Florida Supreme Court rejects bankers' request in funding dispute

The state's bankers’ association says that despite this latest setback, it will continue pushing to change the current IOTA rule approved last year.

By Louis Llovio
| 3:45 p.m. August 12, 2024
| 2 Free Articles Remaining!

The Florida State Capitol in Tallahassee

Florida

The Florida’s Supreme Court has declined a request from the Florida Banker’s Association to hold a hearing on reversing how much interest is paid on specific trust accounts held by lawyers that help fund legal aid organizations statewide.

In a one-sentence notice issued Wednesday, the court stated the association’s motion for a rehearing was denied.

“The FBA is obviously disappointed in the court’s order denying our motion for rehearing,” the group says in a statement sent to the Business Observer on Monday.

“However, we will continue to seek other avenues that will bring relief for our membership on this issue.”

This is the latest setback for the state’s bankers who have lobbied to overturn a Florida Supreme Court rule approved last year that changed the minimum banks must pay on IOTA account (Interest on Trust Accounts) and tied the rate to an indexed rate of between 3.25% and 4.99%.

Two bills that would have done that and capped what banks had to pay on those accounts at 2.55% died in committee in the Florida Legislature earlier this year.

Bankers have argued that the change cuts into their bottom lines by forcing them to pay more for accounts with a heavy transaction load. This, some banks have said, will lead them to drop out of the program.

The Florida Bar, which wrote the new rules the banks questioned, has countered that rule gives banks an incentive to bring in more business by offering higher yields.

The IOTA money is earmarked for Florida residents who are at or below 125% of the poverty level.

According to Funding Florida Legal Aid (formerly The Florida Bar Foundation), the state Supreme Court requires that all nominal or short-term funds belonging to clients or third persons be deposited into interest-bearing checking accounts. But the interest earned cannot be deposited back into the accounts. Instead, the funds go to FFLA to be distributed, in large part, to provide legal assistance for the poor.

The court implemented the program in 1981.

Money matters

In a report filed to the Supreme Court in October, the Florida Bar wrote that in June 2023 banks remitted more than $15 million to Funding Florida Legal Aid. That was money collected in the two weeks after the new rule went into effect May 15, 2023.

According to the Bar, despite it only being two weeks, that amount totaled 31.6% of remittances for the entirety of fiscal year 2022-2023.

In July, over $23 million was remitted and just under $23 million came in in August.

The report says there were 161 banks holding IOTA accounts when the rule went into effect. Of those, three banks stopped offering the accounts and one said it intended to stop in the next month. The four had a combined $880,572.01 in IOTA funds, about 0.1% of all the money held, the report states.

While four banks withdrew, the report says two others enrolled with FFLA and a third has enquired about starting to offer IOTA accounts. And a Clearwater bank already offering IOTA accounts says it will begin offering more of them.

author

Louis Llovio

Louis Llovio is the deputy managing editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.