Senate committee advances bill to limit court-set IOTA rates after lengthy debate

TALLAHASSEE — The Senate Judiciary Committee reported CS for Senate Bill 498 favorably after more than two hours of testimony and debate on whether the Florida Supreme Court had exceeded its authority in setting interest rates paid on IOTA (Interest on Lawyer Trust Accounts) funds.

The bill, sponsored in committee by Senator (presenting) Travis Trumbull, would limit the rate banks may pay on IOTA accounts by creating two alternative safe-harbor rates: 0.25% of the federal funds target rate or the comparable rate a bank pays on similar non‑IOTA accounts, whichever is higher and net of fees. By committee vote, the measure passed (7 yeas, 2 nays).

Why it matters: IOTA funds support civil legal aid programs that lawyers hold in trust for clients; interest is pooled to finance legal services for low‑income Floridians without direct taxpayer funding. Witnesses said the level of interest recently set by a Florida Supreme Court rule produced a large increase in support for legal-aid programs but that the new, higher rate was unsustainable for banks and outside the court’s regulatory scope.

Supporters of the bill — including bankers and some legislators — called the court’s change to a prime-based benchmark an intrusion into bank regulation. “The court is acting like a bank regulator,” said Anthony DeMarco of Florida Bankers, arguing the change set lending-style rates on accounts that are transactionally active and not comparable to savings products. Dennis Murphy, president and CEO of Gulfside Bank, described accounts with hundreds of transactions a month being treated like money-market accounts, and said banks are offering them at a loss under the higher rate.

Legal-aid leaders and allied witnesses said lower rates would sharply reduce available funding for civil services. “This bill would drastically reduce interest rates on IOTA accounts and substantially cut our funding,” Jeff Harvey, CEO of Community Legal Services, said, adding that his organization has seen IOTA distributions jump from hundreds of thousands to millions in recent years and would lose a significant share if rates fall.

Banks said the sudden rule change removed a prior “comparability” approach that required banks to pay IOTA accounts the same rate offered for comparable business accounts, producing a dramatic year‑over‑year increase in IOTA receipts. Bank witnesses and lobbyists urged the committee to restore statutory guardrails.

The committee considered a substitute amendment that preserved a comparability option and set a statutory safe harbor; that substitute was the text reported. Lawmakers and witnesses repeatedly stressed the voluntary nature of IOTA participation by banks and noted the Department of Financial Services and bank regulators watch safety‑and‑soundness implications.

Ending note: Senators split along lines of deference to the court’s authority versus concerns about banking regulation; the committee advanced the bill for further consideration by the full Senate (vote on CS for SB 498: 7 yeas, 2 nays).