Board of Governors reviews proposed IOTA rule amendment
Supreme Court seeking comments on IOTA task force proposals
The Bar Board of Governors has been briefed on proposed Bar rule amendments from the Task Force on the Distribution of IOTA Funds, including that the Supreme Court is now seeking comments on the rule changes.
Former Bar President Mayanne Downs, chair of the task force, presented its recommendations to the court at the board’s interim November 16 meeting.
That discussion included deadlines for commenting on the amendments, whether the board should take a position, and a separate proposal from public board member Jody Hudgins to boost interest payments by banks on IOTA funds.
The amendments would apply to Bar Rule 5-1.1(g), which governs the IOTA program.
Under the task force proposal, “All IOTA monies will be paid to experienced and already-in-this-business-and-good-at-it grantees in Florida and they would use all that money to hire and pay lawyers so that lawyers can provide direct legal services,” Downs said.
Grantee legal aid agencies would be able to use 10% for overhead and The Florida Bar Foundation, which collects IOTA funds from banks and distributes it to local programs, would be able to use 15% for overhead — the first time there have been limits on overhead, Downs said.
It would eliminate the Foundation using IOTA funds for grants to improve the administration of justice, as allowed in earlier Supreme Court IOTA opinions. It would mandate that IOTA funds be distributed within six months of receipt. The rule amendments also call for a two-year review if it is ultimately adopted by the court.
An official notice is online and will be in the December edition of the Bar News. The court has set a January 4 deadline for comments and the task force has until January 25 to respond, Downs said.
The court’s directive in creating the task force in October 2019 was to consider an alternate model for collecting and distributing IOTA funds, whether there should be priorities and limits on how IOTA funds are spent, and whether there should be reporting requirements in the rule (the Foundation now provides a detailed annual audit). The court also, Downs said, specified that “in doing all of our work, we ‘shall give priority consideration to the need for funding direct legal services for low-income litigants in Florida.’”
Board member Paige Greenlee, a former member of the Foundation Board of Directors, asked if the Board of Governors would be taking a position on the rule amendments, adding “I’ve heard from several constituents with concerns.”
President Dori Foster-Morales noted the court set up the task force with administrative support from the Bar, but has not asked the board for its position.
“We are here for discussion and if that’s something that people want to do, then a motion could be made to do that,” she said.
No motion was made at the meeting.
Board member Josh Chilson said the proposed amendments would do away with the Foundation’s program to help repay student loans for legal aid attorneys and asked Downs about that.
Downs called that and the recognition of some other Foundation programs that would lose funding “agonizing” but said it could be reviewed in two years if ending the loan repayment assistance made it difficult to hire or retain legal aid attorneys. She also said the Foundation or legal aid programs might be able to find other funds for that effort.
IOTA Interest Rates
Hudgins, who also serves on the Foundation Board of Directors, outlined a different amendment to Rule 5-1.1(g) he is proposing on behalf of the Foundation to set a standard interest rate for banks to pay in lawyers’ IOTA accounts. He said it has been discussed with the board’s Disciplinary Procedure Committee and the DPC will revisit it at the board’s regular December meeting.
“There’s no equitable…index on the rate being paid on the IOTA funds,” Hudgins said, adding few lawyers know what rate is being paid on their IOTA account and those rates are generally too low.
“Why are banks paying such a low fee? Because we can. Why can we pay such a low fee? Because you guys don’t ask. Why do you not ask? Because it really doesn’t have any economic effect on your practice of law or on your well-being,” said Hudgins, who is a banker. “It has a tremendous effect on the access to justice for the low to moderate income folks around Florida who need access to justice.”
The proposal would set the minimum interest rate on IOTA accounts at 25 basis points [the current rate averages 11 basis points] and allow it to rise when interest rates increase.
Hudgins said he expects “banks to complain a bit” but ultimately go along with the proposed rule change because it is fair and equitable. He noted that every extra basis point paid on IOTA accounts yields an extra $670,000 for the Foundation and its grant programs.
He presented more details at a recent Foundation Board of Directors meeting.