SANTA ANA, Calif. (CN) – A class action accuses Bank of America of charging undisclosed fees on IOLTA accounts, and of doing so after California passed a law requiring banks to pay the same interest rates on IOLTA accounts as they do on other accounts.
Bank of America holds about 20 percent of California’s lawyer trust accounts, named plaintiff William Kent says in Orange County Superior Court. He estimates that the class includes 100,000 to 150,000 members.
The complaint states: “Plaintiff brings this action as a statewide consumer class action against BOA and Does 1-20. … BOA enforced an alleged contractual
obligation against its customers whenever they cash checks contrary to the original agreement with plaintiff and the class.
“IOLTA accounts hold client funds that are too small or are held for too short a period
of time to earn interest that exceeds the cost of maintaining the funds. In California, interest on lawyer trust accounts is distributed among about 100 eligible legal services programs. But the grants fluctuate with interest rates and have shrunk nationwide as the rates have dropped. Grants declined in the state from a peak of $22 million in 1990 to about $14 million in 2008.
“On January 6, 2008, the California Bar Journal published an article about Bank of America reaching an agreement with the State Bar in December 2007 to comply immediately with a new state law that boosts interest on IOLTA accounts. The California Bar Journal is sent to all members of the State Bar. Bank of America is California’s largest bank and the holder of approximately 20 percent of the state’s lawyer trust accounts.”
“The law, AB 1723, authored by Assemblyman Dave Jones, D-Sacramento, and signed by Gov. Schwarzenegger Oct. 10, took effect Jan. 1, 2008. It was expected to double the annual level of statewide funding – from the current $14 million to an estimated $30 million – for legal services programs for low-income and needy Californians. BOA was the first bank in the state to comply with the new law. Its agreement with the bar will generate an estimated $2.25 million in additional funds for legal aid programs in California. The State Bar enacted new regulations to implement the law and a new companion Rule of Court has been submitted to the California Supreme Court.
“In the 2007 – 2008 time frame, most banks in California paid 1 percent interest or less on IOLTA accounts. BOA agreed to boost its rate on those accounts when it signed a contract with the State Bar in December 2007.
“All California banks must comply with AB 1723, which requires them to pay the same interest on Interest on Lawyer Trust Accounts (‘IOLTA’) that they pay on similarly situated non-IOLTA accounts. BOA agreed to exceed this requirement and to do so well in advance of a March 1, 2008 deadline set by the Legal Services Trust Fund Commission. …
“In February 2008, the President of the State Bar of California Jeff Bleich e-mailed all members of the State Bar to advise them about a new statutory provision regarding the IOLTA accounts. The correspondence notified plaintiff and the class that under California Supreme Court order S158605 effective March 1, 2008, California attorneys must hold their IOLTA funds in banks that comply with the legislation. To assist with compliance, on January 31, 2008, the State Bar began posting on its website the list of banks in compliance, which included BOA. The correspondence
went on to state that the State Bar would ‘notify you if your bank is not in compliance.’ The correspondence concluded that ‘Bank of America, in partnership with the State Bar, is the first bank that has agreed to comply early with the new law, offering the statutory comparable rates on IOLTA funds effective January 1, 2008 acting more than two months early, IOLTA accounts held in Bank of America will produce substantial additional funds to assist Californians in need.’
“Based upon the law, plaintiff and the class opened accounts with defendant, and
received a ‘Deposit Agreement and Disclosures,’ defining the ‘rights and obligations for your deposit account relationship with us [the Bank].’
“Defendant bank violates its own written policies as it relates to members of the
California Bar and unlawfully charges such members undisclosed fees. …
“This unlawful hidden ‘fee’ is never explained to the customer at the time of opening
the account, in the agreement or signature card(s) or schedule of fees and the customer has no reason to believe that there will be any charge for cashing attorney-client or other checks by BOA.
“The penalties bear no relation to the cost or damage, if any, incurred by BOA in
connection with their processing of checks.
“This putative class action consists of between 100,000 to 150,000 attorneys and other account holders set forth below.
“BOA has no right, contractual or otherwise, to enforce the penalty against its customers without their consent or otherwise. Plaintiff and the class members seek injunctive relief on behalf of current and former BOA customers who were charged or may be charged a penalty and monetary relief on behalf of current and former BOA customers who paid a penalty to BOA; the imposition of constructive trusts on all monies by which BOA was unjustly enriched as a result of collecting the penalties set forth above; and all such other and further relief to which they may be entitled under the UCL, the CLRA, and common law, including, without limitation, restitution.”
Kent seeks class certification and damages for breach of contract, breach of faith, unfair and deceptive trade, and consumer law violations. He is represented by Richard Quintilone II of Lake Forest.
The 29-page lawsuit includes 50 pages of attachments, including the California Bar Journal article and Bank of America documents.