On February 18, 2011, the FDIC adopted updated final rules, regarding the unlimited insurance coverage, through December 31, 2012, for deposits held in Interest on Lawyers Trust Accounts (IOLTAs). These accounts were previously covered by the FDIC’s Temporary Liquidity Guarantee Program, but were subsequently left out of Dodd-Frank’s expanded insurance coverage.
Recognizing that the interest paid on IOLTAs were used by States to support legal aid for low-income individuals, Congress passed (on December 22, 2010), and the President signed (on December 29, 2010), H.R. 6398, which amended the Federal Deposit Insurance Act to define noninterest-bearing transaction accounts to include IOLTAs. The FDIC noted the potential for this Congressional action in its final rules adopted November 9, 2011, implementing the unlimited insurance coverage for noninterest-bearing transaction accounts, and provided that it would act quickly to notify depository institutions on how to react to the change.
Prior to year-end, the FDIC notified depository institutions that they were not required to send individual notices to IOLTA customers that such funds would not longer be provided with unlimited insurance, and that any institutions that had previously provided such notice were encouraged, but not required to, provide a revised notice advising that IOLTAs will receive unlimited insurance coverage as noninterest-bearing transaction accounts for two years ending December 31, 2012.