounts were slow to increase following periods of downturn.
Interest in implementing the concept was expressed by the NC Equal Access to Justice Commission and leadership of both the NC Bar Association and the NC State Bar (NCSB). John McMillan, immediate past-president of the NC State Bar made exploring the concept a goal of his administration.
NC IOLTA trustees engaged a consultant to produce an analysis of our program to determine whether income would increase significantly. The consultant’s report found that some income increase could be expected even in the unprecedented economic times we are now in, but significant increases could be projected for the future using low, medium or high interest rate scenarios as applied to NC IOLTA data. Therefore, the recommendation in the consultant’s analysis was that North Carolina should begin the process of changing to comparability now so it will be in place when the rate climate begins to turn around so that we can significantly increase the funds available for the support of the bar’s responsibility of ensuring equal access to justice.
The consultant’s report was presented to the IOLTA trustees and the NC State Bar Issues Committee during the April 2009 State Bar meeting. IOLTA staff and leadership worked with State Bar leadership and staff to draft an IOLTA rule revision that would include comparability requirements using resources available at the ABA that review and collect IOLTA rules and can comment on best practices. They also began a dialogue with the NC Bankers Association and started educating the bar about the concept.
The revisions to the NC IOLTA Rules that would require comparability were approved by the NC State Bar Council at its quarterly meeting in January 2010 and by the NC Supreme Court on January 28, 2010. The revised rule has an effective date of July 1, 2010.