IOLTA: Every little helps

My thanks to the Law Society for kicking off discussions about how the profession can ensure that people on low incomes can get the advice they need after the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) cuts come into force in April. A myriad of ideas is coming forward: the Co-op’s new legal services, expanding pro bono work, online legal forms and case management systems, Law Shops and even a £25 levy on solicitors.

The scheme I would like to encourage is the establishment of a national IOLTA – Interest on Lawyer Trust Accounts – scheme similar to those running very successfully in the USA, Australia and New Zealand.

IOLTA funds are generated by putting clients’ monies into a pooled account rather than into individual client accounts. This generates a slightly higher interest rate than from individual accounts. Clients receive the same amount of interest as they would have received from a separate account. The difference in the amount between the interest from investing a single client’s money and the interest from investing all clients’ money in a pooled account is what the IOLTA schemes have to give to good causes.

To take the example of the USA, thanks to IOLTA, hundreds of thousands of people across the country get the legal help they need. IOLTA programmes operate in every state, the District of Columbia and the US Virgin Islands. Although like here in the UK, interest rates are low in the US, because the majority of firms are part of the schemes they still raise significant funds. Virtually all the US IOLTA programmes use their revenue to provide grants to organisations so they can provide legal advice in civil matters to low-income residents.

The beauty of IOLTA is that it is an easy way to increase access to justice with no cost to the taxpayer, lawyers or their clients. The sums raised are relatively small to a large city firm but are very significant to the recipient.

When interest rates are good IOLTA can generate a lot of money. In the current climate it will only work if a large number of firms sign up to it. Then it could generate hundreds of thousands of pounds to be put to good use.

A national scheme
We therefore need a national scheme. There is a debate to be had as to whether the scheme should be voluntary or compulsory. If voluntary, it would need the Law Society to strongly recommend that its members should sign up so that sufficient funds were generated to really make a difference. Law firms that already run local schemes might prefer to opt out so they can focus on issues in their own areas.

City firm Allen & Overy has been running its own IOLTA scheme and raising money for the London Legal Support Trust (LLST) since 2005.  Since then around  £250,000 has been raised (including the latest amount just about to be transferred). As a result of the scheme, thousands of people in need have received help who would otherwise have been denied access to justice.

The funds help to ensure that the LLST can run a third funding round each year. That round has funded all sorts of projects, mainly emergency applications for “keeping the doors open”. These funds have saved posts and even full services in Law Centres and advice services such as Paddington Law Centre, Central London Law Centre and Brent Private Tenants Housing Project.

A national scheme would need a national vehicle for distributing funds. One such vehicle might be the Access to Justice Foundation which runs the It’s Not Just Peanuts appeal. Sums of money from dormant client accounts are used to support pro bono work and given to not-for-profit advice centres and Law Centres to fund advice to people living in poverty but not eligible for legal aid – a group which will vastly increase after April when the legal aid cuts kick in.

I recognise that at its most effective, IOLTA would only be a drop in the ocean given the size of the abyss left by legal aid. But every little helps. And an IOLTA scheme is also symbolic. It shows that the legal community is united in the fight to protect access to justice. It also shows the government that we’re leaving no stone unturned to protect our clients.

 

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    Weil Gotshal & Manges also operate the voluntary scheme with Allen & Overy. They often get forgotten because the type of work they do doesn’t generate lots of “IOLTA” funds. On the other hand, some firms generate very large amounts and they are naturally more reticent to contemplate losing that.

    A national scheme could actually generate quite a bit more than “a drop in the ocean” even if smaller firms (and especially firms whose work is still significantly legal aid work ) were excluded

    The Government muted a compulsory “IOLTA” scheme in the LASPO consultation and decided to wait to see whether a major voluntary scheme developed. LLST supported that decision partly on principle and partly because the funds lost through administrative waste in any compulsory scheme would be heartbreaking.

    However , IOLTA would make no difference to the bottom line of large firms that are already philanthropically generous . It may mean they give less to the arts and more to legal advice (yippee I say being a philistine!) but it wouldn’t necessarily have to change their overall giving. So one would hope that those firms, at least, would jump in to a voluntary scheme soon before the Government comes back to the issue.

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