Florida Senate - 2025                                     SB 498
       
       
        
       By Senator Grall
       
       
       
       
       
       29-00504C-25                                           2025498__
    1                        A bill to be entitled                      
    2         An act relating to the interest rates applicable to
    3         the Interest on Trust Accounts Program; creating s.
    4         655.97, F.S.; requiring the Chief Financial Officer to
    5         establish quarterly two interest rate alternatives
    6         applicable to the Interest on Trust Accounts (IOTA)
    7         Program to determine interest paid to Funding Florida
    8         Legal Aid (FFLA) by participating financial
    9         institutions; requiring such institutions to select
   10         one of the two rate alternatives annually; requiring
   11         that each rate alternative be set at a specified rate;
   12         requiring the Chief Financial Officer to inform FFLA
   13         of the rate alternatives established for each upcoming
   14         quarter; providing applicability; providing an
   15         effective date.
   16  
   17         WHEREAS, in September 1981, the Florida Supreme Court
   18  implemented the nation’s first Interest on Trust Accounts (IOTA)
   19  Program, establishing a vital funding source for civil legal
   20  aid, justice system improvements, and public service programs
   21  for law students, and
   22         WHEREAS, Funding Florida Legal Aid (FFLA), formerly known
   23  as The Florida Bar Foundation, and the Florida Bankers
   24  Association cooperated for decades to sustain the program and
   25  encourage participation, and
   26         WHEREAS, in March 2023, the Florida Supreme Court adopted
   27  new rules requiring lawyers to secure interest rates based on
   28  the Wall Street Journal Prime Rate, compelling banks to pay
   29  higher rates for IOTA accounts than for similar accounts, and
   30         WHEREAS, 44 states, the District of Columbia, and Puerto
   31  Rico have mandatory IOTA programs modeled after Florida’s pre
   32  2023 system, while 5 states and the U.S. Virgin Islands operate
   33  voluntary or opt-out programs, and
   34         WHEREAS, the 2023 rule change made Florida an outlier
   35  compared to other jurisdictions where IOTA rates are typically
   36  benchmarked against interest-bearing checking account rates, and
   37         WHEREAS, the Wall Street Journal Prime Rate serves as a
   38  benchmark for lending and is not used to set deposit account
   39  rates, and
   40         WHEREAS, the 2023 rule change resulted in banks paying
   41  higher rates on funds in IOTA accounts, resulting in record
   42  revenues, exceeding $279 million, paid to FFLA during the 2023
   43  2024 fiscal year, nearly four times the prior peak rate, and far
   44  exceeding average annual interest revenues, and
   45         WHEREAS, in October 2024, the Florida Supreme Court
   46  authorized FFLA to hold nearly $143 million in reserve, and
   47         WHEREAS, it is in the best interests of this state for the
   48  Legislature to establish statutory benchmarks for IOTA rates to
   49  ensure regulatory safety, fairness, and sustainability, similar
   50  to the quarterly interest rate determinations made by the Chief
   51  Financial Officer for interest paid on court judgments, NOW,
   52  THEREFORE,
   53  
   54  Be It Enacted by the Legislature of the State of Florida:
   55  
   56         Section 1. Section 655.97, Florida Statutes, is created to
   57  read:
   58         655.97 Interest on Trust Accounts Program interest rates.—
   59         (1)(a) Each December 1, March 1, June 1, and September 1,
   60  the Chief Financial Officer shall establish two interest rate
   61  alternatives applicable to the Interest on Trust Accounts (IOTA)
   62  Program to determine interest paid to Funding Florida Legal Aid
   63  (FFLA) by participating financial institutions. The rate
   64  alternatives established by the Chief Financial Officer are
   65  effective on the following January 1, April 1, July 1, and
   66  October 1, respectively. Each participating financial
   67  institution must annually select one of the two rate
   68  alternatives.
   69         (b) The first rate alternative must be set at the highest
   70  interest rate or dividend generally available from the
   71  institution to its comparable non-IOTA business or consumer
   72  accounts or nonmaturing deposit accounts, provided that the IOTA
   73  accounts meet or exceed the same minimum balance or other
   74  account requirements. If a financial institution chooses to pay
   75  the rate alternative provided by this paragraph, it must submit
   76  a rate validation sheet to the Chief Financial Officer to ensure
   77  that it has paid at least the same interest on IOTA accounts
   78  that it paid on such other accounts.
   79         (c) The second rate alternative must be set at 25 percent
   80  of the federal funds target rate or 0.25 percent, whichever is
   81  higher, net of fees. If a financial institution chooses to pay
   82  the rate alternative provided by this paragraph, it is exempt
   83  from the rate validation requirement established by paragraph
   84  (b).
   85         (2) Within 3 days after establishing interest rates under
   86  subsection (1), the Chief Financial Officer shall inform FFLA of
   87  the rate alternatives for the upcoming quarter.
   88         (3) This section does not apply to interest rates
   89  established by written contract or obligations unrelated to IOTA
   90  accounts.
   91         Section 2. This act shall take effect upon becoming a law.