NCUA - IOLTA Law and What Change Means for Michigan Credit Unions
In December, President Barack Obama signed the Credit Union Share Insurance Fund Parity Act, providing federally insured credit unions the ability to now offer Interest on Lawyers’ Trust Accounts (IOLTA) insured to the limit allowed by the NCUA Share Insurance Fund. The law provides credit unions parity with banks and can fully insure lawyers’ trust accounts up to $250,000 for each owner of the funds.
NCUA’s announcement explains that “previously, credit unions could not offer the same level of insurance for these accounts as banks; because not all clients of a lawyer were members of the credit union that held the trust account. This placed credit unions at a competitive disadvantage because it was impractical to require attorneys to establish multi-client lawyers’ trust accounts in different credit unions to ensure full Share Insurance coverage.” NCUA will amend its regulations to fully conform to the new law.
Of particular importance for Michigan credit unions is a conflict with the Michigan Rules of Professional Conduct for attorneys. Currently credit unions in Michigan are not included on the state bar’s approved list of financial institutions for IOLTAs due to the fact they have been federally uninsured. MCUL & Affiliates initiated discussions with the State Bar and the league is hopeful that this issue can be resolved in the near future.
Michigan credit unions planning to open IOLTA accounts should contact legal counsel for guidance. With the passage of the new law states should be prompted to follow suit.Go to main navigation