[Federal Register Volume 72, Number 188 (Friday, September 28, 2007)]
[Notices]
[Pages 55273-55276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-4783]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket ID OCC-2007-0015]

FEDERAL RESERVE SYSTEM

[Docket No. OP-1294]

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

[ID-OTS-2007-0018]

NATIONAL CREDIT UNION ADMINISTRATION


Proposed Guidance on Garnishment of Exempt Federal Benefit Funds

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, 
Treasury (OTS); and National Credit Union Administration (NCUA) 
(collectively, the Agencies).

ACTION: Notice with request for comment.

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SUMMARY: The Agencies are proposing guidance entitled Garnishment of 
Exempt Federal Benefit Funds. This proposed guidance has been developed 
to encourage financial institutions to have policies and procedures in 
place with respect to handling garnishment orders and sets forth best 
practices, including procedures designed to expedite notice to the 
consumer of the garnishment process and release of funds to the 
consumer as quickly as possible.

DATES: Comments must be submitted on or before November 27, 2007.

ADDRESSES: The Agencies will jointly review all of the comments 
submitted. Therefore, interested parties may send comments to any of 
the Agencies and need not send comments (or copies) to all of the 
Agencies. Please consider submitting your comments by e-mail or fax, 
since paper mail in the Washington area and at the Agencies is subject 
to delay. Interested parties are invited to submit comments to:
    OCC: You may submit comments by any of the following methods:
     E-mail: [email protected].
     Fax: (202) 874-4448.
     Mail: Office of the Comptroller of the Currency, 250 E 
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public 
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2007-0015'' in your comment. In general, OCC will enter 
all comments received into the docket without change, including any 
business or personal information that you provide such as name and 
address information, e-mail addresses, or phone numbers. Comments, 
including attachments and other supporting materials, received are part 
of the public record and subject to public disclosure. Do not enclose 
any information in your comment or supporting materials that you 
consider confidential or inappropriate for public disclosure.
    You may review comments and other related materials by any of the 
following methods:
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC's Public Information Room, 250 E 
Street, SW., Washington, DC. For security reasons, the OCC requires 
that visitors make an appointment to inspect comments. You may do so by 
calling (202) 874-5043. Upon arrival, visitors will be required to 
present valid government-issued photo identification and submit to 
security screening in order to inspect and photocopy comments.
     Docket: You may also view or request available background 
documents and project summaries using the method described above.
    Board: You may submit comments, identified by Docket No. OP-1294, 
by any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: 202/452-3819 or 202/452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
unless modified for technical reasons. Accordingly, your comments will 
not be

[[Page 55274]]

edited to remove any identifying or contact information. Public 
comments may also be viewed in electronic or paper form in Room MP-500 
of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m. 
and 5 p.m. on weekdays.
    FDIC: You may submit comments by any of the following methods:
     Agency Web Site: http://www.fdic.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency Web 
Site.
     E-mail: [email protected]. Include ``Garnishment 
Statement'' in the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7 a.m. and 5 p.m. (EST).
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Public Inspection: All comments received will be posted without 
change to http://www.fdic.gov/regulations/laws/federal including any 
personal information provided. Comments may be inspected and 
photocopied in the FDIC Public Information Center, 3501 North Fairfax 
Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m. 
(EST) on business days. Paper copies of public comments may be ordered 
from the Public Information Center by telephone at (877) 275-3342 or 
(703) 562-2200.
    OTS: You may submit comments, identified by ID OTS-2007-0018, by 
any of the following methods:
     E-mail: [email protected]. Please include ID 
OTS-2007-0018 in the subject line of the message and include your name 
and telephone number in the message.
     Fax: (202) 906-6518.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: ID OTS-2007-0018.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days. Address 
envelope as follows: Attention: Regulation Comments, Chief Counsel's 
Office, Attention: ID OTS-2007-0018.
    Instructions: All submissions received must include the agency name 
and docket number for this proposed Guidance. All comments received 
will be posted without change to the OTS Internet Site at http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1, including any 
personal information provided.
    In addition, you may inspect comments at the Public Reading Room, 
1700 G Street, NW., by appointment. To make an appointment for access, 
call (202) 906-5922, send an e-mail to public.info@ots.treas.gov">public.info@ots.treas.gov, or 
send a facsimile transmission to (202) 906-7755. (Prior notice 
identifying the materials you will be requesting will assist us in 
serving you.) We schedule appointments on business days between 10 a.m. 
and 4 p.m. In most cases, appointments will be available the next 
business day following the date we receive a request.
    NCUA: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on Proposed Guidance (Garnishment of Federal Benefit 
Payments)'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT:
    OCC: Michael Bylsma, Director, Community and Consumer Law Division, 
(202) 874-5750 or Ann Jaedicke, Deputy Comptroller, Compliance, (202) 
874-4428, Office of the Comptroller of the Currency, 250 E Street, SW., 
Washington, DC 20219.
    Board: Legal Division: Kara L. Handzlik, Attorney (202) 452-3852, 
Board of Governors of the Federal Reserve System, 20th Street and 
Constitution Avenue, NW., Washington, DC 20551. Users of 
Telecommunication Device for Deaf only, call (202) 263-4869.
    FDIC: Patricia Cashman, Senior Policy Analyst, Division of 
Supervision and Consumer Protection, (202) 898-6534, Mark Mellon, 
Counsel, Legal Division, (202) 898-3884 or Patricia Colohan, Senior 
Examination Specialist, Division of Supervision and Consumer 
Protection, Federal Deposit Insurance Corporation, 550 17th Street, 
NW., Washington, DC 20429.
    OTS: Stacy Messett, Senior Project Manager, Compliance and Consumer 
Protection, (202) 906-6241 or Richard Bennett, Senior Compliance 
Counsel, Regulations and Legislation Division, (202) 906-7409, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
    NCUA: Ross Kendall, Staff Attorney, Office of General Counsel, 
(703) 518-6540 or Matthew Biliouris, Program Officer, Office of 
Examination and Insurance, (703) 518-6360, National Credit Union 
Administration, 1775 Duke Street, Alexandria, VA 22314-3428.

SUPPLEMENTARY INFORMATION:

I. Background

    The Agencies developed this proposed guidance, Garnishment of 
Exempt Federal Benefits Funds, to address concerns associated with 
garnishment of exempt federal benefit payments, such as Social Security 
benefits, Supplemental Security Income benefits, Veterans' benefits, 
Federal Civil Service retirement benefits, and Federal Railroad 
retirement benefits. These benefits, which are generally exempt under 
federal law from garnishment orders and the claims of judgment 
creditors, often constitute an important part, and sometimes all of an 
individual's income. As a result, when financial institutions receive 
garnishment orders and place freezes on accounts containing exempt 
federal benefit funds, the recipients of these funds can face 
significant hardship. At the same time, financial institutions are 
required by state law to comply with garnishment orders, which may 
necessitate placing a freeze on an account that contains federal 
benefit payments. The agencies have developed this proposed guidance to 
encourage financial institutions to minimize the hardships encountered 
by federal benefit funds recipients and to do so while remaining in 
compliance with applicable law.

II. Request for Comment

    The Agencies request comment on all aspects of the proposed 
guidance. In addition, the Agencies seek comment on the following 
issues:
    1. Are there practices that would enable an institution to avoid 
freezing funds altogether by determining at the time of receipt of a 
garnishment order that the funds are federally protected and not 
subject to an exception?
    2. Are there other permissible practices that would better serve 
the

[[Page 55275]]

interests of consumers who have accounts containing federal benefit 
payments? Are there ways to provide consumers with reasonable access to 
their funds during the garnishment process?
    3. Are customers adequately informed of their rights when a 
creditor attempts to garnish their funds? What could be done to provide 
consumers with better information?
    4. Institutions often charge customers a fee for freezing an 
account. How do these fees compare to those charged separately when an 
account holds insufficient funds to cover a check presented for 
payment? Are there operational justifications for both types of fees to 
be assessed?

III. Text of Proposed Joint Guidance

Garnishment of Exempt Federal Benefit Funds

    Social Security benefits, Supplemental Security Income benefits, 
Veterans' benefits, Federal Civil Service retirement benefits, and 
Federal Railroad retirement benefits often constitute an important 
part, and sometimes all of an individual's income. Consequently, 
federal law protects these benefit payments from garnishment orders and 
the claims of judgment creditors.\1\ For example, Section 207 of the 
Social Security Act provides that, with certain exceptions, moneys paid 
or payable as Old-Age, Survivors, and Disability Insurance (OASDI) 
benefits are not ``subject to execution, levy, attachment, garnishment, 
or other legal process.'' \2\ Similarly, Veterans' benefits are exempt, 
in most cases, from ``attachment, levy, or seizure by or under any 
legal or equitable process whatever, either before or after receipt by 
the beneficiary'' under a separate section of the United States 
Code.\3\ Federal Civil Service pension benefits are similarly protected 
under federal law.\4\ These federal provisions are subject to certain 
exceptions, such as garnishment orders relating to alimony or child 
support payments.\5\
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    \1\ See 42 U.S.C. 407(a); 42 U.S.C. 1383(d)(1); 38 U.S.C. 5301; 
5 U.S.C. 8346(a); and 45 U.S.C. 231m(a).
    \2\ 42 U.S.C. 407.
    \3\ 38 U.S.C. 5301.
    \4\ 5 U.S.C. 8346.
    \5\ See, e.g., 42 U.S.C. 659.
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    The Social Security Administration (SSA) and Department of Veterans 
Affairs (VA) have not to date specified rules outlining the scope of 
these protections. However, a number of court decisions have addressed 
aspects of these protections. This statement, issued by the Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, Office of the Comptroller of the Currency, Office of 
Thrift Supervision, and National Credit Union Administration 
(Agencies), represents guidance on best practices for financial 
institutions to protect consumers' funds while remaining in compliance 
with state laws and court orders governing garnishment, attachment, and 
other legal process.
    Creditors and debt collectors are often able to obtain enforceable 
orders from state courts on an ex parte basis garnishing funds in a 
consumer's account. To comply with state court garnishment orders, 
financial institutions often place a temporary freeze or hold on an 
account upon receipt of a garnishment order. Although the freeze will 
preserve the funds in the account and provide the account owner with an 
opportunity to assert any rights, exemptions, and challenges to the 
garnishment order, including the exemptions under applicable federal 
benefits laws, the freeze can also cause significant hardship for the 
account owner. This is especially true when, as is often the case, the 
recipients of federal benefits, such as SSA and VA benefits, depend on 
these funds as their primary source of income.
    At the same time, financial institutions are required by state law 
to comply with garnishment orders, and in many states, are liable for 
any funds that are withdrawn by a consumer after the financial 
institution has received a garnishment order for a particular account. 
State garnishment orders may not provide sufficient information to 
allow financial institutions to know if the order is subject to one of 
the exceptions in federal law allowing garnishment of federal benefit 
funds. Moreover, consumer accounts may include both funds that may be 
protected by federal law from garnishment and other funds that are not 
protected.
    The interplay of federal law and state garnishment laws raises 
difficult and complex issues. A freeze is designed to preserve the 
funds in an account until the legal status of the funds can be 
determined. The Agencies are aware, however, of the hardship that 
recipients of exempt federal benefit funds may face when a freeze is 
placed on their accounts. In order to minimize this hardship and ensure 
compliance with applicable law, the Agencies encourage financial 
institutions to have policies and procedures in place to address 
garnishment orders, including procedures designed to expedite notice to 
the consumer of the garnishment process and release funds to the 
consumer as quickly as possible.
    Among the best practices in this area are the following:
     Promptly notify a consumer when a financial institution 
receives a garnishment order and places a freeze on the consumer's 
account;
     Provide the consumer with information about what types of 
federal benefit funds are exempt, including SSA and VA benefits, in 
order to aid the consumer in asserting federal protections;
     Promptly determine, as feasible, if an account contains 
only exempt federal benefit funds such as SSA or VA benefits;
     Notify the creditor, collection agent, or relevant state 
court that the account contains exempt funds in cases in which the 
financial institution is aware that the account contains exempt funds;
     If state law or the court order will permit a freeze not 
to be imposed if the account is determined to contain only exempt 
federal benefit funds, act accordingly if that determination is made;
     Minimize the cost to a consumer when the consumer's 
account containing exempt federal benefit funds is frozen, such as by 
refraining from imposing overdraft, NSF, or similar fees while the 
account is frozen or refunding such fees when the freeze has been 
lifted;
     Allow the consumer access to a portion of the account 
equivalent to the documented amount of exempt federal benefit funds as 
soon as the financial institution determines that none of the 
exceptions to the federal protections against garnishment of exempt 
federal benefit funds are triggered by the garnishment order;
     Offer consumers segregated accounts that contain only 
federal benefit funds without commingling of other funds; and
     Lift the freeze on an account as soon as permissible under 
state law.
    The Agencies encourage financial institutions to stay apprised of 
any future guidance issued by the SSA or VA regarding garnishment 
practices and of developments in the courts in their jurisdiction 
regarding garnishment practices.

    Dated: September 21, 2007.
John C. Dugan,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, September 19, 2007.
Jennifer J. Johnson,
Secretary of the Board.

    Dated at Washington, DC, the 19th day of September, 2007.


[[Page 55276]]


    By order of the Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

    Dated: September 19, 2007.

    By the Office of Thrift Supervision.
John Reich,
Director.

    Dated: September 19, 2007.

    By the National Credit Union Administration.
JoAnn M. Johnson,
Chairman.
[FR Doc. 07-4783 Filed 9-27-07; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P; 7535-01-P