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How the New IOLTA Rule Will Impact Your Member Accounts
Wednesday, January 6, 2016 6:45 AM

From the CUNA CompBlog

Under NCUA’s new Interest on Lawyers Trust Accounts (IOLTA) rule, which goes into effect Jan. 27, 2016, share insurance coverage will be expanded for your IOLTA accounts and other accounts that satisfy the definition of “other similar escrow accounts.” 

Basically, the new rule shifts the membership requirement from the clients of the attorney, who own the funds in the account, to the attorney. In other words, as long as the attorney or escrow agent is a member of the credit union, then the funds in the IOLTA/escrow accounts will be insured on a pass-through basis on behalf of the individuals who actually own the funds, whether they are members or not.  

Congress passed the Credit Union Share Insurance Parity Act (Insurance Parity Act) in December 2014, which requires this insurance expansion in order to ensure that NCUA and the FDIC insure IOLTAs and escrow accounts in an equivalent manner.  CUNA had been pushing Congress for this change arguing that credit unions have been at a disadvantage by not being able to insure IOLTA and escrow funds for nonmembers.

Although no implementing regulations were required for this change in insurance coverage to take effect, some of the legislative language was vague. CUNA asked the agency for clarifications and strongly urged NCUA to specifically include prepaid and payroll cards within the new requirements.

To read more, please visit the CUNA CompBlog.