Treasury Says New Garnishment Rule Applies Only To Court Orders

CUs must review accounts for Federal Benefit Funds only upon receipt of a garnishment order, but there is some confusion in the rule’s definitions.

Earlier this week, Treasury issued a Frequently Asked Questions (FAQ) document regarding the newly effective interim final rule on garnishments.

In that FAQ, Treasury highlights the requirement that a credit union review its accounts for Federal Benefit Funds only upon receipt of a garnishment order. The regulation defines a garnishment order as an order issued by a court or a state child support enforcement agency. This means that IRS levies or levies issued from the state tax authority do not trigger the new garnishment rules.

The main confusion about which types of attachments trigger compliance with the new garnishment rules arises from the definition section. In the rules, a garnishment is defined as an execution, levy, attachment, garnishment, or other legal process, which would indicate that a variety of legal proceedings would trigger compliance. However, the procedures in the rule are all triggered by receipt of a garnishment order, which is defined as a writ, order, notice, summons, judgment, or similar written instruction issued by a court or a state child support enforcement agency.

This means that even though the rules consider a levy, for example, to be a garnishment, receipt of a levy notice does not trigger the account review requirement. Only a written instruction from a court or state child support enforcement agency triggers the account review process.

It should be noted that Oregon state law requires credit unions to review all accounts upon receipt of an attachment.

The new garnishment rules were effective on May 1, 2011.

 

If you have questions about garnishments, please contact NWCUA compliance at [email protected] or 800-546-4465.