The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Rules
BILL: CS/CS/SB 498
INTRODUCER: Banking and Insurance Committee; Judiciary Committee and Senator Grall
SUBJECT: Trust Fund Interest for Purposes Approved by the Supreme Court
DATE: April 7, 2025
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Davis Cibula JU Fav/CS
2. Johnson Knudson BI Fav/CS
3. Davis Yeatman RC Pre-meeting
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/CS/SB 498 mandates the interest rates or dividends that a financial institution must pay on
certain lawyer or law firm trust accounts. The interest rate or dividend is the highest rate or
dividend generally available from the institution to its comparable business or consumer
accounts. However, the minimum interest rate must be at least 0.25 percent.
These accounts are currently known as interest on trust accounts program or IOTA accounts. The
accounts generate interest or dividends that fund a foundation established by the Supreme Court
and The Florida Bar named Funding Florida Legal Aid (FFLA). The foundation provides free
legal services to low-income individuals and other purposes authorized by the Court.
In 1981, the IOTA program was implemented by rules adopted by the Florida Supreme Court
and is administered by The Florida Bar Foundation. Currently, The Florida Bar Rules prescribe
criteria to determine whether a financial institution is eligible to participate in the voluntary
IOTA program. One of the eligibility criteria is the minimum interest rate that must be paid by
participating financial institutions. According to the Rules, when the Wall Street Journal Prime
Rate (indexed rate) is between 3.25 and 4.99 percent, the minimum yield or interest rate paid net
of all fees and service charges must be no less than 3.00 percent below the indexed rate. When
the indexed rate is 5.00 percent or above, the yield must be no less than 40 percent of the indexed
rate in effect on the first business day of each month.
REVISED: BILL: CS/CS/SB 498 Page 2
Accordingly, the interest rates on trust accounts established by the bill are inconsistent with those
that are part of the eligibility criteria established by rules of The Florida Bar to participate in the
IOTA program. If the rates established by the bill are found by the courts to be a regulation of
banking, not the practice of law, the bill will likely require The Florida Bar to revise its
eligibility criteria for financial institutions to participate in the lawyer or law firm trust account
program.
The minimum interest rate or dividend mandated by the bill does not apply to interest rates that
are established by written contract or obligations that are unrelated to the trust accounts
described in this bill.
The bill takes effect upon becoming law.
II. Present Situation:
The Jurisdiction of the Florida Supreme Court, The Florida Bar, and the IOTA Program
The central issue in this legislation involves weighing the competing needs of The Florida Bar
foundation to fund its legal aid programs against the ability of banking institutions to pay
sufficient and sustainable interest rates that fund the foundation’s legal aid programs. Both
organizations estimate that between $9 and $10 billion is deposited annually into IOTA accounts
at banking institutions.
The State Constitution grants exclusive jurisdiction to the Florida Supreme Court to regulate the
admission of people to practice law in the state. The Court also has exclusive jurisdiction to
discipline those people once they are admitted to practice law.
1
Florida is a mandatory bar state
and all members who are admitted to practice in Florida must be members of The Florida Bar.
2
The Florida Supreme Court has established the “authority and responsibilities of The Florida
Bar” in the Rules Regulating the Florida Bar.
3
Chapter 5 contains the “Rules Regulating Trust
Accounts,” which all attorneys who maintain trust accounts must abide by. Funds that are placed
in an attorney’s trust account produce interest income exclusively for the IOTA program. The
interest-producing program generates millions of dollars in interest each year. Once generated,
the interest funds are swept by The Florida Bar directly into the Bar’s foundation, Funding
Florida Legal Aid.
The Florida Bar created the non-profit, tax-exempt corporation, The Florida Bar Foundation
(Foundation), in 1956, and subsequently changed the name of the Foundation to Funding Florida
Legal Aid in 2023. The Foundation functions to increase legal access for people with limited
means by funding legal services, developing programs, and supporting legal aid providers
selected by the foundation for grant awards. The Foundation’s primary financial support comes
1
FLA. CONST. art. V, s. 15. The Court conducts these official functions through two separate entities: the Florida Board of
Bar Examiners and The Florida Bar.
2
The Florida Bar, Frequently Asked Questions, https://www.floridabar.org/about/faq/ (last visited March 7, 2025).
3
The Florida Bar, Rules Regulating the Florida Bar, https://www-media.floridabar.org/uploads/2025/02/2025_06-DEC-
RRTFB-12-30-2024.pdf. The Rules are divided into 21 chapters consisting of 807 pages. BILL: CS/CS/SB 498 Page 3
from the IOTA program, but donations are also received from attorneys, law firms, corporations,
foundations, and individuals.
4
It is important to note that, while the IOTA program is mandatory for attorneys, it is technically
voluntary for banks to participate in the program.
Interest on Trust Accounts (IOTA) Program and Funding Florida Legal Aid (FFLA)
Background on Attorney Trust Accounts
A trust account is a short-term account set up by an attorney in which he or she deposits funds on
behalf of a client. The account generally contains funds that are combined such as a retainer
payment, discovery or litigation costs paid in advance, filing fees, or a settlement award. The
amount of money in the account changes often because deposits and withdrawals are made
frequently. These fees may not be commingled with an attorney’s operating account but must be
kept separately.
A trust account has been described as an “unusual” creation that is significantly different from
other accounts. Although an attorney opens the account and is responsible for managing the
funds in the account, he or she is not technically the owner of the funds.
5
While an attorney is not
the owner of the account, and therefore not entitled to interest generated by the account, neither
is the client entitled to interest generated by the funds. The U.S. Court of Appeals for the
Eleventh Circuit issued a decision in 1987 determining that a client was not entitled to the
interest generated in a trust account.
6
How the accounts may be regulated or restricted has presented a quandary for almost 200 years.
The earliest attempt to regulate trust accounts can be traced to the Legislative Council of the
Territory of Florida in 1828. In 1936, the Florida Supreme Court incorporated the regulation of
trust accounts into the Court’s rules. Additional measures were adopted over the years to ensure
that attorneys, acting as “trustees” would not misuse their clients’ funds or neglect to return them
when requested to do so by the client.
7
The Evolution of Interest Earned on Trust Accounts
Trust accounts have evolved from simple accounts that earned no interest and benefitted no one
in particular to today’s accounts in which The Florida Bar, with Florida Supreme Court approval,
mandates participation by attorneys, establishes the interest rates, and requires that the interest be
remitted to The Florida Bar’s foundation, Funding Florida Legal Aid.
4
FFLA, Funding Florida Legal Aid, Leadership and Funding for Justice in Florida, https://fundingfla.org/about-ffla/ffla-
overview/ (last visited March 7, 2025).
5
In re Amendments to the Rules Regulating the Florida Bar-Miscellaneous: The Florida Bar’s Response to the Florida
Bankers Association’s Motion for Rehearing, Case No. SC22-1292 (April 14, 2023), https://acis-
api.flcourts.gov/courts/68f021c4-6a44-4735-9a76-5360b2e8af13/cms/case/baa8ed04-2926-4922-b099-
9d51fd7ab2ae/docketentrydocuments/a8e413ea-a6d4-417f-a1b0-2536bb7c9292 (last visited Mar. 27, 2025).
6
Cone v. State Bar of Florida, 819 F.2d 1002 (11th Cir. 1987).
7
A Petition of Florida Bar, 356 So. 2d 799 (Mem), 800-801 (Fla. 1978). (The lengthier case style is In re Interest on Trust
Accounts, A Petition of The Florida Bar to Amend the Code of Professional Responsibility and the Rules Governing the
Practice of Law.) BILL: CS/CS/SB 498 Page 4
For many years, attorneys deposited their clients’ funds in non-interest-bearing checking
accounts because trying to apportion multiple clients’ interest earnings on short-term deposits
was too complex. However, in 1978 and in response to a petition by The Florida Bar,
8
the
Florida Supreme Court amended the Bar rules and authorized attorneys to invest trust funds held
for their clients to generate investment income that would, among other things, provide legal aid
to the poor and help provide student loans.
9
Participation in the program would be voluntary. The
interest payments would be transmitted directly from the financial institutions to The Florida Bar
Foundation. In implementing these changes, Florida became the first state in the nation to adopt
an interest on trust accounts program, commonly called IOTA.
10
After several adjustments were
made, the program became operational in 1981 and permitted voluntary participation by
attorneys and their firms.
11
In 1989, the Rules were amended and participation in the program
became mandatory for all attorneys.
12
The next significant development occurred in 2001 when the trust account rules were amended to
define financial institutions that are eligible to hold IOTA accounts. These eligible institutions
were limited to the institutions that pay IOTA account depositors “the highest interest rate or
dividend generally available from the institution to its non-IOTA account customers when IOTA
accounts meet or exceed the same minimum balance” or other eligibility requirements. In
essence, The Florida Bar Foundation was asking that IOTA accounts be placed on an equal par
with non-IOTA accounts in an institution.
13
Financial institutions may impose charges and fees
on IOTA accounts, as described below:
14
It is worth noting that these rules are not found in the Florida Statutes, but are rules adopted by
The Florida Bar and approved by the Florida Supreme Court.
The following charges and fees have been defined as “reasonable” and are the only service
charges or fees permitted to be deducted from interest earned on IOTA accounts. These service
charges or fees may be deducted from IOTA account interest only at such rates and under such
circumstances as is the financial institution’s customary practice for all its interest-bearing
checking account customers:
• Per check charge.
• Per deposit charge.
• Fee in lieu of minimum balance.
• Federal deposit insurance fee.
8
More specifically, the petition to amend the rules was brought by the Board of Governors of The Florida Bar with the
concurrence of the Board of Directors of The Florida Bar Foundation.
9
In re Interest on Trust Accounts, A Petition of The Florida Bar, 356 So. 2d 799 (Mem) (Fla. 1978).
10
Id. at 800-801.
11
It should be noted that the establishment of IOTA or IOLTA (Interest on Lawyers’ Trust Accounts as they are called in
other states) was possible only after Congress made changes to federal banking laws in 1980 that allowed certain checking
accounts to pay interest. American Bar Association, Interest on Lawyers’ Trust Accounts,
https://www.americanbar.org/groups/interest_lawyers_trust_accounts/overview/ (last visited Mar. 27, 2025). See also Matter
of Interest on Trust Accounts, 402 So. 2d 389 (Mem) (Fla. 1981).
12
Matter of Interest on Trust Accounts: Petition to Amend the Rules Regulating the Florida Bar, 538 So. 2d 448, 449-450,
(Fla. 1989).
13
Amendment to Rules Regulating the Florida Bar—Rule 5-1.1(e)--IOTA, 797 So. 2d 551 (Fla. 2001).
14
Funding Florida Legal Aid, Iota, for Lawyers and Law Firms, https://fundingfla.org/iota/attorneys-lawfirms/ (last visited
Mar. 24, 2025). BILL: CS/CS/SB 498 Page 5
Financial institutions also may recoup special costs for their participation in IOTA through
deduction of a reasonable IOTA handling or administrative fee.
15
2023 Amendments to Interest on Trust Accounts Rule
The Florida Bar’s Position
The Florida Bar petitioned the Court on October 3, 2022, to once again amend the IOTA rules.
The stated goal of the proposed amendments was to “include all possible accounts that can be
used as trust accounts” and “ensure the highest possible interest is available for IOTA
accounts.”
16
The net effect of these amendments would be to increase funding to the Bar’s legal
aid funding organization, Funding Florida Legal Aid.
On March 16, 2023, the Florida Supreme Court adopted amendments to Rules Regulating The
Florida Bar, including provisions regulating trust fund accounts. The amendments:
• Expand the definition of an interest or dividend-bearing account to include a business or
consumer deposit account, non-maturing deposit, an investment product, a daily financial
institution repurchase agreement or a money market account.
17
• Require eligible institutions to maintain IOTA accounts that pay the highest interest rate or
dividend generally available from the institution to its non-IOTA business or consumer
account customers when IOTA accounts meet or exceed the same minimum balance
qualifications.
18
• Mandate that eligible institutions tie minimum interest rates for IOTA accounts to the Wall
Street Journal Prime Rate (indexed rate).
19
The formula to determine interest rates and dividends based on the Wall Street Journal Prime
Rate is described by the amendments as follows:
When the Wall Street Journal Prime Rate (“indexed rate”) is between 325 and
499 basis points (3.25% and 4.99%), the minimum interest rate paid net of all
fees and service charges (“yield”) must be no less than 300 basis points (3.00%)
below the indexed rate in effect on the first business day of each month. When
the indexed rate is 500 basis points (5.00%) or above, the yield must be no less
than 40% of the indexed rate in effect on the first business day of each month.
20
The Wall Street Journal Prime Rate is a lending rate.
21
To establish this rate, the Wall Street
Journal regularly surveys the 30 largest banks in the United States to determine what interest rate
15
Id.
16
In re Amendments to the Rules Regulating the Florida Bar – Miscellaneous: Petition to Amend the Rules Regulating the
Florida Bar, Case No. SC2022-1292 (10/03/2022), https://acis-api.flcourts.gov/courts/68f021c4-6a44-4735-9a76-
5360b2e8af13/cms/case/baa8ed04-2926-4922-b099-9d51fd7ab2ae/docketentrydocuments/60ddf5a7-6ae4-425a-a90b-
2cebcc635bd0 (last visited Mar. 27, 2025).
17
R. Regulating Fla. Bar Rule 5-1.1(g)(1)(E).
18
R. Regulating Fla. Bar Rule 5-1.1(g)(5)(A).
19
R. Regulating Fla. Bar Rule 5-1.1(g)(5)(B).
20
Id.
21
Fulton Bank, What Is Wall Street Journal Prime Rate and Why It Matters https://www.fultonbank.com/Education-
Center/Managing-Credit-and-Debt/Prime-rate-and-why-it-matters (last visited March 7, 2025). BILL: CS/CS/SB 498 Page 6
they are charging their customers with the highest-rated credit for short-term loans.
22
When 75
percent of the 30 banks change their prime rate, the Wall Street Journal changes its rate.
23
As of
March 5, 2025, the Wall Street Journal Prime Rate is 7.5 percent.
24
In a January 16, 2024, article published in the Florida Bar News, the amended rule was
explained this way:
For instance, under the amended rule, when prime rate is between 3.25% and
5%, then the trust account rate banks pay out is between .25% and 2%, a 3%
gain. After that the gains get even better for banks. At a 7% interest rate, for
example, banks will pay out 2.8%, a 4.2% gain.
25
Another article explained the rule change in these terms:
As a result of this change, for a financial institution to be eligible to participate
in the program, it must pay a minimum interest rate of 3.00% when the Wall
Street Journal Prime Rate (index rate) is between 3.25% and 4.99%. When the
index rate is above 5.00%, to stay eligible, financial institutions are required to
pay a minimum interest rate equal to 40% of the index rate.
26
Florida Bankers Association’s Opposition and Challenge to the 2023 Rule Amendments
One criticism of the amended rule is that the Wall Street Journal Prime Rate is a benchmark for
lending purposes and is not used to set deposit account interest rates. As a result, the interest rate
is significantly higher than interest rates paid for other deposits.
The Florida Bankers Association (FBA) filed a motion for rehearing on March 31, 2023, stating
that it did not receive adequate or meaningful notice of the proposed IOTA amendments.
27
The
FBA contended that the amended rules, while admirable, would “have a significant and negative
impact on participating banks” and go far beyond its intended purpose. The FBA argued that
basing the interest rate for IOTA accounts on the Wall Street Journal’s Prime Rate would mean
that the minimum interest paid on IOTA accounts would be significantly higher than any other
interest rate offered by a bank on consumer or business accounts. The FBA also argued that the
judicial branch had violated the separation of powers doctrine and encroached impermissibly on
the executive branch’s power to regulate banks through the Office of Financial Regulation, the
Department of Financial Services, and the Financial Services Commission.
22
Bankrate, Wall Street Journal Prime rate (Mar. 18, 2025), Wall Street Prime Rate | WSJ Current Prime Rate Index (last
visited Mar. 24, 2025).
23
Id.
24
The Wall Street Journal, WSJ-Markets, https://www.wsj.com/market-data/bonds (last visited March 5, 2025).
25
Florida Bar News, Measure Would Have Florida’s CFO Set the Rate Paid on Iota Accounts (Jan. 16, 2024)
https://www.floridabar.org/the-florida-bar-news/measure-would-have-floridas-cfo-set-the-rate-paid-on-iota-accounts/ (last
visited Mar. 27, 2025).
26
The Bank of Tampa, Invested in You, https://www.bankoftampa.com/iota/ (last visited March 7, 2025).
27
In re: Amendments to Rules Regulating the Florida Bar 5-1.1; Florida Bankers Association’s Motion),
Case No. SC22- 1292 (Mar. 31, 2023), 70f6bc15-9b6e-41b5-8c56-65db9b750a31 (flcourts.gov) (last visited Mar. 27, 2025). BILL: CS/CS/SB 498 Page 7
The new rule became effective on May 15, 2023, and remains in effect. The Court allowed
comments from interested parties until November 1, 2023, and directed The Florida Bar to file a
report on the status of the implementation of the rules.
Negotiation Attempts Have Failed to Reach a Compromise
According to documents filed in the Florida Supreme Court, the Florida Bankers Association and
The Florida Bar have attempted for months to reach a compromise rate that is agreeable to both
parties. This has resulted in an impasse and no compromise has been reached.
28
On August 7,
2024, the Court denied the Florida Bankers Association for rehearing.
IOTA Data for Funding Florida Legal Aid
Amounts Received by FFLA From the IOTA Program
Funding Florida Legal Aid supplied the information below on remittances from the IOTA
accounts. The fiscal year begins July 1 and ends June 30 of the following year.
FY 2018-19 $12,711,423
FY 2019-20 $16,233,686
FY 2020-21 $7,749,737
FY 2021-22 $9,498,692
FY 2022-23 $45,547,390
FY 2023-24 $279,656,155
Information for FY 2024-25 is only partially complete. However, for remittances received from
July 2024 through January 2025, FFLA reports total receipts of $155,378,419.
29
It is significant
to note that the IOTA collections increased by $234,108,765 between fiscal year 2022-23 and
fiscal year 2023-24. This is due to the newly implemented funding formula authorized by the
Supreme Court in May 2023 for the benefit of the Foundation.
30
28
In re Amendments to the Rules Regulating the Florida Bar, The Florida Bankers Association’s Comment to the Florida
Bar’s Report on Implementation Status, Case No: SC2022-1292, https://acis-api.flcourts.gov/courts/68f021c4-6a44-4735-
9a76-5360b2e8af13/cms/case/baa8ed04-2926-4922-b099-9d51fd7ab2ae/docketentrydocuments/f5381851-24da-4ff6-932d-
487a9ca0b99c (last visited Mar. 27, 2025).
29
Email from Amanda Fraser, Governmental Consultant on behalf of Funding Florida Legal Aid (Feb. 19, 2025) (on file with
the Senate Committee on Banking and Insurance).
30
In re Amendments to the Rules Regulating the Florida Bar – Miscellaneous: The Florida Bar’s Report on Implementation
Status (April 2, 2024) Case No: SC2022-1292, https://acis-api.flcourts.gov/courts/68f021c4-6a44-4735-9a76-
5360b2e8af13/cms/case/baa8ed04-2926-4922-b099-9d51fd7ab2ae/docketentrydocuments/e5b1ae2c-d317-4a98-8c2e-
79231698b18d (last visited Mar. 27, 2025). BILL: CS/CS/SB 498 Page 8
The FFLA shows with the chart below how the annual revenue collections through the IOTA
program have changed over the years.
31
Participating Banking Institutions and IOTA Program Accounts
The number of financial institutions participating in the IOTA program has not changed
significantly since the interest formula was amended in May 2023.
April 2023 151
32
December 2023 162
33
December 2024 170
34
According to the FFLA, the program has grown by a net of 16 banks since the IOTA interest
formula was amended in 2023.
35
Four banks have withdrawn from the program since the
31
Florida Funding Legal Aid, Financial Stewardship, https://fundingfla.org/about-ffla/ffla-finances/ (last visited March 10,
2025).
32
Email from Amanda Fraser, Governmental Consultant on behalf of Funding Florida Legal Aid (Mar. 27, 2025) (on file
with Senate Committee on Banking and Insurance).
33
Email from Amanda Fraser, Governmental Consultant on behalf of Funding Florida Legal Aid, SB 498 Fiscal Analysis
from FFLA (Feb. 19, 2025) (on file with the Senate Committee on Banking and Insurance).
34
Id.
35
Supra at 33. BILL: CS/CS/SB 498 Page 9
adoption of the 2023 IOTA amendment.
36
The number of trust accounts in the FFLA system as
of January 2025 is 33,823.
37
Receipts and Disbursements by Funding Florida Legal Aid
Funding Florida Legal Aid received $279,656,155 in IOTA collections for the fiscal year ending
June 30, 2024. The Court granted FFLA’s request to distribute $94,832,278 to qualified
organizations and place the remaining $142,875,455 in reserve for the benefit of present and
future organizations. The Court found the proposed distribution and additional reserve amount
was reasonably prudent to promote stability in distribution of IOTA funds. According to the
Court’s administrative order, this represents a 145 percent increase over the previous year’s
distribution.
38
Trust Account Programs in Other States
According to the American Bar Association (ABA), interest paid on trust account programs,
sometimes called IOLTA, or Interest on Lawyers’ Trust Accounts, are found in all 50 states,
Washington, D.C., Puerto Rico, and the U.S. Virgin Islands. The ABA estimates that, since
1981, these programs have generated over $4 billion to fund legal services for people living in
poverty, often through legal aid and pro bono programs.
39
According to the Foundation, most
states that have a safe harbor rate, have rates that range from 50 - 55 percent of the Federal Funds
Target Rate(FFR) up to one percent of the FFR.
40
The programs in Texas and Georgia are
described below.
Texas
In Texas, the Access to Justice Foundation administers the IOLTA program, which was
established in 1984 by the Supreme Court of Texas.
41
As of July 1, 1989, all Texas attorneys
handling qualifying client funds must establish an IOLTA account, unless a low balance exempts
them.
42
Pursuant to the Supreme Court of Texas, attorneys must hold IOLTA accounts in eligible
banks, which are those that pay interest rates comparable to other similar situated accounts.
The attorney, or law firm, establishing the interest-bearing demand account, must attempt in
good faith to obtain a rate of interest payable on the account not less than the rate paid by the
depository institution to other depositors with accounts of similar size.
43
A higher rate offered by
the institution on deposits meeting certain time requirements or minimum amounts, such as those
offered in the form of certificates of deposit, may be obtained if there is no impairment of the
right to withdraw or transfer principal immediately, other than the statutory notification
36
Id.
37
Id.
38
In Re: FFLA-FY 2023-24 IOTA Collections, Request for Approval of Additional Reserve Amount, No. AOSC24-70, (Oct.
4, 2024) https://supremecourt.flcourts.gov/content/download/2441648/file/AOSC24-70.pdf.
39
American Bar Association, Interest on Lawyers’ Trust Accounts, Overview, The Impact of IOLTA,
https://www.americanbar.org/groups/interest_lawyers_trust_accounts/overview/.
40
Email from Amanda Fraser, Governmental Consultant on behalf of Funding Florida Legal Aid, SB 498 Fiscal Analysis
from FFLA (March 5, 2025) (on file with the Senate Committee on Banking and Insurance).
41
Directory of IOLTA Programs (americanbar.org) (last visited Mar. 27, 2025).
42
Texas Access to Justice Foundation, TAJF- Funding (teajf.org) (last visited Mar. 27, 2025).
43
See State Bar of Texas Rules, Article XI, Sections 5-6. In the Supreme Court (teajf.org) (last visited Mar. 27, 2025). BILL: CS/CS/SB 498 Page 10
requirements generally applicable to those accounts, even though interest may be lost because of
the withdrawal or transfer.
44
Georgia
Pursuant to the Georgia Supreme Court rules, the Georgia Bar Foundation administers the
IOLTA program.
45
On any IOLTA account, the rate of interest payable may not be less than:
• The highest interest rate or dividend generally available from the approved institution to its
non-IOLTA customers for each IOLTA account that meets the same minimum balance or
other eligibility qualifications, if any. In determining the highest interest rate or dividend
generally available from the institution to its non-IOLTA customers, the institution may
consider factors, in addition to the IOLTA account balance, customarily considered by the
institution when setting interest rates or dividends for its customers if such factors do not
discriminate between IOLTA accounts and accounts of non-IOLTA customers; or
• Alternatively, an institution may choose a rate equal to the greater of 0.65% per annum or a
benchmark interest rate, net of allowable reasonable fees, set by the Foundation, which shall
be expressed as a percentage (index) of the federal funds target rate, as established from time
to time by the Federal Reserve Board. In order to maintain an overall comparable rate, the
Foundation will periodically, but not less than annually, publish its index. The index shall
initially be 65 percent of the federal funds target rate.
• Approved institutions may choose to pay rates higher than comparable rates discussed
above.
46
Chief Financial Officer
The State Constitution provides that the Chief Financial Officer (CFO) serves as the chief fiscal
officer of the state. The CFO is a member of the cabinet and is responsible for settling and
approving accounts against the state and keeping all state funds and securities.
47
The CFO serves
as the head of the Department of Financial Services (DFS).
48
Additionally, the CFO is required by statute to set the rate of interest that will be payable on
judgments or decrees for the calendar quarter beginning January 1 each year. The CFO must
adjust the rate quarterly on April 1, July 1, and October 1, by averaging the discount rate of the
Federal Reserve Bank of New York for the preceding 12 months, then adding 400 basis points to
the average federal discount rate.
49
As of January 1, 2025, the annual interest rate is 9.38
percent.
50
44
Id.
45
Supreme Court of Georgia, Rule 15-103, prescribes the rate of interest paid. ORDER-2014_1_FINAL_with-State-Bar-
Edits1.pdf (gasupreme.us) (last visited Mar. 27, 2025).
46
Id.
47
FLA. CONST. art. IV, s. 4(c).
48
Section 20.121(1), F.S.
49
Section 55.03(1), F.S.
50
My Florida CFO, Current Judgment Interest Rates, https://myfloridacfo.com/division/aa/audits-reports/judgment-interest-
rates (last visited March 4, 2025). BILL: CS/CS/SB 498 Page 11
Financial Services Commission
The Financial Services Commission (commission) is composed of the Governor, the Attorney
General, the CFO, and the Commissioner of Agriculture.
51
Commission members serve as the
agency head for purposes of rulemaking under ch. 120, F.S.
52
The Office of Financial Regulation
(OFR) and the Office of Insurance Regulation (OIR)
53
are units under the commission.
54
Each
director or commissioner of the OIR and OFR, respectively, is the agency head for purposes of
final agency action under chapter 120, F.S., for all areas within the regulatory authority delegated
to the director’s office.
55
Although the commission is created within the DFS, the commission is not subject to the control,
supervision, or direction by the DFS in any manner, including purchasing, transactions involving
real or personal property, personnel, or budgetary matters.
56
Further, the DFS is required to
provide administrative and information systems support to the offices.
57
State and Federal Regulation of Financial Institutions
The OFR regulates state-chartered banks, credit unions, other financial institutions, finance
companies, and the securities industry.
58
The Division of Financial Institutions within OFR
charters, licenses, and regulates various entities that engage in financial institution business in
Florida, in accordance with the Financial Institutions Code.
59
Under the dual banking system in the United States, banks may be chartered under either state or
federal law:
• State-chartered banks
60
are chartered under the laws of the state in which the bank is
headquartered. State-chartered banks have both a state regulator, which for banks chartered
by the state of Florida is the OFR, and a federal regulator. The primary federal regulator for
state banks that are members of the Federal Reserve System is the Board of Governors of the
Federal Reserve System, and the primary federal regulator for non-member state banks is the
Federal Deposit Insurance Corporation.
61
51
Section 20.121(3), F.S.
52
Section 20.121(3)(c), F.S
53
Pursuant to s. 20.121(3)(a)1., F.S., the OIR is responsible for all activities concerning health maintenance organizations,
life and health insurers, property and casualty insurers, and other risk-bearing entities, including licensing, rates, policy
forms, market conduct, claims, issuance of certificates of authority, solvency, viatical settlements, premium financing, and
administrative supervision, as provided under the Florida Insurance Code.
54
Section 20.121(3)(a), F.S.
55
Section 20.121(3)(c), F.S.
56
Section 20.121(3), F.S.
57
Section 20.121(3)(e), F.S.
58
Section 20.121(3)(a)2., F.S.
59
Pursuant to s. 655.005(1)(k), F.S., the term, “financial institutions code,” means chs. 655, 657, 658, 660, 662, 663, 665, and
667, F.S.
60
Like banks, credit unions can be organized under a state or federal charter. The National Credit Union Administration is an
independent federal agency that insures deposits at federally insured credit unions, protects the members who own credit
unions, and charters and regulates federal credit unions. 12 U.S.C. § 1753.
61
12 U.S.C. § 1813(q). BILL: CS/CS/SB 498 Page 12
• National banks
62
are chartered by the Office of the Comptroller of the Currency (OCC) under
the National Bank Act.
63
As such, the OCC is the primary federal regulator for national
banks.
64
A trust company is a business organization, other than a bank, which is authorized by lawful
authority to engage in the business of acting as a fiduciary.
65
Trust companies are chartered by
states, and the state regulator for trust companies chartered by the state of Florida is the OFR.
Trust companies do not have a federal regulator.
III. Effect of Proposed Changes:
The bill establishes the interest rate that financial institutions must provide when paying interest
or dividends on certain lawyer or law firm trust accounts. The interest or dividends will be
remitted to an entity established by the Florida Supreme Court that facilitates free legal services
to low-income people or a program that is consistent with other court-authorized purposes.
A financial institution that holds such a trust account must pay the highest interest rate or
dividend that is generally available to its comparable business or consumer accounts or
nonmaturing deposit accounts if the trust account meets or exceeds the same minimum balance
or other account requirements. However, the interest rate must be at least 0.25 percent.
The financial institution must submit a rate validation sheet and affidavit to the Chief Financial
Officer by the tenth day of each quarter attesting that it will pay the required interest rates. The
affidavit must attest that the rate information submitted on the rate validation sheet is true and
factual. The Chief Financial Officer must verify that the rate validation sheet and affidavit have
been received by the Department of Financial Services.
The minimum interest rate or dividend required by the bill does not apply to interest rates that
have been established by written contracts or obligations unrelated to the trust accounts
described in this bill.
The bill takes effect upon becoming law.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
62
National banks are authorized to exercise “all such incidental powers as shall be necessary to carry on the business of
banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving
deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtaining, issuing,
and circulating notes.” 12 U.S.C. § 24 (Seventh).
63
12 U.S.C. § 38.
64
12 U.S.C. § 1813(q).
65
Section 658.12(20) and (21), F.S. BILL: CS/CS/SB 498 Page 13
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
Separation of Powers
The State Constitution divides the powers of state government into three branches: the
legislative, executive, and judicial branches. The Constitution prohibits a person in one
branch from exercising any powers that belong to the other two branches of government
unless it is expressly provided.
66
The Florida Supreme Court, under s. 15 of Article V of the State Constitution, has the
“exclusive jurisdiction to regulate the admission of persons to the practice of law and the
discipline of persons admitted.” The Supreme Court exercises this responsibility through
The Florida Bar and its rules. If the bill is determined to be a regulation of attorneys or
the practice of law, it may be declared unconstitutional.
Federal Preemption/Regulation of Federally Chartered Financial Institutions
The bill creates s. 655.97, F.S., within the Financial Institutions Code (code).
67
The code
generally applies to the regulation of state-chartered financial institutions by the Office
Financial Regulation. The provisions of the bill require any financial institutions holding
a trust account of a lawyer or law firm to select an interest rate option prescribed in the
bill and submit rate validation sheet and affidavit to the Chief Financial Officer (CFO).
Chapter 17, F.S, prescribes the duties of the CFO.
The National Banking Act was enacted by Congress to facilitate a national banking
system.
68
The Office of the Comptroller of the Currency is the federal agency charged
with regulating national banks and savings associations.
69
The National Credit Union
Administration is an independent federal agency that insures deposits at federally insured
credit unions, protects the members who own credit unions, and charters and regulates
federal credit unions. It is unclear whether the regulation of rates of interest on trust
66
FLA. CONST. art. II, s. 3.
67
Chs. 655, 657, 658, 660,662,663, 665, and 667, F.S.
68
Marquette Nat’l Bank of Minneapolis v. First of Omaha Serv. Corp., 439 U.S. 299 (1978).
69
12 USC s. 1 et seq. BILL: CS/CS/SB 498 Page 14
accounts within the code would be applicable to federally chartered financial institutions,
such as national banks, savings associations, or credit unions.
The U.S. Supreme Court has reviewed the federal constitutional foundations of the
national banking system, and reaffirmed that national bank powers are not normally
limited by state law.
70
The Court concluded that “where Congress has not expressly
conditioned the grant of ‘power’ upon a grant of state permission, the Court has
ordinarily found that no such condition applies.”
71
Further, in another case, the Court
concluded, “We find no indication that Congress intended to make this phase of national
banking [deposit-taking] subject to local restrictions, as it has done by express language
in several other instances.”
72
If the bill is determined to be a regulation of financial institutions, The Florida Bar may
be required to revise its rules governing the obligations of attorneys to establish IOTA
accounts or the eligibility of financial institutions to participate in the IOTA program.
However, federal law may preempt the application of the bill to the regulation of
federally chartered financial institutions. The OFR does not have primary regulatory
authority over nationally chartered institutions.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
The bill provides that state chartered financial institutions must pay a certain interest rate
or dividend on trust accounts where the interest is remitted to an entity established by the
state Supreme Court for the purposes of providing legal aid or for other purposes
authorized by the state Supreme Court. Such interest rates will result in the financial
institution not providing an interest rate that meets the higher interest rate required by the
Florida Bar Rules for attorneys. As a result, financial institutions participating in the
program may see greater profits under this bill, be able to pay higher interest rates to
other customers, or charge lower fees for services. In contrast, Funding Florida Legal Aid
will likely see a significant reduction in the interest revenue it receives to fund its legal
aid programs, and other authorized programs.
The minimum interest rate of 0.25 percent provided in the bill will be one of the lowest of
all states. According to the FFLA,
73
the proposed minimum safe harbor rate that was
70
Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 32 (1996) (the history of the legal concept of national bank
powers “is one of interpreting grants of both enumerated and incidental “powers” to national banks as grants of authority not
normally limited by, but rather ordinarily preempting, contrary state law.). See also Franklin Nat'l Bank v. New York, 347
U.S. 373 (1954).
71
Barnett, 517 U.S. at 34.
72
See also Franklin Nat'l Bank v. New York, 347 U.S. 373 (1954).
73
Email from Amanda Fraser, Governmental Consultant on behalf of Funding Florida Legal Aid, SB 498 Fiscal Analysis
from FFLA (Feb. 19, 2025) (on file with the Senate Committee on Banking and Insurance). BILL: CS/CS/SB 498 Page 15
contained in the CS/SB 498 (25 percent of the Federal Funds Target Rate or FFR or 0.25
percent, whichever is higher, net of fees) was the lowest in the country. Most states who
have safe harbor plans have rates that range from .55 or 55% to up to 1.00 percent of the
FFR.
74
The state with the lowest safe harbor rate, Pennsylvania, provides a safe harbor
rate of .50 percent of the FFR.
75
The “federal funds target rate” is the interest rate that commercial banks charge one
another for short-term loans or the interest rate that banks use to borrow or lend their
excess reserves to one another overnight to meet the reserve balance requirements.
76
As
of March 19, 2025, the Federal Open Market Committee of the Federal Reserve has not
changed the federal funds target rate, and it remains at 4.25 percent to 4.50 percent.
77
C. Government Sector Impact:
Indeterminate. The financial institution filings submitted to the CFO under this bill could
be subject to OFR review during the normal course of a state-chartered financial
institution examination. This would be similar to the current practice of OFR collecting
and examining DFS pledge worksheets completed by institutions relating to public
deposits. However, the OFR does not have primary regulatory authority over nationally
chartered institutions.
78
VI. Technical Deficiencies:
Regulation of Financial Institutions
The bill requires the Chief Financial Officer to verify that the rate validation sheet and affidavit,
which are submitted by financial institutions, have been received by the Department of Financial
Services. It is unclear whether the Legislature can regulate federally chartered financial
institutions, which are not subject to regulation by the Office of Financial Regulation (OFR).
Further, the CFO does not appear to have regulatory jurisdiction of state-chartered financial
institutions, which is under the jurisdiction of the OFR.
It is unclear what the penalty is for a financial institution that does not timely file a rate
validation sheet and affidavit. It is unclear what specific information would be required on the
“rate validation sheet.”
The bill does not provide the Financial Services Commission with authority to adopt rules or
forms to implement these reporting requirements. It is unclear whether the Department of
Financial Services has the authority to adopt rules that apply to state-chartered financial
institutions regulated under ch. 655, F.S.
74
Id.
75
Id.
76
Investopedia, Federal Funds Rate: What It Is, How It’s Determined, and Why It’s Important (Jan. 27, 2025)
https://www.investopedia.com/terms/f/federalfundsrate.asp. (last visited Mar. 28, 2025).
77
Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC Statement (Mar. 19 , 2025) Federal
Reserve Board - Federal Reserve issues FOMC statement (last visited Mar. 24, 2025).
78
Office of Financial Regulation, Analysis of SB 498 (Mar. 26, 2025) (on file with Senate Banking and Insurance
Committee). BILL: CS/CS/SB 498 Page 16
Potential Confusion Over the Number of Interest Rates Available
There seems to be an inconsistency or contradiction within the provisions of s. 655.97(1)(a), F.S.
as to whether one or two interest rates is available for a financial institution to select. As written,
s. 655.97(1), F.S., requires that the highest interest rate or dividend generally available on
comparable accounts must be paid on the trust accounts “but the interest rate on trust accounts
may not be less than 0.25 percent.” This indicates that there is only one interest rate with a floor
of 0.25 percent.
Immediately below that provision is s. 655.97(1)(a), F.S., which requires the submission of a rate
validation sheet and affidavit. However, in that paragraph reference is made to the financial
institution paying the interest rate or dividend for comparable accounts “or the minimum 0.25
percent.” The use of the disjunctive “or” seems to indicate that the financial institution has a
choice and may choose to pay the highest rate for comparable business or consumer accounts or
choose to pay an interest rate that is not less than 0.25 percent. A clarifying amendment could
resolve this inconsistency.
VII. Related Issues:
In the event the Supreme Court declined to amend Rule 5-1.1(g) in accordance with the bill, it is
unclear whether attorneys would still be subject to disciplinary action for failing to follow
Florida Bar Rules and establishing trust accounts with a financial institution paying lower
interest pursuant to the bill.
It is possible that the effect of the bill may be to require the use of federally chartered financial
institutions for IOTA accounts. The bill limits the interest that state-chartered financial
institutions may offer on IOTA accounts. If such limitations are not in compliance with the
requirements of the Rules Regulating the Florida Bar, then attorneys would need to maintain
such accounts in federally chartered financial institutions, which generally are not subject to the
requirements of ch. 655, F.S.
VIII. Statutes Affected:
This bill creates section 655.97 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS/CS by Banking and Insurance on March 31, 2025:
The CS provides the following changes:
• Revises the interest rate a financial institution must pay on a trust account of a lawyer
or law firm by providing that a financial institution must pay the highest interest rate
or dividend that is generally available to its comparable business or consumer
accounts or nonmaturing deposit accounts if the trust account meets or exceeds the
same minimum balance or other account requirements, however, the interest rate on
such trust accounts must be at least 0.25 percent; BILL: CS/CS/SB 498 Page 17
• Eliminates the role of the Chief Financial Officer in establishing interest rates on such
trust accounts; and
• Revises reporting requirements, relating to the interest rate selection and rate
validation sheet and affidavit, for financial institutions.
CS by Judiciary on March 12, 2025:
The committee substitute differs from the underlying bill by:
• Removing references to Interest on Trust Account programs and Funding Florida
Legal Aid.
• Requiring the institutions that choose the first interest rate alternative program
submit an affidavit to the Chief Financial Officer in addition to the rate validation
sheet.
• Clarifying that the Chief Financial Officer sets the interest rate only on the second
interest rate alternative, not both interest rate alternatives.
• Clarifying that the bill is a regulation of financial institutions and is not a regulation
of The Florida Bar.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.