Garnishments

Question 1

What types of federal benefit payments are covered by the regulation? (6)

Answer 1

The types of Federal benefit payments covered by the interagency regulation are:
• Social Security benefits;
• Supplemental Security Income benefits;
• Veterans benefits;
• Federal Railroad retirement, unemployment and sickness benefits;
• Civil Service Retirement System benefits; and
• Federal Employee Retirement System benefits.

Question 2

Under the regulation, what general procedures must a bank follow after receiving a garnishment order? (3)

Answer 2

• Determine if any account held by the named account holder received exempt federal payments by direct deposit
• determine the sum of protected federal benefits deposited to each individual account during a two month period and
• ensure that the account holder has access to an amount equal to that sum or the current balance of such accounts, whichever is lower

Question 3

What two agencies are exempt from federal garnishment protection procedures?

If a bank receives a garnishment order from one of these agencies what procedures should they follow?

Answer 3

The united states or a State child support enforcement agency

If a bank receives a garnishment order from either of the above the bank should follow its customary procedures for handling garnishments as federal benefit payments can generally be accessed or garnished by such agencies.

Question 4

What can a bank rely on to determine whether a direct deposit payment is a federal benefit payment?

Answer 4

The regulation allows the bank to rely on certain ACH identifiers (ex: character XX encoded in the appropriate positions of the “company entry description” field of the Batch Header Record)

Question 5

A bank must notify the account holder that they received a garnishment order if what three conditions are met?

Answer 5

(1) a covered benefit agency deposited a benefit payment into an account during the
lookback period;

(2) the balance in the account on the date of
account review was above zero dollars and the financial institution established a protected amount; and

(3) there are funds in the account in excess of the protected amount.

Question 6

Can a bank charge a garnishment fee?

Answer 6

It depends.

For an account containing a protected amount the bank may not charge or collect a garnishment fee against the protected amount.

But the bank may charge a fee against additional funds deposited to the account up to 5 business days after the account review date.

Question 7

What is an account?

Answer 7

Means an account, including a master account or subaccount, at a financial institution to which an electronic payment may be directly routed.

An account does not include an account to which a benefit payment is subsequently transferred following its initial delivery by direct deposit to another account. If a payment recipient is assigned a customer number that serves as a “prefix” for individual sub-accounts, the individual sub-account (and not the “master account”) is subject to the account review and lookback.

Question 8

Who is an account holder?

Answer 8

Means a natural person against whom a garnishment order is issued and whose name appears in a financial institution’s records as the direct or beneficial owner of an account.

Question 9

What is an account review?

Answer 9

Means the process of examining deposits in an account to determine if a benefit agency has deposited a benefit payment into the account during the lookback period.

Question 10

What is a benefit agency? (4)

Answer 10

• Social Security Administration
• Department of Veterans Affairs
• Railroad Retirement Board
• Office of Personnel Management

Question 11

What is a federal benefit payment?

Answer 11

Means a Federal benefit payment referred to in 31 CFR 212.2(b) paid by direct deposit to an account with the character “XX” encoded in positions 54 and 55 of the Company Entry Description field and the number “2” encoded in the Originator Status Code field of the Batch Header Record of the direct deposit entry.

Question 12

What is the definition of Freeze or account freeze?

Answer 12

Means an action by a financial institution to seize, withhold, or preserve funds, or to otherwise prevent an account holder from drawing on or transacting against funds in an account, in response to a garnishment order.

Question 13

What is a garnishment?

Answer 13

Means execution, levy, attachment, garnishment, or other legal process.

Question 14

What is a garnishment fee?

Answer 14

Means any service or legal processing fee, charged by a financial institution to an account holder, for processing a garnishment order or any associated withholding or release of funds.

Question 15

What is a garnishment order?

Answer 15

Means a writ, order, notice, summons, judgment, levy, or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account, to effect a garnishment against a debtor.

Question 16

What is a lookback period?

Answer 16

The two-month period that

(a) begins on the date preceding the date of account review and
(b) ends on the corresponding date of the month two months earlier, or on the last date of the month two months earlier if the corresponding date does not exist.

Question 17

When would the lookback period end in the following example?

Lookback period begins on November 15

Answer 17

It would end on September 15

Question 18

When would the lookback period end in the following example?

Lookback period began on April 30th

Answer 18

The lookback period would end of February 28th or 29th in a leap year, to reflect the fact that there are not 30 days in February.

Question 19

What is the protected amount? (2)

Answer 19

“Protected amount” means the lesser of:

1. The sum of all benefit payments posted to an account between the close of business on the beginning date of the lookback period and the open of business on the ending date of the lookback period; or
2. The balance in an account when the account review is performed.

The account balance includes intraday items such as ATM or cash withdrawals. The balance does not include any line of credit associated with the account.

Question 20

What is a bank’s first step after receiving a garnishment order, and how soon must they complete this step?

Answer 20

Within two business days after receiving a garnishment order, and prior to taking any other action related to the order, a financial institution must determine whether the order was obtained by the United States or issued by a State child support enforcement agency. To make this determination, the financial institution may rely on a “Notice of Right to Garnish Federal Benefits” (see Appendix B of the interagency regulation), which is typically attached or included with the order.

Question 21

True or false:

If a State law establishes a minimum protected amount before a garnishment order can be applied, the financial institution need not examine the order to determine if a Notice of Right to Garnish Federal Benefits is attached or included, or take any of the additional steps required under the rule.

Answer 21

True

State law is not inconsistent with the interagency regulation if it protects benefit payments in an account from being frozen or garnished at a higher protected amount than required under the regulation.

Question 22

What are the timing requirements for the account review process? (2)

Answer 22

After having been served a garnishment order issued against a debtor, a financial institution must perform an account review:

1. No later than two business days following receipt of both the garnishment order and sufficient information from the creditor to determine whether the debtor is an account holder; or
2. By a later date permitted by the creditor in situations where the financial institution is served a batch of a large number of orders. The date must be consistent with the terms of the orders and the financial institution must maintain records on such batches and creditor permissions

Question 23

What should a bank do if the account review shows no benefit payment was deposited during the lookback period?

Answer 23

If the account review shows that a benefit agency did not deposit a benefit payment into the account during the lookback period, then the financial institution should follow its customary procedures for handling the garnishment order and not the procedures

Question 24

When performing an account review, the bank must perform the review without consideration for what attributes of the account or garnishment order? (6)

Answer 24

The financial institution must perform an account review without consideration for any other attributes of the account or the garnishment order, such as:

1. The presence of other funds, from whatever source, that may be commingled in the account with funds from a benefit payment;
2. The existence of a co-owner on the account;
3. The existence of benefit payments to multiple beneficiaries, and/or under multiple programs, deposited in the account;
4. The balance in the account, provided the balance is above zero dollars on the date of account review;
5. Instructions to the contrary in the order; or
6. The nature of the debt or obligation underlying the order.

Question 25

True or false:

The bank can take other actions related to the garnishment order that may affect funds in the account prior to performing an account review.

Answer 25

False: The bank must perform the account review prior to any other action on the garnishment order especially those that would impact the funds of the account

Question 26

What is the next step a bank must take if the account review identifies protected funds in the account?

Answer 26

• The bank must determine the protected amount for each of the consumers accounts
• follow normal garnishment procedures for any amount in excess of the protected amount

Question 27

What requirements should a bank follow when determining the protected amount? (4)

Answer 27

• The bank must calculate and establish the protected amount for an account, ensuring the account holder has full access to the protected amount. (for accounts with debit card access this mean the account holder should have debit card access to the protected amount)
• The protected amount must be established separately for each account in the name of the account holder.
• The bank may not freeze the protected amount in response to the garnishment order.
• The account holder may not be required to assert any right of garnishment exemption prior to establishing the protected amount in the account.

Question 28

What should the bank do with funds in excess of the protected amount?

Answer 28

For any funds in an account in excess of the protected amount, the financial institution must follow its customary procedures for handling garnishment orders, including the freezing of funds.

Question 29

If the bank receives a duplicate garnishment order, are they required to go through the account review process again?

Answer 29

No, the bank is only required to perform the account review one time after it receives a garnishment order and should not repeat the account review or take any other action related to the order if the same order is subsequently served again upon the financial institution. However, if the financial institution is subsequently served a new or different garnishment order against the same account holder, the financial institution must perform a separate and new account review.

A “new” garnishment order means the creditor has gone back to court and obtained a new order, as opposed to re-filing an order previously served. A garnishment order that is re-issued after the return date, under a different execution number, would not constitute a “new” garnishment order.

Question 30

True or false:

A bank can continually garnish amounts deposited or credited to the account following the date of the account review.

Answer 30

False the bank cannot do this.

It also must take no action to freeze any funds subsequently deposited or credited, unless the institution is served with a new or different garnishment order.

Question 31

When must a bank send an account holder named in the garnishment order a garnishment notice? (3)

Answer 31

A financial institution must send an account holder named in the garnishment order a notice if:

1. A covered Federal benefit payment was directly deposited into an account during the lookback period;
2. The balance in the account on the date of account review was above zero dollars and the financial institution established a protected amount; and
3. There are funds in the account in excess of the protected amount.

Question 32

What information must be included in the Garnishment notice? (11)

Answer 32

1. The financial institution’s receipt of an order against the account holder;
2. The date on which the order was served;
3. A succinct explanation of garnishment;
4. The financial institution’s requirement under the interagency regulation to ensure that account balances up to the protected amount specified in 31 CFR 212.3 are protected and made available to the account holder if a benefit agency deposited a benefit payment into the account in the last two months;
5. The account subject to the order and the protected amount established by the financial institution;
6. The financial institution’s requirement pursuant to State law to freeze other funds in the account to satisfy the order and the amount frozen, if applicable;
7. The amount of any garnishment fee charged to the account, consistent with 31 CFR 212.6;
8. A list of the Federal benefit payments subject to this interagency regulation, as identified in 31 CFR 212.2(b);
9. The account holder’s right to assert against the creditor that initiated the order a further garnishment exemption for amounts above the protected amount, by completing exemption claim forms, contacting the court of jurisdiction, or contacting the creditor, as customarily applicable for a given jurisdiction;
10. The account holder’s right to consult an attorney or legal aid service in asserting against the creditor that initiated the order a further garnishment exemption for amounts above the protected amount; and
11. The name of the creditor, and, if contact information is included in the order, means of contacting the creditor.

Question 33

What information can a bank include in the garnishment notice at its option? (3)

Answer 33

1. The means of contacting a local free attorney or legal aid service;
2. The means of contacting the financial institution; and
3. A disclaimer that the financial institution is not providing legal advice by sending the required notice to the account holder.

Question 34

What are the requirements regarding the garnishment notice delivery method an timing?

Answer 34

The notice must be issued directly to the account holder or a fiduciary who administers the account. (only one notice is required if there are multiple accounts)

only info and documents pertaining to the garnishment order may be included in the communication

the bank must send the notice to the account holder within 3 business days of the date of the account review.

Question 35

What are the record retention requirements under the regulation?

Answer 35

A financial institution must maintain records of account activity and actions taken in response to a garnishment order, sufficient to demonstrate compliance with this part, for a
period of not less than two years from the date on which the financial institution receives the garnishment order.

The financial institution has discretion in deciding what documentation to retain. The appropriate documentation may vary depending on the circumstances of each situation.