NAFCU Compliance Blog

Agencies Issue Final Garnishment Rule

Written by Bernadette Clair, Regulatory Compliance Counsel

Recently, the Treasury Department, Social Security Administration, Department of Veterans Affairs, Railroad Retirement Board, and the Office of Personnel Management (the Agencies) issued a final rule on the garnishment of accounts containing federal benefit payments.  An interim final rule which established procedures that financial institutions must follow when they receive a garnishment order for an account holder has been in effect since May 1, 2011.

The final rule makes several revisions of interest.  For example, the definition of “garnishment order” has been revised to include orders or levies issued by a State or State agency or municipality.  This revision will bring levies issued directly by a State agency, such as a State revenue department, under the scope of the rule.

Another issue of particular interest to credit unions is how the rule applies to “master” and “sub” accounts.  The preamble to the final rule discusses the application of the rule: 

“The requirement to perform an account review applies to the deposit account to which a Federal payment is routed and credited. In cases where a payment recipient is assigned a member number that doesn’t represent an account per se, but that serves as a ‘‘prefix’’ for individual sub accounts, it is the individual sub account (and not the ‘‘master account’’) that is subject to the account review and lookback.”

Other revisions include amendments regarding the identification of federal benefit payments, the ability to collect a garnishment fee for 5 days following the account review if nonprotected funds subsequently become available, and a revision to the notice requirements to only require notice in cases where there are funds in the account in excess of the protected amount.

The final rule is effective June 28, 2013.

 

NCUA Reg Alert on Garnishment Rule; CARD Act Webcast

Written by Steve Van Beek

In July, NCUA issued a Regulatory Alert to credit unions discussing the recent Interim Final Rule on garnishments.  The Interim Final Rule became effective May 1, 2011 but the Reg Alert provides a general summary of the requirements.

We discussed the garnishment issue previously here - which included a link to FAQs from Treasury.

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If you missed NAFCU's August 10 webcast on the Clarifications to the Credit CARD Act, you can still purchase the on-demand version.  

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I'm off to Michigan for additional wedding planning activities this weekend.  Given the weather report and flight cancellations, our return trip back to the DC area might be interesting.

Have a great weekend and stay stafe!

Garnishment FAQ

Posted by Sarah Loats Zimmermann

Happy Monday - hopefully you all enjoyed your weekend! I think Steve and I bombarded you with enough sports rivalry banter last week so I'll just dive into it on Monday morning...

The garnishment interim final rule has been in place for a couple of weeks now and in light of some of the questions that have come up, the Treasury Dept. has issued a set of FAQs. As a refresher, this rule provides procedures credit unions must take when they receive a garnishment order against a member who receives certain Federal benefit payments by direct deposit.

It is a short document but it does address one of the more common questions we've received. Below is Q&A #2 from the document.

2.Are tax levies subject to the rule? Currently, the requirements of the rule are
triggered by the receipt of a “garnishment order,” which is defined as an order
issued by a court or a state child support enforcement agency.  Accordingly,
Federal or State tax levies issued directly by a taxing authority are not
subject to the rule. Treasury is seeking public comment on all aspects of
the rule, including whether levies should be included in the definition of
"garnishment order.”  The comment period for the rule extends through
May 24, 2011. 

As part of the Greenbook the Treasury Dept. has also issued Guidelines and a Quick Reference Guide.


If you are wondering what this Greenbook thing is, it is a guide for Federal ACH Payments and Collections. It is a useful guide if you receive payments from, and send payments to, the Federal government (it even devotes and entire chapter to reclamations, a topic which can cause confusion).