In December 2023, The Florida Bar Foundation changed its name to FFLA. Posts prior to this date contain our former name.
On May 15, 2023, an amendment to Florida Bar Rule 5-1.1(g) took effect, requiring financial institutions that offer IOTA accounts to base their interest rate for those accounts on a new set of terms. Interest earned on lawyers’ trust accounts is used by the Foundation to fund legal aid.
The rule language states that “when the Wall Street Journal Prime Rate (‘indexed rate’) is between 325 and 499 basis points (3.25% and 4.99%), the yield must be no less than 300 basis points (3.00%) below the indexed rate in effect on the first business day of each month. When the indexed rate is 500 basis points (5.00%) or above, the yield must be no less than 40% of the indexed rate in effect on the first business day of each month.”
The Wall Street Journal prime rate since 2000 has averaged approximately 4.75%, while the rate paid on IOTA accounts has averaged approximately 0.46%.
Currently, 161 financial institutions offer IOTA accounts in Florida. The Foundation collects IOTA funds from 35,005 accounts. Ten banks hold 63% of all IOTA accounts.
In the month before the amendment went into effect, the three financial institutions with the most IOTA accounts gave those accounts an average interest rate of 1.5%. Once the amended rule took effect, their rates rose to 3.3% While a seemingly small increase, the additional funds will have a large impact on legal aid.
Interest rates can be volatile, and financial institutions have historically offered a wide range of rates that changes often. The result of the amended rule will be more consistent and predictable rates and a meaningful increase in funds available for legal aid programs.
The Florida Bar Foundation appreciates and supports The Florida Bar’s extraordinary effort to increase IOTA collections so that access to our justice system may be increased for those of limited means.