Florida legal aid groups warn bank-backed legislation could slash their funding

Yahoo

12-03-2025

A long-simmering feud over the money that banks pay to legal aid organizations to fund legal help for the poor is in front of the Legislature again.
Florida bankers are supporting a bill (SB 498) to cap the rate paid on interest on trust accounts (IOTA). An attorney trust account is a special bank account used to hold client funds separately from a lawyer's business funds to follow legal and ethical rules.
Legal aid organizations believe the move will cut their budgets, preventing them from providing services to those in need, including veterans seeking to access benefits, hurricane victims, families looking to adopt and more.
'The changes proposed would come at expense of vulnerable Floridians who rely on Florida legal aid programs even though those banks are not required to participate in the program,' said Leslie Powell-Boudreaux, executive director of Legal Services of North Florida.
Because of a change made by the Florida Supreme Court in 2023, banks were required to pay out rates on trust accounts that were tied to the Wall Street Journal Prime Rate, which averages rates made on loans.
That rate was higher than the prior IOTA rate rule, and combined with the surge in interest rates set by the Federal Reserve which drove loan rates higher, it resulted in a massive boost to the interest paid on trust accounts and the funds received by legal aid groups.
In the 2021-22 fiscal year, IOTA funds provided $9.5 million to Funding Florida Legal Aid, the group formerly known as the Florida Bar Foundation. It provides money to legal services groups around the state.
In the 2024-25 year, the funds jumped to $280 million, or about 29½ times more. Through the first six months of the current fiscal year, IOTA funds ran up to $155.4 million.
Bankers argue the new higher rates they pay on trust accounts are unfair. Trust accounts involved a high volume of transactions and more work for the banks to maintain, while paying higher rates than they do for other low-volume accounts they maintain.
'We are fully in support of legal aid but it's got to be done in a way that makes sense,' said Dennis Murphy, president and CEO of Gulfside Bank, a Sarasota-based bank.
'These accounts literally have hundreds if not sometimes thousands of in-and-out type of transactions on a monthly basis,' he added. 'The rule change ... doesn't allow us to offset the interest with wire fees and all the other transactions we've got.'
The banks in support of the bill also claim the rule change by the court was an inappropriate regulation of their business by the justices; the legal aid groups argue it was a change in the rules for lawyers.
The Florida Bankers Association asked the court to reconsider its decision but the Florida Supreme Court rejected that move in August 2024. The court did approve of allowing the FFLA to set aside $143 million in its current budget for reserves – more than half of the $280 million it received.
For the bankers, this showed that the legal aid groups can't spend all the money they've received in the last few years and the rate for IOTAs should be lowered. But legal aid groups counter that the reserves will allow them to mitigate for fluctuations in interest rates that could lead to lean times in the years ahead.
The bill passed through the Senate Judiciary Committee on Wednesday on a 7-2 vote, with two Democrats, Sens. Lori Berman of Lantana and Rosalyn Osgood of Tamarac voting against it. Another Democrat, Sen. Tina Polsky of Boca Raton, voted with Republicans in favor of it.
Berman noted that banks don't have to participate in the IOTA program. As of December, 170 banks offer IOTA to lawyers, 16 more than in March 2023 when the Florida Supreme Court issued the rule change.
'I would like to see us have a dedicated funding source for legal aid,' Berman said. 'I would like to see a resolution where everybody can get on board … but until that time I'm going to support what the Florida courts have done.'
Sen. Don Gaetz, R-Niceville, noted that while the bill might cut funding for legal aid groups, they have so much stored away in reserves it wouldn't disturb services for those in need. Saying he was a supporter of legal aid, he still took issue with how the courts made the change in the first place.
'I'm troubled that the Supreme Court would tell banks what interest rates they have to pay,' he said.
The bill faces two more committee hurdles in the Senate before reaching the floor in that chamber. Its companion measure (HB 173) hasn't yet received a hearing in the House.
Last year, a similar bill advanced in the Senate but didn't gain traction in the House.
Gray Rohrer is a reporter with the USA TODAY Network-Florida Capital Bureau. He can be reached at [e-mail]. Follow him on X: @GrayRohrer.
This article originally appeared on Tallahassee Democrat: Senate panel advances bill limiting legal aid funding from banks