The Treasury Issued Amendments to the Garnishment of Federal Benefit Payments Rule

The U.S. Treasury and other Federal Agencies have adopted an amendment to the regulation for garnishments of accounts containing federal benefit payments. The new final rule, Garnishment of Accounts Containing Federal Benefit Payments (31 CFR Part 212), is effective June 28, 2013.

The agencies have clarified that in cases where a payment recipient is assigned a member number that doesn’t represent an account per se, but 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.

The agencies are also revising the definition of garnishment order to include orders or levies issued by a state or state agency or municipality. To remove any doubt as to whether the rule applies to restraining orders, the Agencies are amending the definition of a garnishment order to include “an order to freeze the assets in an account.”

With regard to the question of whether a “garnishment order” includes an order issued by the clerk of the court or an attorney acting in his or her capacity as an officer of the court, it was not the agencies’ intention that an order “issued by a court” be so narrowly construed as to exclude such orders. The agencies’ view is an order issued by the clerk of the court or an attorney acting in his or her capacity as an officer of the court in accordance with state law constitutes an order issued by the court. Lastly, the agencies did intend by removing the phrase “to enforce a money judgment” from the definition of “garnishment” in the interim final rule to ensure that the rule is not limited to civil money judgments.

The agencies have decided to amend the rule to provide financial institutions with an opportunity, for five days following the account review, to impose a garnishment fee in the event that nonprotected funds become available following the account review. If funds other than a benefit payment are deposited to an account during the five business days following the date of the account review, the credit union may charge or collect a fee from the additional funds. In order to impose such a fee, the credit union could check the account at any time during the five days after the account review to determine if funds other than benefit payments were deposited.

The agencies also believe that it is important that financial institutions be able to quickly identify whether a garnishment order pertains to state child support, so they are not revising the requirement of such state agencies to provide the notice of right to garnish federal benefit payments.

Finally the agencies have made some changes to the requirement for credit unions to send their members notice of garnishments of accounts that contain federal benefit payments. The agencies are revising the rule to require a notice to an account holder only in cases where there are funds in the account in excess of the protected amount, and credit unions may deliver the notice to multiple account holders, but there is no obligation to do so.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Awards, Compliance, Federal, MAXX Annual Convention, NWCUA.