On December 22, 2010, Congress passed a bill to amend the Dodd-Frank Act to include Interest on Lawyers Trust Accounts, or IOLTAs, within the definition of noninterest-bearing transaction accounts. This amendment will provide IOLTAs with the same temporary, unlimited insurance coverage afforded to noninterest-bearing transaction accounts under the Dodd-Frank Act. President Obama is expected to sign the bill into law.
The amendment will necessitate changes to FDIC regulations concerning insurance coverage for noninterest-bearing transaction accounts. The existing regulations require insured depository institutions participating in the FDIC’s Transaction Account Guarantee Program on December 31, 2010 to notify IOLTA depositors that their unlimited deposit insurance ends on December 31, 2010 (12 CFR § 330.16).
The FDIC will issue guidance to all insured depository institutions providing information on Congress’s action to include IOLTAs in the definition of noninterest-bearing transaction accounts. Pending issuance of this guidance, the FDIC is advising insured depository institutions that they do not have to send individual notices to IOLTA depositors, as is currently required. After the bill is signed, institutions that have already notified IOLTA depositors may provide a revised notice advising that IOLTAs will receive unlimited insurance coverage as noninterest-bearing transaction accounts for two years ending December 31, 2012. The FDIC’s guidance will also provide new language for the posted notice required by 12 CFR § 330.16.
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