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November 04, 2008

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Comments

Joyce

So either I'm really thick-headed or I simply remain very confused about whether or not CUs can open IOLTA accounts. According to my own research - and then your 10/29 blog confirmed it - unless all clients are members of the CU, the atty. cannot open an IOLTA account. But if you read the FAQ issued by NCUA, it sounds as if an atty. can in fact open the account, it just won't be insured for those who are not members. Your thoughts?
NCUA's FAQ:
Q: Are IOLTA funds covered if the client is not eligible for membership? Since a joint owner is covered but not necessarily a member and beneficiaries can now be anyone and they are covered, why aren't client funds covered?
A. We assume you are referring to Interest on Lawyers Trust Accounts. For this type of account, if the client is not membership member, the funds are not insured. Under Part
745 of the NCUA Rules and Regulations, the NCUSIF does not extend insurance coverage
to persons not entitled to maintain an insured account or to account relationships that
have not been approved by the Board as an insured account.

Anthony Demangone

No - you're not thick-headed! Once piece of guidance clearly indicates that all clients must be members. Others "imply" that the only issue is insurability. I wish there was the missing link: a new letter that clarifies that credit unions are permitted to maintain IOLTAs where a client is not a member, with the acknowledgement that funds owned by that client are not insured by the NSUSIF.

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