Lawyer trust accounts 'could help fill legal aid gap'
A national scheme to use interest on lawyers’ trust accounts (IOLTA) could help fund access to justice in the wake of the impending legal aid cuts, the director of the Law Centres Federation, Julie Bishop, has suggested.
Bishop has resurrected the debate on whether client money, held by firms, could be pooled, with the increased interest on the combined resources being used to fund law centers and other advice services.
With interest rates so low, Bishop said a national scheme would be needed in order to make it worthwhile, but accepted that even at its most effective, it would be a ‘drop in the ocean’.
If such a scheme were to be voluntary, she said it would need the support of the Law Society to recommend it to its members.
Bishop suggested that law firms that already run local IOLTA schemes could opt out of any national project so they can continue to focus on issues in their own areas: ‘The beauty of IOLTA is that it is an easy way to increase access to justice with no cost to the taxpayer, lawyers or clients. The sums raised are relatively small to a large city firm but are very significant to the recipient.
She added that an IOLTA scheme is also symbolic: ‘It shows that the legal community is united in the fight to protect access to justice. It also shows the government that we’re leaving no stone unturned to protect our clients.’
A Law Society spokesman said: ‘Redistribution of IOLTA is just one of many ideas emerging from the debate on helping those on low incomes to access justice, all of which will be carefully considered.’
Pro bono manager at magic circle firm Allen & Overy, Helen Rogers, said the firm had run an IOLTA scheme since 2005, raising around £250,000 for the London Legal Support Trust which used the funds to help Law Centres and other advice centres.
Comments
I do wonder sometimes if
I do wonder sometimes if certain individuals inhabit this world
Many provincial firms are hanging on by their fingertips with reducing lenders panels, increasing regulatory costs arising from draconian SRA demands, the worst recession in living memory etc etc.
Need I go on!!!
No, we could do more.How
No, we could do more.How about chipping in a proportion of our dwindling annual incomes as well then provincial firms will disappear altogether!
How about helping solicitors for a change? I agree with Stephen.
Whose money it is, anyway
This is typical woolly thinking. The money belongs to clients and isn't ours to 'donate' in this or any other way.
Can someone please point me
Can someone please point me to the rule which allows me to divert a client's interest to a third party?
"The support of the Law Society"
This would need more than the support of the Law Society - it would need an amendment to the rules (unless, perhaps, you and the relevant clients agreed to "contract out" under Rule 25 of the SRA Accounts Rules 2011). In effect, it would be a form of taxation: the interest is taken away from the client and is used to try to plug holes in the funding system. Sounds pretty desperate, as well as unrealistic.
It's like asking GPs to pay more tax to fund the NHS
Many high street lawyers have, if truth be told, been using any extra income they derive from interest on client monies to subsidise legal aid for years. I can't imagine any other profession or industry being asked to subsidise a government service in this way. It's a bit like asking GPs to pay more tax to fund the NHS.
Not woolly thinking
In response to some of the posts above, this scheme can hardly be described as
'woolly' and the SRA is open to such schemes.
Yes, there is a principle to return balances on client accounts but where the rightful owner cannot be traced, assuming that certain safeguards are met (e.g. taking adequate steps to identify the rightful owner), rules 20.1 and 20.2 of the Solicitors’ Accounts Rules permits balances under £50 to be paid to charity without SRA permission. Amounts over £50 can also be paid to charity provided SRA permission is granted.
The cuts in legal aid affect Law Centres, on average, more than any other type of legal aid provider. They have the choice of doing nothing or trying to do as much as possible to survive. What would you do in the same position?
Need I go on?
Yes
Yes, we know there are certain de minimis rules, but that is not what this proposal is about.
If I were in the positon of the law centres, I would lobby the goverment more effectively. This is not even a case of asking lawyers to help you out - it's a case of asking lawyers' clients to help you out, by giving you interest which is theirs. There's not much mileage in that.
SOLICITORS' FEES
It is not the responsibility of the government, well-off clients, or the tax payer (that's me too!) to support and keep afloat the traditional legal profession of solicitors or barristers, simply because they are adamant on keeping their fees so high they are totally unaffordable to the general public, and hence are going bust due to diminishing market demand. How many times does it have to be pointed out to them that if solicitors and barristers always charged an honest and affordable hourly rate, they would be attracting more high street clients, including those who would have been eligible for legal aid in the 'good old days'!
The post above highlights a
The post above highlights a common misconception. Fees are high because of the high overheads of running a solicitors practice. Fees could be kept down by practising without insurance or regulation via a limited company with no protection to the client if things go wrong.
If it can work in the USA,
If it can work in the USA, why can't it work here?
I gladly welcome any suggestion to increase access to the law. I don't see how this would make provincial firms disappear, the interest accrued in these accounts (from what I understand) wouldn't go to the firm. I don't see the issue with pooling together funds to make sure more people are able to excercise their legal rights.
@Interested Observer The
@Interested Observer
The above post is by a person who sells legal services to the public. (And makes some pretty outrageous claims on her website in so doing).
Of course she can say that, becase her clients:-
1) Will get precisely jack sh** if she negligently advises them and messes up her case, because firstly she pretends she isn't giving legal advice (even though she is charging for so doing) and secondly she won't have the money to pay.
2) Have zero protection if she gets short of money and pays herself more than she ought (or fails to pay her taxes, of falls out with her franchisee or whatever), because if she goes insolvent, any client money she holds is fair game for her general creditors.
3) Have no recourse to any compensation fund if she chooses she is bored with this and wants to do something else, because she doesn't have one.
4) Can not rely on any protection by way of professional rules, such as that she won't act in a conflict of interest, because she doesn't have any professional rules. So if she chose to act in circumstances that she felt OK, even if the client, the court and other people think it wouldn't be OK, that's tough!
5) Don't have to pay her to bother complying with any troublesome requirements imposed by the court which may increase costs (such as the proper duty of disclosure on Form E), becuase she has no duty to the court anyway - and if anything goes wrong, the client just gets the blame anyway.
6) Have no means of redress if they receive poor service, because if they complain to her and she doesn't like their complaint, the clients get ... f all! And they could go to the Legal Ombudsman, but they have no jurisdiction.
7) Have no way of knowing if the qualifications and experience she purports to have are genuine or simply fabricated by her to "improve on her marketing and client relations" (is that the right expression? Perhaps someone from the ABS Gazette could let me know?).
And this is only the issues that arise with her clients, let alone the court, her opponents, witnesses, third parties etc.
The irony is that the likes of the Legal Ombudsman, Consumer Panels, Law Society Gazette (with its constant advertorials, sorry "articles", from Marketing Companies and ABS Consultants) have unleashed this monster and its many offshoots (including Ms Matheson-Durrant, Stobart Barristers, and others). But surely the services provided by her are the exact opposite of what they want? Yet I don't see any of them in a hurry to do anything about it.
No much better to try and make a problem out of solicitors' will writing where no problem exists!
Dom Coop's comments
You are spot on. The problem with regulation is two fold. First of all, the regulators find it easier to impose ever more regulation on a very heavily regulated sector, rather than concentrate their attentions on the real abuses.
Secondly, the type of people in charge of regulation tend to be earnest Guardian reading types with public sector mentalities. They are natural box tickers and bureaucrats, not people with vision. For example, when it was first announced that under the ABS scheme. firms of solicitors could be owned from overseas, I asked at a meeting of regulators, what safeguards there would be to make sure that this was not a conduit for overseas money laundering. I was derided by one of the regulators, who said that criminals would not be interested in laundering drugs money through property in the UK. As a result of this lack of awareness, they are always behind the curve on the big issues, and very slow to appreciate what is going on and to react.
IOLTA in perspective
Thanks to David Gilmore for his comments above.
The Law Centres Federation does not believe that lawyer trust accounts ‘could fill the legal aid gap’, as the title of the piece suggests. Rather, as the following sentence clarifies, we believe it could help fund access to justice. Not a silver bullet, more of a step in the right direction.
We are under no illusion that, at its most effective, IOLTA would only be a drop in the ocean. However, it is a drop that is vital in the increasingly arid landscape of funding for social welfare law.
For this reason we welcome the public debate initiated by the Law Society and agree with their spokesman, quoted above, that IOLTA and other ideas for helping people on low income access justice must be carefully considered.
Ultimately, we believe it is the state’s responsibility to facilitate access to legal advice for all, as part of the safety net offered to the most disadvantaged in society. Law Centres will continue to advocate this and propose ways in which it can sustainably be achieved.
Get rid of small firms
Everything that the SRA and the Legal Services Commission are doing is to close small firms. Eventually it will be the death of high street firms. What is the Law Society doing about this?
IOLTA
For 12 years, I was a senior manager at the Law Society of Upper Canada and have first hand experience with the challenges of IOLTA. When developed as a program where the financial institutions automatically calculate the interest earned and foward it to the recipient body, it works well and with little added administrative burden on a practitioner.
One caveat I would suggest in order to maximize the interest earned - do not include an exclusion that permits a law firm client to designate that client's trust money as an individual (read as a separate) trust account distinct from the pooled trust accounts. Needless to say, wealthy client and corporations will adopt that approach and it will reduce the interest earned factor.
To discuss further, contact me through my website...lawyeraudithelp.com
IOLTA
Its simple enough - if all interest generated on client accounts has to be paid away, law firms will need to introduce banking charges for conducting client accounts.
(At the moment clients get free banking via what is in effect an interest bearing current account ).
Those charges would be set against interest earned. So the interest available to be paid away, whether to fund Legal Aid or anything else, will be significantly reduced or even eliminated.
Lawyer FInancials
Lawyers are facing tough circumstances given the kind of environment that has taken hold of the industry. The recession has hurt the legal industry all the way around and in no bigger place than legal aid which given by the state. It's hard for the government to be able to give funding when the budgets are being slashed. In addition to IOLTA accounts, legal funding may be another way until budgets are made whole again .