ALEXANDRIA, Va. -- NCUA is applauding a recent decision from the Washington State Supreme Court allowing credit unions to remain on the list of financial institutions where attorneys can keep interest on lawyer's trust accounts or IOLTAs.
In 2003, the Washington State Bar Association conducted a review of the Washington Rules of Professional Conduct and recommended an amendment that CUs be removed from the list because there was only a small number of them on the list and that NCUA would not insure accounts that held nonmember funds even though the trust accounts belonged to a CU member, for example, the attorney.
"NCUA believes the Washington State Supreme Court made the right decision in its review of the state bar association rules when it rejected a proposal to remove credit unions from the types of financial institutions where attorneys can set up IOLTA accounts," said John McKechnie, NCUA director of public and congressional affairs. "Nothing in the Federal Credit Union Act or NCUA's rules prohibit this type of account at credit unions, although membership requirements for account insurance coverage limits coverage. Attorneys can set up IOLTA accounts at credit unions and account insurance will be available for client funds in these accounts as long as the clients are members of the credit union."
The Washington CU League and several CUs in the state wrote to the Supreme Court urging them to keep CUs on the list.
With IOLTAs, attorneys routinely hold funds in trust for clients to pay costs related to legal services like court filings, depositions and business transactions. The league said because credit unions often pay higher rates on accounts and because interest earned on an IOLTA goes directly to the Legal Foundation of Washington administered by the WSBA, the Supreme Court's decision will result in additional funds for the legal foundation. These funds are used to fund legal services for those who cannot afford them.