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Senate committee adopts bill to cap IOTA interest and set minimum for banks
Summary
The Banking & Insurance Committee voted to report favorably on CS/SB 498, which seeks to curb a surge in interest remittances under the IOTA program by setting a rate floor and clarifying a comparable-rate requirement for participating savings institutions.
The Florida Senate Banking and Insurance Committee on Oct. 12 approved CS for Senate Bill 498, a measure that would adjust how interest earned on law-firm trust accounts (the IOTA program) is calculated and reported to the program that funds civil legal aid.
The bill’s sponsor, identified in committee as Senator Graal, told the panel the Florida Supreme Court’s March 2023 amendment to the court’s IOTA rule tied the remittance rate to the Wall Street Journal prime rate — a lending benchmark that currently far exceeds typical deposit or savings rates. That change, Graal said, produced a sharp increase in payments to the program administered by Funding Florida Legal Aid (FFLA), risking sustainability for participating savings institutions.
The measure, as amended in committee, requires savings institutions to remit at least the higher of a 0.255% minimum or the institution’s highest commonly offered interest/dividend rate on comparable non-IOTA accounts, provided the IOTA account meets the same minimum-balance or account requirements. The institution must document and attest the comparable rate to the Department of Financial Services when using it.
Why it matters: The IOTA program has been the primary private funding source for civil legal aid in Florida since 1978. Committee debate focused on balancing funding for legal services with bank participation and community-banking viability. Supporters of the bill argued the current court-set benchmark created an outsized windfall — and placed community banks at a competitive disadvantage — while opponents warned that changing the rule via statute would conflict with the Supreme Court’s role in lawyer regulation.
Public testimony reflected the division. Scott Jenkins, representing the Bank for Sustainable IOTA Program, said small-community banks have been “heavily impacted” by the 2023 rule change and urged a sustainable, comparable approach. Dominic McKenzie, executive director of Funding Florida Legal Aid (FFLA), told senators FFLA serves millions of low-income Floridians and said the court’s change simplified remittances and increased funding for civil legal aid; McKenzie defended the rule as necessary to expand services.
Other legal-aid leaders, including Jeff Harvey (CEO, Community Legal Services) and Bethany Barber (executive director, Legal Aid Society of the Orange County Bar Association; president, Florida Civil Legal Aid Association), said the program is tightly audited, serves vulnerable Floridians, and prevents taxpayer funding of services by providing a stable private revenue stream.
The committee adopted an amendment (barcode 496408) described by the sponsor as a compromise arising from public testimony; it implements the minimum-rate floor and the documentation/attestation requirement for comparable rates. After debate and public comment, the committee reported the committee substitute favorably in a roll call vote (see “Votes at a glance”).
Ending note: The bill advances to the next stage of Senate consideration with broad committee support but a recorded no vote and continued opposition from several legal-aid organizations concerned about statutory interference with the Supreme Court’s rulemaking authority.
