Falling Interest Rates Whack Legal Aid Groups

Funds tied to Fed's benchmark rate
By Kevin Spak,  Newser Staff
Posted Jan 19, 2009 1:11 PM CST
David Hall, executive director of Texas Rio Grande Legal Aid, is shown outside the Texas Capitol before a news conference Thursday, May 29, 2008, in Austin, Texas.    (AP Photo/Harry Cabluck)
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(Newser) – There’s been some collateral damage from the Federal Reserve’s slashing of interest rates: legal aid societies. These groups, which aim to help the poor in civil cases, such as unemployment or foreclosure disputes, have long relied on little-known programs to draw interest from short-term deposits from clients. With the Fed rate near zero, they’re scaling back, even as demand for their services soars.

“We are watching the interest rates with a sense of horror,” said the director of a Connecticut group. Even in good times, many agencies had to turn away qualified applicants. Now, according to one New York attorney, it’s like “a MASH unit in a war zone.” Federal money is available, but it comes with strings attached. Groups taking it can't work on class-action cases, or anything related to immigration, abortion, and other contentious issues.