[Federal Register Volume 76, Number 36 (Wednesday, February 23, 2011)]
[Rules and Regulations]
[Pages 9939-9962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3782]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 76, No. 36 / Wednesday, February 23, 2011 /
Rules and Regulations
[[Page 9939]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 831, 841
RIN 3206-AM17
RAILROAD RETIREMENT BOARD
20 CFR Part 350
RIN 3220-AB63
SOCIAL SECURITY ADMINISTRATION
20 CFR Parts 404, 416
RIN 0960-AH18
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 212
RIN 1505-AC20
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 1
RIN 2900-AN67
Garnishment of Accounts Containing Federal Benefit Payments
AGENCY: Department of the Treasury, Fiscal Service (Treasury); Social
Security Administration (SSA); Department of Veterans Affairs (VA);
Railroad Retirement Board (RRB); Office of Personnel Management (OPM).
ACTION: Interim final rule with request for public comment.
-----------------------------------------------------------------------
SUMMARY: Treasury, SSA, VA, RRB and OPM (Agencies) are issuing an
interim final rule to implement statutory restrictions on the
garnishment of Federal benefit payments. The rule establishes
procedures that financial institutions must follow when they receive a
garnishment order against an account holder who receives certain types
of Federal benefit payments by direct deposit. The rule requires
financial institutions that receive such a garnishment order to
determine the sum of such Federal benefit payments deposited to the
account during a two month period, and to ensure that the account
holder has access to an amount equal to that sum or to the current
balance of the account, whichever is lower.
DATES: This interim final rule is effective May 1, 2011. Comments must
be received on or before May 24, 2011.
ADDRESSES: The Agencies invite comments on all aspects of this interim
final rule. In accordance with the U.S. government's eRulemaking
Initiative, the Agencies publish rulemaking information on http://www.regulations.gov. Regulations.gov offers the public the ability to
comment on, search, and view publicly available rulemaking materials,
including comments received on rules.
The Agencies will jointly review all of the comments submitted.
Comments on this rule must only be submitted using the following
methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions on the Web site for submitting comments.
Mail: Gary Grippo, Deputy Assistant Secretary, Fiscal
Operations and Policy, U.S. Department of the Treasury, 1500
Pennsylvania Avenue, NW., Room 2112, Washington, DC 20220.
Instructions: All submissions received must include the Agencies'
names and RIN numbers 3206-AM17, 3220-AB63, 0960-AH18, 1505-AC20, and
2900-AN67 for this rulemaking. In general, comments received will be
published on Regulations.gov without change, including any business or
personal information provided. Treasury will also make such comments
available for public inspection and copying in Treasury's Library, Room
1428, Department of the Treasury, 1500 Pennsylvania Avenue, NW.,
Washington, DC 20220, on official business days between the hours of 10
a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect
comments by telephoning (202) 622-0990. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Gary Grippo, Deputy Assistant
Secretary, Fiscal Operations and Policy, U.S. Department of the
Treasury, at (202) 622-6222.
SUPPLEMENTARY INFORMATION:
I. Background and Summary of Proposed Rule
Background
On April 19, 2010, the Agencies published a proposed rule to
address concerns associated with the garnishment of certain exempt
Federal benefit payments, including Social Security benefits,
Supplemental Security Income (SSI) benefits, VA benefits, Federal
Railroad retirement benefits, Federal Railroad unemployment and
sickness benefits, Civil Service Retirement System benefits and Federal
Employee Retirement System benefits. See 75 FR 20299. The Agencies
received 586 comments on the proposed rule, including comments from
individuals, consumer advocacy organizations, legal services
organizations, financial institutions and their trade associations,
State attorneys general and State child support enforcement agencies.
As described in Parts II and III of this SUPPLEMENTARY INFORMATION, the
interim final rule adopts the proposal with a number of changes.
Social Security benefits, SSI benefits, VA benefits, Federal
Railroad retirement benefits, Federal Railroad unemployment and
sickness benefits, Civil Service Retirement System benefits and Federal
Employee Retirement System benefits are protected under Federal law
from garnishment and the claims of judgment creditors.\1\ This legal
protection continues after benefits are deposited to an individual's
account at a financial institution. Nevertheless, creditors and debt
collectors are often able to obtain court orders garnishing funds in an
individual's account. To comply with court garnishment orders and
preserve funds subject to the orders, financial
[[Page 9940]]
institutions often place a temporary freeze on an account upon receipt
of a garnishment order and remit the garnished funds to the court or
creditor. Although State laws provide account owners with an
opportunity to assert any rights, exemptions, and challenges to the
garnishment order, including the exemptions under applicable Federal
benefits laws, the freezing of funds during the time it takes to file
and adjudicate such a claim can cause significant hardship for account
owners.
---------------------------------------------------------------------------
\1\ See 42 U.S.C. 407(a); 42 U.S.C. 1383(d)(1); 38 U.S.C.
5301(a); 45 U.S.C. 231m(a); 45 U.S.C. 352(e); 5 U.S.C. 8346(a) and 5
U.S.C. 8470.
---------------------------------------------------------------------------
Proposed Rule
To address the foregoing problems, the Agencies published for
comment a proposed rule to require financial institutions to follow
certain procedures upon receipt of a garnishment order, as follows:
Upon receipt of a garnishment order, a financial institution would
first determine if the United States is the plaintiff that obtained the
order. If not, the financial institution would review the account
history during the 60-day period that precedes the receipt of the
garnishment order. If, during this ``lookback period,'' one or more
exempt payments were directly deposited to the account, the financial
institution would allow the account holder to have access to an amount
equal to the lesser of the sum of such exempt payments or the balance
of the account on the date of the account review (the ``protected
amount''). The financial institution would be required to notify the
account holder of the protections from garnishment that apply to exempt
funds. The notice, which would have to include certain information,
would be required to be sent within two business days of the completion
of the account review. Financial institutions could choose to use a
model notice contained in the rule in order to be deemed to be in
compliance with the notice content requirements. Financial institutions
that complied with the proposed rule's requirements would be protected
from liability.
For an account containing a protected amount, the financial
institution would be permitted to collect a garnishment fee only
against funds in the account in excess of the protected amount on the
date of the account review, and only if the financial institution
customarily charges its other account holders a garnishment fee of the
same nature and in the same amount. In addition, for accounts
containing a protected amount, a financial institution would not be
permitted to charge or collect a garnishment fee after the date of
account review. The proposed rule would not have required financial
institutions to determine the purpose of a garnishment order, including
whether the order seeks to collect child support or alimony
obligations.
II. Comments and Analysis
In general, individuals, consumer groups, legal aid organizations
and State attorneys general were supportive of the proposed rule and
urged that it be finalized, subject to a number of changes. Banks and
banking industry trade groups generally acknowledged the need for the
rule, but were critical of various aspects of the rule and commented
that a number of changes should be made to the proposed rule in order
to facilitate banks' ability to comply with the requirements of the
rule. Many credit unions and several credit union trade associations
opposed the proposed rule, and objected to various provisions as time-
intensive and burdensome, particularly for smaller credit unions.
Several State child support enforcement agencies commented that the
proposed rule would harm custodial parents and children receiving child
support, and opposed the adoption of the rule unless protection from
garnishment for child support obligations is removed.
Effective Date
Many banks and banking industry associations commented that the
rule should not become effective until one year following the
implementation of the garnishment exemption identifiers that the
Treasury will encode in Automated Clearinghouse (ACH) Batch Header
Records. The commenters stated that systems programming and testing
would be required to automate the detection of the identifiers. The
Agencies are not delaying the effective date of the rule until a year
after garnishment exemption identifiers have been included in the ACH
Records. Although the Agencies understand that many financial
institutions will make systems changes to help automate compliance, the
Agencies do not consider such changes to be necessary for compliance
and do not believe they should be established as a pre-condition to
protecting Federal benefits exempt from garnishment by law. However, to
provide financial institutions with additional time for staff training
and procedural changes, as well as for potential systems changes, we
are delaying the effective date until May 1, 2011. Before this date,
the Treasury will include the garnishment exemption identifiers in
benefit payments and will provide additional information on the
identifiers in an update to the Green Book, A Guide to Federal
Government ACH Payments and Collections.
Scope (Proposed Sec. 212.2)
Some commenters, primarily individuals, noted that the proposed
rule did not include within its scope various Federal payments that are
protected from garnishment by statute. These commenters urged that the
final rule cover all such payments, which include military retirement
payments, as well as certain payments made by the Army, Navy, Air
Force, Marines, Coast Guard, National Oceanographic and Atmospheric
Administration and the Public Health Service.
The Agencies are aware that some other Federal payments are also
protected from garnishment and have structured the rule so as to create
a framework in which such payments can be included in the future.
Federal agencies that issue such payments could, through a public
notice-and-comment rulemaking process, amend their regulations to
provide that their exempt payments are covered by this rule. The
Agencies would then issue a rulemaking to include those payments within
the scope of this rule.
Definition of ``Account'' (Proposed Sec. 212.3)
Some banks and bank trade groups expressed concerns with the broad
definition of ``account'' in the proposed rule, which defined an
``account'' as ``an account at a financial institution to which benefit
payments can be delivered by direct deposit.'' Banks observed that this
definition does not distinguish between personal and business accounts,
both of which could receive direct deposits of Federal benefits. Banks
indicated that the definition raises operational issues, because if an
account, such as a business account, is not held in the name of the
personal customer or debtor it is not likely to be found during the
search of accounts. They therefore recommended that the definition of
the term ``account'' should be expressly limited to ``a personal
consumer account at a financial institution to which benefit payments
can be delivered by direct deposit,'' a definition that would more
closely align with bank record keeping and research systems.
The Agencies are not limiting the definition of account in the rule
to an account held for personal, family or household purposes. Although
the delivery of a benefit payment to a business account may be
relatively uncommon, the Agencies see no reason why the protection
afforded to a benefit payment should be contingent on its delivery to a
personal account, as opposed to a business account. The
[[Page 9941]]
Agencies have refined the definition of account to include any account,
whether classified as a master account or a sub account, to which an
electronic payment may be directly routed. This clarifies, for example,
how the definition would apply to credit union accounting structures
where there is a main member number under which there are individual
transactional accounts. It also makes the definition more consistent
with the provisions of the rule that require financial institutions to
conduct a separate account review for each account that may receive a
benefit payment.
Definition of ``Benefit Payment'' and Use of a Garnishment Exemption
Identifier (Proposed Sec. 212.3)
Some banks and bank trade groups requested that the definition of
``benefit payment'' be revised to avoid confusion in circumstances
where an individual's benefit payments have been directly deposited to
an account held by a representative payee. These commenters suggested
that the term benefit payment be defined to mean ``a direct deposit
payment made by a benefit agency to a natural person, or to a
representative payee receiving payments on behalf of a natural person
`whose name appears in the bank's records as account owner,' under a
federal program listed in Sec. 212.2(b).'' Other banks specifically
urged the Agencies to revise the definition of benefit payment in
proposed Sec. 212.3 to exclude payments made to organizational
representative payees.
Many banks and payment organizations urged that the definition of
``benefit payment'' be revised to make it clear that a payment
constitutes a ``benefit payment'' only if the ACH Batch Header record
contains the unique garnishment exemption identifiers discussed in the
proposed rule. These commenters stated that an institution should be
able to rely on these unique identifiers, and that this ability be
codified in the regulation itself, by amending the definition of
``benefit payment'' and/or the provisions in Sec. 212.5(a) regarding
the account review to be performed by the financial institution. With
respect to the proposal to encode an ``X'' in position 20 of the
``Company Name'' Field of the Batch Header Record for each exempt
benefit ACH payment, many financial institutions noted that encoding an
``X'' in position 20 can result in the ``X'' not being readily readable
because it is the last character position of that field. They
recommended that, instead, an ``X'' be encoded in the first two
positions of the ``Company Name'' Field--positions 5 and 6--which would
make the identifier easier to recognize and would reduce the potential
for false positives where a non-Federal agency company name begins with
a single letter ``X.''
One consumer advocacy organization urged that deposits made by
check be protected under the same procedures applicable to a ``benefit
payment,'' which was defined in the proposed rule to include only a
directly deposited payment. The organization argued that a financial
institution that has a particular type of account designated for
recipients of exempt funds or that notes the exempt source at the time
of the deposit should be encouraged not to freeze those exempt funds
and should be provided the safe harbor protections under this rule.
The Agencies are revising the definition of ``benefit payment,'' as
recommended by the commenters, to make it clear that a payment
constitutes a ``benefit payment'' only if the ACH Batch Header Record
contains a specified unique garnishment exemption identifier. The rule
provides that a payment constitutes a benefit payment if it contains
the characters ``XX'' encoded in positions 54 and 55 of the ``Company
Entry Description'' Field of the Batch Header Record of the direct
deposit entry. While the proposed rule indicated that the garnishment
exemption identifier should be in the ``Company Name'' Field of the
Batch Header Record, the interim final rule provides that the
identifier will be in the ``Company Entry Description'' Field to ensure
that the identifier can be used with all types of ACH transactions. For
example, placing the identifier in the ``Company Name'' Field would
preclude its use with the International ACH Transaction (IAT) Standard
Entry Class code, which does not contain the ``Company Name'' Field. As
with the ``Company Name'' Field, the ``Company Entry Description''
Field is typically captured and included in an account statement,
allowing both the financial institution and the account holder to
readily identify Federal benefit payments exempt from garnishment.
With the garnishment exemption identifier in the ``Company Entry
Description,'' a Social Security payment that currently contains ``SOC
SEC'' in this field will now be encoded as ``XXSOC SEC.'' A Federal
retirement payment currently encoded as ``FED ANNUT'' will now appear
as ``XXFED ANN.'' All benefit payments subject to the interim final
rule will be similarly encoded. The encoding of payments will be in
place by May 1, 2011.
The comments regarding benefit payments delivered to representative
payees have been addressed by changes to the definition of ``benefit
payment'' and the addition of a new defined term, ``account holder.''
The reference to representative payees has been deleted from the
definition of ``benefit payment,'' and the new term ``account holder''
is defined to mean ``a natural person against whom a garnishment order
is issued and whose name appears in a financial institutions records as
direct or beneficial owner of an account.'' These changes clarify that
the protections in the rule apply whenever a person's name appears in
the financial institution's records with an ownership interest in an
account, either as the directly named owner or as the beneficial owner
on an individual or organizational representative payee account, or on
another type of fiduciary account.
The scope of the interim final rule does not extend to check
payments. Checks do not raise the same concerns raised by the direct
deposit of exempt funds because a benefit recipient who receives a
Treasury check representing exempt funds can choose to cash the check
rather than to deposit the check and take on the risk that the funds
will be garnished. In addition, financial institutions cannot readily
identify whether a Treasury check that was deposited to an account
represents exempt funds. Whereas ACH record formats and systems
facilitate both the encoding and recognition of a garnishment exemption
identifier with directly deposited payments, the systems and processes
used to produce and receive Treasury checks do not facilitate an
equivalent approach that would make it possible for financial
institutions to determine whether a Treasury check represents an exempt
payment. Even if the Agencies could develop a feasible way for an
identifier to be included on a Treasury check, a financial institution
would need to manually retrieve images or copies of recent items to
find Treasury checks and visually inspect them. The fact that the rule
does not address Treasury checks in no way affects an individual's
right to assert or receive an exemption from garnishment by following
the procedures specified under the applicable law.
Definition of ``Garnishment'' and ``Garnishment Order'' (Proposed Sec.
212.3)
Several commenters requested clarification on whether pre-judgment
garnishments and similar extraordinary legal process are excluded from
the scope of the definition of garnishment and the requirements of the
rule, stating that the policy considerations behind
[[Page 9942]]
emergency and extraordinary legal process are different from those
relevant to civil debt collection. One commenter, however, expressed
concern that the definition of garnishment order in the proposed rule
was too narrow and that it should be revised to include: Any order to
freeze an account in anticipation of a further order to enforce a money
judgment; any legal process issued as part of a civil proceeding but
prior to entry of a money judgment; and any order of a State or local
government or agency to freeze or pay funds in connection with an
obligation owed to or collected by the State or local government or
agency.
The definition of ``garnish or garnishment'' has been revised to
make it clear that pre-judgment garnishments are included within the
definition. The proposed definition, which was ``execution, levy,
attachment, garnishment, or other legal process to enforce a money
judgment,'' has been revised by deleting the phrase ``to enforce a
money judgment.'' With the deletion, the definition used in the rule is
identical to the definition used in some of the Agencies anti-
garnishment statutes.
Definition of Lookback Period (Proposed Sec. 212.3)
Many comments were received regarding the length of the lookback
period. Individual benefit recipients and consumer groups generally
commented that the 60 day lookback period should be extended, with most
commenters suggesting a 65 day period in order to ensure that two
months worth of payments are protected in all cases. Several consumer
groups and individuals commented that the rule would not protect funds
in an account that originated from a large back-payment of benefits, as
could occur if a back-payment were credited to an account more than 60
days prior to the receipt of a garnishment order. One consumer advocacy
organization urged that the rule require banks to have an informal
process in place to evaluate a claim by the debtor that the funds in
excess of the two months are also protected under Federal garnishment
rules in cases where a judgment creditor seeks more than two months of
value of the debtor's protected income. The purpose of this informal
process would be to protect beneficiaries with more than two months
worth of Federal benefits in their financial institution and alleviate
the burden of forcing them to go to court to protect exempt funds.
Credit unions generally commented that, as creditors and potential
garnishors, they felt it was inappropriate to shield 60 days of
payments from garnishment, and that 30 days protection would be more
appropriate. Some banks and credit unions stated that due to the way
account history is archived, they could not easily comply with a 60 day
lookback requirement and requested that the lookback period be limited
to 45 days or one month. Most banks commented that they could comply
with a 60 day lookback period, but some banks and bank trade groups
commented that a two month lookback period would be easier to
administer and less prone to potential errors. Using this two month
definition, the lookback period would be measured not by counting back
60 days, but rather by measuring a date-to-date period from a start
date, for example September 15, and ending with the corresponding date
of the month two months earlier, in this example July 15. In light of
the comments, the Agencies have revised the lookback period. The
interim final rule defines the lookback period as a two month period
beginning on the date preceding the date of the account review. The two
month lookback period will ensure that in almost all cases, the
protected amount will include two benefit payments, as urged by
consumers and consumer advocacy groups. The Agencies conducted research
on Federal benefit payments covered by this rule over a 7 year period
that showed that a 60 day lookback period will capture at least two
payments in 95% of cases, whereas a two month lookback period measured
date-to-date will capture at least two payments in 99% of cases. In
addition, the two-month lookback period addresses financial
institutions' request for a lookback period that is easier to
administer and less error-prone.
Moreover, in the proposed rule the lookback period began on the
date preceding the date on which a financial institution is served a
garnishment order. In the interim final rule, the lookback period
begins on the date preceding the date of account review. This change
reflects that the interim final rule allows two business days, and
potentially additional time, to perform the account review after
receipt of a garnishment order. By linking the lookback period to the
date of account review and not the date an order is served, the rule
ensures that the account review will better reflect the current state
of an account and capture the most recent benefit payments that may be
deposited on or after the day an order is served but before the account
review is performed.
Definition of ``Protected Amount'' (Proposed Sec. 212.3)
One bank questioned whether the ``balance on the day of the account
review'' used in defining the protected amount refers to the beginning
balance or ending balance on that day, and recommended that the rule be
clarified by stating that financial institutions are to look at the
beginning account balance. Another commenter asked whether items
presented for payment against the debtor's account that arrive the same
day as the garnishment are included in the protected amount and asked
that the rule provide explicit guidance on whether the protected amount
is calculated based on the account balance prior to or after posting of
the debits or credits received on the same day as the garnishment.
Some commenters urged the Agencies to define the protected amount
as an aggregate across accounts, rather than applying a protected
amount to each account separately. Under this proposed definition, the
protected amount would be the lesser of (i) the sum of all benefit
payments deposited ``into all accounts owned by the account holder''
during the lookback period or (ii) the ``aggregate balance in these
accounts'' on the date of account review.
Some commenters, including financial institutions, trade groups,
and consumer advocacy groups, stated that protecting a flat dollar
amount would promote certainty, clarity and administrative simplicity.
The interim final rule refers specifically to beginning and ending
balances in the definition of protected amount. Under the revised
definition, items presented for payment against the account that arrive
on the same day as the date of account review would not be included in
the protected amount. The Agencies are not defining a flat dollar
amount as the protected amount because the use of a flat dollar amount
will invariably result in underprotecting some individuals and
overprotecting others.
The Agencies are not defining the protected amount based on the
aggregate deposits and balances across all accounts, for several
reasons. First, the Agencies believe the protection should be specific
to the account(s) to which benefit payments are directly deposited,
ensuring that a direct, verifiable connection exists between the
protected amount and the evidence of an exempt Federal benefit payment.
Second, defining the protected amount as an aggregate across all
accounts assumes that amounts transferred between accounts must be
exempt. As discussed
[[Page 9943]]
more fully in this preamble under the heading ``Protection for funds
transferred to another account (Sec. 212.5),'' however, the Agencies
do not believe the account review and the establishment of the
protected amount can apply to funds transferred from one account to
another. Third, an aggregated protected amount would introduce
additional accounting complexities in different deposit and balance
scenarios. For example, if the sum of benefit payments is less than the
combined balance across accounts, but more than the balance in any
individual account, the protected amount could cover only partial
amounts in one or more accounts and would require a rule for allocating
the protected amount across accounts.
The interim final rule retains the subsection in the proposed rule
that makes clear that a protected amount must be established separately
for each account held in the name of the account holder.
U.S. Garnishment Orders (Proposed Sec. 212.4)
Many commenters objected to excluding garnishment orders obtained
by the United States from the protections of the rule. Legal aid
organizations, consumer advocacy groups and individuals stated that
these orders should not be excluded because doing so contradicts the
goal of ensuring that beneficiaries retain their exempt benefits, and
that no specific creditor should be treated differently from others.
Financial institutions stated that the requirement in the proposed rule
to treat garnishment orders where the United States is the garnishor
differently from other garnishment orders adds an undesirable level of
complexity to the garnishment process and raises compliance concerns.
Some financial institutions expressed concerns that it may be difficult
to determine whether the United States is the creditor is some cases.
Financial institutions and financial institution trade groups
requested that if the requirement to exclude orders obtained by the
United States is retained, the final rule require that each order
issued by the United States state on its face--preferably on the first
page--that it is exempt from the requirements of 31 CFR 212.5 and
212.6. Financial institutions argued that such a statement would
provide certainty and allow for rapid decision-making and handling by
the financial institution. Alternatively, financial institutions
requested that each order issued by the United States be accompanied by
a Notice of Garnishment as set forth in Appendix B of the rule so as to
ensure that the initial examination is handled quickly and accurately.
Financial institutions also requested confirmation that non-
garnishment forms of legal seizure issued by the United States are also
excluded from the review/protection process. They explained that the
term ``garnishment'' typically encompasses the orders used in the
judicial collection of a civil money judgment, and indicated that they
handle many non-garnishment legal orders that freeze customer funds on
a continuing basis, such as temporary restraining orders, injunctions
and seizure warrants. They recommended that all legal process issued by
the United States be treated the same way, and be specifically excluded
from the requirements of proposed Sec. Sec. 212.5 and 212.6.
One commenter suggested that the rule be modified to require a
financial institution receiving a garnishment order from the Federal
government to screen the account for any of the types of benefits that
are not exempt from collection by the Federal government. This
commenter recommended the creation and use of a separate code for those
Federal benefits that are not exempt from collection when the creditor
is the Federal government, and that financial institutions be required
to screen for this factor.
The Agencies are retaining in the rule an exclusion for garnishment
orders obtained by the United States. There are several Federal
statutes that expressly permit the United States to garnish Federal
benefit payments. See 18 U.S.C. 3613(a), 26 U.S.C. 6334(c), 31 U.S.C.
3716(c)(3)(A)(i), and 42 U.S.C. 1320a-8(e)(1)(C). Absent a carve-out
for all garnishment orders obtained by the United States, financial
institutions would face uncertainty and the burden of determining on a
case-by-case basis whether a particular order obtained by the United
States was subject to the rule or not. Moreover, garnishments orders
obtained by the United States are already governed by a comprehensive
Federal statute, the Federal Debt Collection Procedures Act (FDCPA), 28
U.S.C. 3001 et seq., which establishes a uniform framework with
exclusive civil procedures for the collection of all judgments due the
United States, including cases where the United States is prohibited
from garnishing Federal benefit payments as well as cases where it is
expressly allowed to garnish such payments. While the rule is needed to
address the problems of garnishing exempt funds, it would both overlap
and conflict with the framework of the FDCPA unless garnishment orders
obtained by the United States are excluded.
In order to allow financial institutions to quickly identify
whether a garnishment order was obtained by the United States, the rule
requires that such orders have attached or included with them a
standard Notice of Right to Garnish Federal Benefits.
Child Support Orders (Proposed Sec. 212.4)
Several State child support enforcement agencies argued that
garnishment orders for purposes of child support should be treated in
Sec. 212.4 in the same way as orders obtained by the United States.
These agencies expressed concerns regarding the legality and equity of
protecting benefit payments from garnishment for child support. State
child support agencies pointed out that Federal law and administrative
regulation not only allow but encourage child support enforcement
programs to take enforcement action against most funds identified as
``protected'' in the proposed rule in order to satisfy court ordered
support requirements. They noted that an obligation to support children
and family is not characteristically similar to other debts and that
child support obligations are not treated like other debts in contexts
of many Federal statutes, such as the Bankruptcy Code, the Fair Debt
Collections Practices Act, and the Consumer Credit Protection Act.
State child support enforcement agencies also pointed out that
while SSA benefit programs participate with the Federal Office of Child
Support Enforcement (OCSE) in data matching programs that allow child
support programs to collect child support from Social Security Title II
benefits, this is not the case for VA programs. There is no proactive
matching that provides viable useful information on VA benefits, and
there is not an effective program that efficiently allows for
collection of child support from any VA benefits.
Child support enforcement agencies argued that the proposed rule
would diminish their powers in direct contravention of the rights and
responsibilities assigned to the child support enforcement program by
Federal law and regulation. In view of these concerns, commenters
requested that a provision be added to the rule to require a financial
institution to make a determination if an order was issued by a Child
Support program under Title IV-D of the Social Security Act, in the
same way that financial institutions are required to make as to whether
a garnishment order was obtained by the United States. These agencies
argued
[[Page 9944]]
that an exemption for child support orders would be consistent with the
clear Congressional intent to require all persons to support their
families. Commenters argued that such an exemption would not be
burdensome for financial institutions to comply with because child
support garnishment orders are distinctive and easily identifiable by
financial institutions.
The interim final rule contains an exclusion for garnishment orders
issued by a State child support enforcement agency that administers a
child support program under Title IV-D of the Social Security Act.
These orders are treated in the same way as orders obtained by the
United States. Under the rule, a financial institution must determine
whether an order was obtained by the United States or issued by a State
child support enforcement agency. In making this determination, a
financial institution may rely on the presence of a Notice of Right to
Garnish Federal Benefits, which must be attached or included with the
order. If the notice is present, a financial institution is not
required to perform an account review or take actions otherwise
required by the rule. Rather, the financial institution follows its
customary procedures for garnishment orders and treats the relevant
account(s) as if no Federal benefit payment were present. However, the
Agencies note that this exclusion does not alter an individual's right
to assert any protections for benefit funds that may exist under
applicable Federal law.
Deadline for Account Review (Proposed Sec. 212.5(a))
Most of the banks and bank trade groups that commented on the
proposed rule stated that the requirement to perform an account review
within one business day of receipt of a garnishment order is
unrealistic. Commenters stated that garnishment orders can be delivered
to any bank location and may not reach the designated processing
department until after one day from ``receipt.'' They also pointed out
that sometimes States bundle together large numbers of garnishment
orders and deliver them in a batch. Financial institutions requested
that the final rule recognize the delivery of bundled/batches of large
numbers of garnishments delivered in one shipment and permit financial
institutions to commence the account review (and accordingly, the
lookback period) as permitted by the creditor. Financial institutions
argued that they should be allowed leeway in this regard as it may be
impossible to meet the one day review requirement.
Some commenters, primarily credit unions, asked that the deadline
be increased to a period ranging from two to five business days
following receipt of the order. Other commenters, primarily banks,
asked that the obligation to commence review begin only after the
institution receives the information necessary to identify the property
of the benefit recipient. Some commenters asked for a combination: the
longer of two business days or the receipt of the information necessary
to identify the property of the benefit recipient.
A number of commenters suggested that the phrase ``a garnishment
order issued against an account'' in proposed Sec. 212.5(a) be
rewritten to refer to ``a garnishment order against a natural person.''
These commenters pointed out that a garnishment order must be directed
against an individual rather than a deposit account, as a garnishment
order is directed against a judgment debtor and his or her property,
and rarely against a deposit account. Commenters indicated that this
definition would be more accurate and also avoid capturing garnishment
orders directed against organizations.
The Agencies have extended the account review deadline from one
business day to two business days. To address situations in which a
financial institution receives a garnishment order that does not
include sufficient information to identify whether the debtor is an
account holder, the rule provides that in such a case the two business
day deadline commences when the financial institution receives
sufficient information to determine whether the debtor is an account
holder. Based on comments submitted by a variety of financial
institutions, the Agencies understand that when a financial institution
receives a garnishment order with insufficient information to identify
the debtor, it notifies the creditor or court that additional
information is needed and and can take no action on the order until it
receives such information. The rule does not affect this status quo
process, and recognizes that action on an order, including the account
review, can't begin until the debtor is identified as an account
holder.
In cases where a financial institution is served a batch of a large
number of orders at the same time, the interim final rule extends the
account review deadline to a date that may be permitted by the creditor
that initiated the orders.
Finally, the language in the interim final rule has been revised to
reflect that garnishment orders are issued against debtors rather than
accounts.
Protection for Funds Transferred to Another Account (Proposed Sec.
212.5)
Financial institutions broadly supported the proposal to exclude
funds transferred to another account from the rule's protection, and
requested that Sec. 212.5 explicitly state that transferred funds are
not subject to protection.
One consumer advocacy organization commented that exempt money that
is transferred from one account to another should be protected under
the rule. This organization commented that to preserve economic
security, elders and younger adults living with disabilities are
generally counseled to transfer incoming income into a safe savings
account. The organization argued that transferring exempt money into a
secondary account should not be seen as forfeiting the protection
available for exempt funds and that, at the very least, beneficiaries
should be notified by the financial institution before transferred
funds are released under the garnishment order and allowed the
opportunity to show the institution that the transferred funds are
exempt Federal funds and therefore protected under the rule.
The Agencies have revised Sec. 212.5 to state explicitly that
funds transferred from one account to another are excluded from the
account review and the establishment of the protected amount. Although
the Agencies understand that exempt funds may be transferred to a
savings or other secondary account following the initial deposit, it is
not clear that transferred funds necessarily retain their exempt
character in all cases, and, unlike a direct deposit payment, that
transfer transactions will be readily identifiable as containing exempt
funds.
If the source account from which funds are transferred contains
other deposits of non-exempt funds or withdrawals of exempt funds, or
if the receiving account contains other credits or debits following the
transfer of funds, there is no clear way to distinguish balances
transferred into the receiving account as exempt. While the Agencies
might develop a standard accounting convention to label and trace
originally exempt funds transferred over time, doing so would likely
generate inaccurate or inappropriate results given the uniqueness of
transactions in a given case, and given the attenuated connection that
may exist between the original deposit and subsequent transfer.
Moreover, requiring the examination of all account transfers after a
Federal benefit payment has been identified would impose a significant
burden on financial institutions, since
[[Page 9945]]
they would not be able to rely on a transaction indicator, like the ACH
identifier, in searching account histories to determine whether
transferred funds should be classified as exempt.
While the interim final rule states that financial institutions
should not attempt to trace the movement of funds between accounts in
establishing a protected amount, the Agencies recognize that exempt
funds may be transferred and note that nothing in the rule limits an
individual's right to assert a further exemption for additional funds
or to alter the exempt status of transferred funds that may be
identifiable and traceable when the facts of a given case are reviewed.
Access to Protected Amount by Account Holder (Proposed Sec. 212.6(a))
Consumer groups commented that the rule should make it clear that
an account holder has ``full, unfettered and customary'' access to the
protected amount, to prevent banks from improperly providing only
limited access to account holders. One commenter urged that language be
added to preclude any attempts by creditors to subsequently litigate
whether the ``protected amount'' actually consists of exempt funds.
The rule has been revised to state that a financial institution
must ensure that the account holder has ``full and customary'' access
to the protected amount. The Agencies intend by this language to ensure
that after a garnishment order is received, the account holder
continues to have the same degree of access to the protected funds that
was provided prior to the receipt of the order. Additional language
also has been added to make it clear that a financial institution's
calculation of the protected amount is not subject to a legal action by
a creditor challenging that determination.
One-Time Account Review (Proposed Sec. 212.6(d))
One bank requested clarification on the requirement in proposed
Sec. 212.6(d) to determine whether a garnishment order that is
received was previously served on the bank. The bank commented that
financial institutions often receive multiple orders from the same
creditor for the same account holder, and that it is difficult to
determine whether the receipt of a second order would be considered the
same order, which would not require another account review; or a new or
different order, which would require a new account review. The Agencies
are not addressing in the final rule what process financial
institutions should use to determine whether a garnishment order is a
new order or an order that was previously received, as this is
necessarily a fact-specific determination.
Continuing Garnishment Responsibilities (Proposed Sec. 212.6(e))
One commenter requested that the language of proposed Sec.
212.6(e) be revised. That section provides that a financial institution
``shall have no continuing obligation to garnish'' amounts deposited or
credited to the account following the account review. The commenter
observed that this wording would allow a financial institution to
decide whether to comply with the terms of a continuing garnishment
order, rather than prohibiting a financial institution from complying
with the terms of a continuing garnishment order. The interim final
rule has been revised to make it clear that a financial institution is
not permitted to give effect to a continuing garnishment order
affecting an account containing a protected amount.
Deduction of Garnishment Fees (Proposed Sec. 212.6(f), (g))
Many comments were received on the provisions in the proposed rule
regarding the imposition of garnishment fees by financial institutions.
Consumer advocacy groups opposed the language in the proposed rule at
Sec. 212.6(f) that affirms the ability of a financial institution to
charge a customary garnishment fee if the account contains an
unprotected amount. They argued that if a garnishment fee is prohibited
on exempt amounts, it should be prohibited regardless of whether the
exempt funds fall into the artificially narrow scope of the protected
amount. They commented that proposed Sec. 212.6(f) should be deleted
because it may provide support for the imposition of excessive fees.
Consumer advocacy groups further urged that the definition of
``garnishment fee'' be amended to include not only a fee for imposing
the garnishment, but rather any fee that arises as a result of a
garnishment.
Financial institutions, on the other hand, strongly objected to
restricting the collection of a garnishment fee to cases in which there
are funds in the account in excess of the protected amount. They
challenged the legality of the restriction and argued that it is unfair
both to the financial institution and to other account holders, to whom
the costs for administering these accounts will be transferred. Some
financial institutions commented that this restriction may lead them to
close accounts that contain benefit payments if a garnishment order is
received.
Some financial institutions argued that the provisions of the rule
on garnishment fees exceed the Agencies' statutory authority, stating
that none of the statutes cited as authority for the regulation allow
the Agencies to limit or prohibit any fee a financial institution
charges for any service based on the source of funds in the account.
One financial institution argued that the prohibition may amount to an
unlawful taking, running afoul of the Fifth Amendment to the United
States Constitution. Another financial institution commented that the
proposed rule contravenes a bank's legal right to take a security
interest in its deposit accounts and its common law right of offset.
Many financial institutions argued that the imposition of garnishment
fees is a matter of contract between financial institutions and their
customer, and that customers agree to pay for fees and charges with the
maintenance of their deposit accounts.
Banks also opposed the garnishment fee restrictions as a matter of
policy and equity. Some banks commented that they did not understand
the distinction drawn by the Agencies between a garnishment fee and
other fees and charges incurred by a customer. Many financial
institutions commented that they incur significant costs in processing
garnishment orders, and that garnishment fees should be permitted
whether or not an account has excess funds beyond any protected
amounts. Financial institutions also argued that there is no principled
reason why benefit recipients should be allowed to contract or pay for
needed banking services but be legally shielded from a garnishment fee.
Some financial institutions went further and argued that in fairness to
customers who do not receive Federal benefit payments, a separate
garnishment fee should be allowable for those accounts with Federal
benefit payments to help defray the extra costs to the bank imposed by
this regulation and to recognize benefit received by the customer from
the protections of this rule.
Financial institutions also opposed the proposed restriction to
permit assessing the fee only on the date of account review. One bank
indicated that it saw no purpose in mandating the date on which the fee
may be assessed and that if banks are afforded only a single, specific
date to assess the garnishment processing fee, they may automatically
elect to assess this fee without regard to whether the fee may be
waived in certain instances.
[[Page 9946]]
Other financial institutions indicated that if they could not
recoup their costs for processing garnishment orders, there would be
little incentive to allow the account to remain open. Rather than incur
the risk of future garnishment expenses, some financial institutions
indicated that they might choose to close accounts for this population.
Commenters noted that Federal benefit payment accounts are often small-
balance, labor intensive accounts that can be unprofitable for banks to
maintain, and that limitations in the proposed rules on the ability of
banks to recover their costs for handling garnishments exacerbate this
situation.
Some legal aid organizations and consumer advocacy groups appeared
to anticipate that financial institutions might respond to the rule by
closing accounts held by benefit recipients if the accounts are
garnished. These organizations indicated that this practice already
occurs in some instances. Specifically, in some cases banks that
receive a garnishment order for an account containing only exempt funds
send the account holder a check for the exempt funds and close the
account. Legal aid organizations requested that the final rule prohibit
this practice, which causes hardship for benefit recipients.
The interim final rule prohibits financial institutions from
charging a garnishment fee against a protected amount, and also
prohibits the charging of a garnishment fee after the date of the
account review. The Agencies believe that the anti-garnishment statutes
support a prohibition against the imposition of a garnishment fee if
the account contains only a protected amount. Some cases have held that
financial institutions may charge account-related fees against
protected funds in an account, and that the charging of the fees does
not constitute garnishment or other legal process. For example, courts
have upheld a bank's right to charge overdraft fees from Social
Security and Supplemental Security Income funds deposited to a bank
account. See Lopez v. Washington Mutual Bank, 2002 U.S. App. LEXIS
24344; see also Wilson v. Harris, 2007 U.S. Dist. LEXIS 65345. The
Agencies view garnishment processing fees as distinct from other
account-related fees. If funds in an account are protected from
garnishment, the Agencies find it unreasonable to conclude that those
same funds can be subjected to a fee for handling a garnishment order--
an order that itself cannot legally be processed against the funds.
The rule prohibits a financial institution from charging a
garnishment fee after the date of account review because otherwise the
rule would need to prescribe procedures that financial institutions
would follow to monitor accounts in real time to track deposits and
withdrawals, determine whether new deposits are exempt or not, and
determine whether a garnishment fee could be imposed. The Agencies
believe that such an approach would be complex, confusing for account
holders and at odds with the one-time review process established under
the rule. Accordingly, the rule restricts the timing of garnishment
fees.
The Agencies do not believe that the anti-garnishment statutes
support a general prohibition on imposing a garnishment fee against
non-protected funds. In addition, the Agencies are not expanding the
prohibition on garnishment fees to apply to ``any fee that arises as a
result of a garnishment,'' because such a definition would be overly
broad. The Agencies are not in this rulemaking addressing a financial
institution's right to take a security interest in its deposit accounts
or to exercise a contractual right to deduct fees or a common law right
of offset against funds that are exempt from garnishment, except in the
very narrow context of deducting a garnishment processing fee from an
account containing a protected amount following receipt of a
garnishment order.
The interim final rule requires financial institutions to ensure
that account holders have full and customary access to protected
amounts. The rule does not address the conditions under which financial
institutions may close accounts, which the Agencies believe is beyond
the ambit of this rule.
No Actions After the Date of Account Review (Proposed Sec. 212.6)
The proposed rule was based on the principle that a financial
institution's response to a garnishment order must be a one-time event,
based on the status of an account on the date of account review, and it
prohibited financial institutions from taking any action on the account
in response to the garnishment order after the date of account review.
The interim final rule adopts this principle, which applies to all
actions that a financial institution may perform on an account,
including examining deposits, freezing funds, protecting funds, and
collecting garnishment fees. Accordingly, Sec. 212.6(f) of the interim
final rule provides that a financial institution must perform the
account review only one time and may not repeat the review
subsequently, including in cases where the same garnishment order is
served again on the financial institution. Similarly, Sec. 212.6(g)
preempts State laws requiring continuing garnishments and prohibits a
financial institution from freezing funds deposited after the one-time
account review. Likewise, Sec. 212.6(h) provides that a financial
institution may not collect a garnishment fee from unprotected funds
after the date of account review.
The Agencies have necessarily established these provisions to give
proper effect to the anti-garnishment statutes, since it is not
feasible to implement both a protected amount and to permit continuing
actions related to the garnishment order. Because the status of an
account will change with every transaction following the account
review, requiring both protection for exempt funds and permitting other
subsequent actions would necessitate the monitoring of transactions in
real time to continually re-assess the account balance and determine
which funds are exempt and which are not exempt from garnishment. As
was discussed in the supplementary information to the proposed rule,
the Agencies believe that any policies that would necessitate the on-
going monitoring of transactions would be neither operationally nor
economically feasible. Therefore, the rule does not permit actions
related to a garnishment order after the date of account review, and
requires all permissible actions to be based on the balance in the
account derived from transactions occurring at or before the open of
business on the date of account review.
Financial Institution Right of Offset (Proposed Sec. 212.8)
Consumer advocacy groups urged the Agencies to delete the language
in Sec. 212.8(b) of the proposed rule stating that nothing in the rule
shall be construed to invalidate any term or condition of an account
agreement that is not inconsistent with the rule, on the basis that
this provision tacitly supports setoffs from exempt funds. Consumer
groups noted that the proposed rule is silent as to overdraft charges
and other setoffs against exempt funds. These commenters supported
prohibiting setoffs against exempt funds for all types of fees, arguing
that there are some cases that have held it is not legal for financial
institutions to seize exempt funds. Alternatively, they requested that
the Agencies clarify that this provision should not be construed to
validate account agreements that permit the seizure of exempt funds
through setoff or any other means.
[[Page 9947]]
In contrast, some financial institutions commented that it is
important that their existing rights of setoff be protected. Credit
unions commented that currently there are two different mechanisms
credit unions can employ in order to use members' funds on deposit to
satisfy outstanding debts to the credit union. First, credit unions may
create a contractual lien during the account opening and lending
process that provides the credit union the right to use shares on
deposit in the event an account holder becomes delinquent on a loan
issued by the credit union. Additionally, the Federal Credit Union Act
(FCUA) provides credit unions the statutory right to enforce a lien
against a member's shares if the member is delinquent on a loan issued
by the credit union. See 12 U.S.C. 1757(11). In order to take advantage
of the statutory lien, a credit union must comply with 12 CFR 701.39 of
the National Credit Union Administration's (NCUA) rules and
regulations.
The proposed rule did not address, nor did the Agencies intend to
address, the right of financial institutions to set off obligations of
an account holder against an account to which Federal benefit payments
have been deposited. The rule is intended to protect account holders
who receive directly deposited benefit payments from difficulties that
may arise when a garnishment order against an account holder is served
on a financial institution. Accordingly, the issue of setoff by
financial institutions is outside the scope of the interim final rule.
Notice (Proposed Sec. 212.6(c), Sec. 212.7, Appendix A)
Comments on the required notice to account holders were received
from a broad array of commenters. The most frequent comment, which was
received from all types of commenters, was that the model notice needs
to be rewritten to be more easily understandable, and that the Agencies
should have the notice revised by a literacy expert and tested. In
addition, financial institutions commented broadly on a wide range of
other issues relating to the notice. Many financial institutions
objected to the requirement to send any notice, observing that this is
outside the scope of a financial institution's responsibilities with
respect to its customers, imposes considerable costs burdens on
financial institutions, and likely will result in follow-up telephone
calls which add to customer service burdens. Commenters argued that
debtors who have protected Federal benefits deposited to their accounts
will receive two notices from two different sources which is likely to
generate additional confusion. Some commenters suggested that the rule
provide, at least in the jurisdictions in which the creditor is
required to send garnishment information to the debtor, that the
creditor be required also to send a notice regarding Federal benefit
payments to the debtor. Two State child support enforcement agencies
objected to the requirement that any notice be sent, on the basis that
the notice would lead to the withdrawal of funds and create the false
impression that funds are protected from child support enforcement
action.
Many financial institutions also commented on specific aspects of
the notice and notice requirement. Some financial institutions asked
for longer periods of time ranging from 3 to 7 days to send the notice
in light of the burden it imposes. One commenter noted that Sec. 212.7
of the proposed rule does not indicate who is to receive the notice in
cases where the account in question is held in the names of two or more
persons, and recommended that in the case of multiple account holders,
notice to any of the account holders should be sufficient, regardless
of who is ultimately required to receive the notice. Some banks
commented that if a customer has more than one account at a bank, the
bank should have the option of sending one notice for all accounts or
separate notices for each account. They stated that this would provide
flexibility to design bank processes in the manner the bank deems most
efficient while ensuring that the customer receives the information he
or she needs.
Financial institution trade groups recommended that the notice
requirement not apply in situations where a financial institution finds
when it conducts the account review that the account reflects an
overdraft or zero balance, or where there are no funds in the
customer's account that exceed the protected amount. They expressed
substantial concerns that the requirement to provide notice in these
cases would unnecessarily confuse the account holder, and that
customers receiving this notice are likely to call the bank for an
explanation, requiring additional resources to handle calls. They also
indicated that requiring notice in these cases would be a significant
burden for financial institutions. One bank estimated that
approximately 60% of the orders it receives would involve accounts
where no funds were frozen, either because there are no funds in the
account or because the funds that are present are fully exempt.
Some financial institutions commented that the list of benefits
required under Sec. 212.7(a)(7) of the proposed rule to be included in
the notice is confusing and misleading, both because account holders
may construe it to mean that the funds should not have been held and
because in many States these funds are not exempt once deposited in a
bank account. Commenters requested that this requirement be amended to
state simply that Federal or State law may provide additional
exemptions and that comparable changes be made to the model form.
A number of financial institutions requested the removal or
revision of the requirement at Sec. 212.7(a)(8) of the proposed rule
that the notice explain the account holder's right to assert a further
garnishment exemption for amounts above the protected amount by
completing exemption claims forms. They argued that this requirement
imposes a considerable burden on the financial institution to keep
apprised of the process for claiming exemptions in each jurisdiction
and to provide a description of the process in the notice to the
account holder, particularly for an institution with a presence in a
large number of States. Some financial institutions argued that this
provision goes beyond the stated purpose of the regulation, because in
most cases the relevant exemptions would be under State law, which is
not within the scope of the Federal garnishment laws. One large bank
expressed concern that by providing guidance on the statutory
processes, a bank risks creating the perception that it is providing
legal advice. Some commenters urged that the notice simply state that
the account holder may have a right to assert a further garnishment
exemption for amounts above the protected amount by complying with the
processes provided by State law. Other commenters recommended that this
provision clarify that such claims are not against a bank that has
complied with the proposed rules, so as to avoid potential customer
confusion regarding available remedies and next steps he or she should
take. Several commenters suggested that the Agencies urge the States to
incorporate into State garnishment forms model language on the
protection of Federal benefits, stating that uniform adoption of
standard language on Federal benefit payments would reduce the
potential confusion to account holders.
Some financial institutions requested that Sec. 212.7(a)(9) and
(10) of the proposed rule be revised to state that the notice include
the means of contacting the judgment creditor and court only if
[[Page 9948]]
that information is contained in the garnishment order served on the
financial institution.
In contrast to financial institutions, consumer advocacy and legal
aid organizations commented that the notice is important in ensuring
that account holders are informed of the receipt of a garnishment order
and aware of their rights in relation to it. One consumer advocacy
group proposed that for those consumers that do in fact have their
accounts garnished, notice be required to be given by either registered
mail or personally served to ensure that the consumer actually receives
notice of the garnishment. Several legal services organizations
commented that the model notice should advise the debtor of his right
to consult an attorney and include information on the availability of
free legal aid attorneys.
Consumer advocacy groups recommended that the notice specify
exactly how much money the bank has frozen and the name and number of
the account in which these funds are found. They also recommended that
the notice specify the amount of any garnishment fee the bank has
assessed against the recipient's account. Other recommendations
included (1) the notice should state that future funds deposited in the
account will not be subject to seizure as the result of this
garnishment order; (2) the notice needs to include information about
local, free legal programs; and (3) the regulation itself should
reference and specifically recommend the use of the model notice with
blanks to be filled in for State-specific information.
As indicated above, both consumer advocacy organizations and
financial institution trade groups criticized the complexity of the
wording of the proposed model notice, noting that it uses complex
language, compound sentences, and long paragraphs. Many commenters
submitted proposed revisions to the wording to improve its readability.
In general, commenters encouraged the Agencies to consider testing
provisional form(s) with consumer focus groups directly or through
voluntary financial institutions; to strike references to creditor and
court contact information; and to rewrite the notice at more basic
literacy standards, not to exceed an 8th grade reading level.
An organization representing collection attorneys requested that
the final rule require financial institutions to provide notice not
only to the account holder but also to the judgment creditor. They
argued that since the rule does not require notice to the judgment
creditor/garnishor, it violates the creditor's constitutional rights to
notice that its State law rights are preempted. They contended that
such a result is patently unfair to judgment creditors/garnishors that
have a right to know the particulars as to why a financial institution
did not freeze certain funds otherwise subject to collection under
State law.
The interim final rule contains a number of changes to the notice
provisions and to the model notice itself, reflecting the comments
received. The amount of time required to issue the notice has been
increased from two business days to three business days from the date
of account review. The Agencies believe that the notice should be sent
to the account holder named in the garnishment order, and not to a co-
owner of an affected account, and have revised the rule accordingly.
The Agencies agree with comments made by consumer advocacy
organizations that the notice should identify the account affected by
the order and specify exactly how much money the financial institution
has frozen, if any, as well as the amount of any garnishment fee
assessed. The Agencies do not believe that notice should be required to
be sent by registered mail or personally served on the account holder.
The Agencies do not believe it serves a useful purpose, and agree that
it may be confusing to an account holder, for a notice to be sent in
situations where a financial institution finds when it conducts the
account review that the account reflects an overdraft or zero balance.
In contrast, however, the Agencies do not agree that a notice should
not be required where there are no funds in the customer's account that
exceed the protected amount. Therefore, the interim final rule requires
notice to the account holder if the financial institution's account
review results in the establishment of a protected amount.
In the interim final rule, the Agencies have attempted to strike a
balance between ensuring that account holders receive useful, relevant
information and avoiding the complexity and confusion that a lengthy
notice could create. The Agencies are also cognizant of the concerns
expressed by financial institutions that the provision of certain
information may be unduly burdensome and could create the impression
that the financial institution is providing legal advice or acting as
an intermediary between the debtor and the court or creditor.
Accordingly, the interim final rule allows, but does not require,
financial institutions to include: Additional information regarding
State or local rules; the availability of legal resources that account
holders might wish to consult; and a statement that by issuing the
notice, the financial institution is not providing legal advice. In
addition, the rule has been revised to state that in providing the
notice, a financial institution shall not be deemed to be providing
legal advice to the account holder. The requirement that financial
institutions provide the means of contacting the creditor and court has
been qualified to make it clear those requirements apply only if the
order includes that information. Lastly, the Agencies are not including
a requirement in the rule to send a copy of the notice to the creditor.
The Agencies believe it is inappropriate for the financial institution
to bear the cost of notification to a creditor since the financial
institution has no relationship with the creditor, in contrast to the
account holder.
Finally, the Agencies have revised the model notice in the interim
final rule to improve its readability based on input from financial
education and literacy professionals. The organization of the model
notice has been changed to a question-and-answer format with a chart
showing the status of the benefit recipient's account, and the language
has been re-written to reflect more basic literary standards and
comprehension levels.
Preemption of State law (Proposed Sec. 212.9)
Some financial institutions expressed confusion over the interplay
of the rule with State law and questioned how the preemption of State
law would work in certain situations. These commenters urged the
Agencies not to preempt greater protections that States provide with
respect to garnishment of bank accounts and asked that the final rule
explicitly state that it does not preempt State laws that are at least
as protective to account holders as Federal law.
The interim final rule preempts any State or local government law
that is inconsistent with any provision of the rule. Such a preemption
occurs only to the extent that an inconsistency between the rule and
State law would prevent a financial institution from complying with the
requirements of the rule. Some State laws, for example, may protect
from garnishment funds in a bank account in an amount that exceeds the
protected amount. The interim final rule does not displace or supersede
such a State law requirement, provided that the financial institution
has complied with all of the requirements of the interim final rule.
[[Page 9949]]
Safe Harbor (Proposed Sec. 212.10)
Some commenters stated that proposed Sec. 212.10(c)(3), which
allows for the account holder to provide express written instructions
to use an otherwise protected amount to satisfy the garnishment holder,
raises concerns. These commenters recommended that proposed Sec.
212.10(c)(3) be removed from the regulation because, although the
instructions need to be received by the bank after the date of the
garnishment, there is nothing to prevent a creditor from forcing a
recipient to sign such instructions in advance. If this section remains
in the rule, these commenters recommended that language be added that
such instructions cannot be a result of a prior agreement.
Many banks commented that the Agencies should expressly extend the
safe harbor provisions to instances where financial institutions are
unable to comply with the requirement to perform an account review
within one business day due to the need to obtain additional
information or to handle the exceptional circumstances. Some financial
institutions asked that the safe harbor be pushed back to the point
where the financial institution relies on the ACH record to identify a
benefit payment, stating that the safe harbor should clarify that when
the institution relies on such record, the payment should be deemed to
be a benefit payment. Some commenters urged the Agencies to strike the
requirement of good faith compliance from proposed Sec. 212.10 as a
condition to the safe harbor because this creates a triable issue of
fact before the safe harbor is available. Other commenters suggested
that the safe harbor be expanded to protect a financial institution
from liability in cases where the financial institution, after a review
of its own records, releases to the account holder benefit payments as
defined by the rule.
The Agencies have revised the language of the proposed rule to make
it clear that an account holder may not instruct a financial
institution in advance or in a standing agreement to use exempt funds
to satisfy a garnishment order. Apart from this change and other minor
technical revisions, the Agencies do not believe any change to the safe
harbor language is necessary. Changes to the deadline for performing
the account review adequately address the concern that the safe harbor
should cover financial institutions that are unable to comply with the
requirement to perform an account review within one business day due to
the need to obtain additional information or to handle the exceptional
circumstances. Similarly, because the definition of ``benefit payment''
has been revised to refer to payments in which the ACH identifier is
present, it is clear that a financial institution that relies on the
ACH record would be covered by the safe harbor. The Agencies are
retaining the good faith requirement as a condition for the
availability of the safe harbor. In addition, the Agencies do not
believe it is appropriate to protect from liability a financial
institution that voluntarily releases funds that fall within the rule's
definition of ``benefit payments.'' This could result in the release of
months' or years' worth of benefit payments, without regard to
withdrawals, account activity or the extent to which funds in the
account retain the characterization of exempt payments.
Enforcement and Record Retention (Proposed Sec. 212.11)
Some consumer groups commented that they had significant concerns
regarding lack of enforcement of the proposed rule. These commenters
noted that while the Federal banking agencies have the right to enforce
the proposed rule, they are often overwhelmed and lack the resources to
address all of the abuses in the banking system. They recommended that
the rule include a private right of action so consumers themselves can
force financial institutions to comply with the new rules.
Many banks noted that although the proposed rule required that
records be maintained to demonstrate compliance with the rule, the
proposed rule did not specify a time period for the requirement to
maintain records. Most banks that commented on this issue recommended
that a time period of one year following the account review be
stipulated.
Congress did not provide a private right of action in the statutes
prohibiting garnishment of Federal benefits and therefore the interim
final rule does not include such a provision. The Agencies have
specified a two-year record retention period in the rule.
III. Summary of Interim Final Rule
Under the rule, a financial institution that receives a garnishment
order must first determine if the United States or a State child
support enforcement agency is the plaintiff that obtained the order. If
so, the financial institution follows its customary procedures for
handling the order. If not, the financial institution must review the
account history for the prior two-month period to determine whether,
during this ``lookback period,'' one or more exempt benefit payments
were directly deposited to the account. The financial institution may
rely on the presence of certain ACH identifiers to determine whether a
payment is an exempt benefit payment for purposes of the rule.
The financial institution must allow the account holder to have
access to an amount equal to the lesser of the sum of exempt payments
directly deposited to the account during the lookback period or the
balance of the account on the date of the account review (the
``protected amount''). In addition, the financial institution must
notify the account holder that the financial institution has received a
garnishment order. The notice must briefly explain what a garnishment
is and must also include other information regarding the account
holder's rights. There is no requirement to send a notice if the
balance in the account is zero or negative on the date of account
review. Financial institutions may choose to use a model notice
contained in the rule in order to be deemed to be in compliance with
the notice content requirements.
For an account containing a protected amount, the financial
institution may not collect a garnishment fee from the protected
amount. The financial institution may only charge a garnishment fee
against funds in the account in excess of the protected amount and may
not charge or collect a garnishment fee after the date of account
review. Financial institutions that comply with the rule's requirements
are protected from liability.
IV. Section-by-Section Analysis for 31 CFR Part 212
The provisions of the rule are set forth in a new part 212 to 31
CFR. SSA, VA, RRB and OPM are each amending their existing regulations
to include a cross-reference to 31 CFR part 212.
Section 212.1
Section 212.1 sets forth the purposes of the rule.
Section 212.2
The rule applies to every entity defined as a financial
institution, if the financial institution holds accounts to which
benefit payments are directly deposited by one or more of the Agencies.
Section 212.3
Various terms used in the regulation are defined in section 212.3.
``Account holder'' 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
[[Page 9950]]
beneficial owner of an account. ``Account'' is defined to mean any
account, whether a master account or sub account, at a financial
institution and to which an electronic payment may be directly routed.
The definition includes master and sub accounts to reflect account
structures used by credit unions. As defined, ``account'' does not
include an account to which a benefit payment is subsequently
transferred following its initial delivery by direct deposit to another
account.
The definition of ``benefit payment'' is limited to direct deposit
payments that include an ``XX'' in positions 54 and 55 of the Company
Entry Description field in the Batch Header Record of the direct
deposit entry. Because benefit recipients can cash checks rather than
deposit them and take the risk that funds will be garnished, financial
institutions do not need to examine accounts to identify benefit checks
for purposes of complying with the rule. To determine whether a payment
constitutes a benefit payment, financial institutions may rely on the
presence of an ``XX'' encoded in positions 54 and 55 of the Company
Entry Description field of the Batch Header Record of a direct deposit
entry.
``Financial institution'' is defined as a bank, savings
association, credit union or other entity chartered under Federal or
State law to engage in the business of banking. The definition is
intended to be very broad, in order to capture any financial
institution that might hold an account to which Federal benefits may be
directly deposited.
The definition of ``garnish'' and ``garnishment'' are taken
directly from the wording of Agency statutes establishing the exemption
of certain Federal benefit payments from garnishment. ``Garnishment
fee'' is defined to mean any kind of a fee that a financial institution
charges to an account holder related to the receipt or processing of a
garnishment order. ``Garnishment order'' and ``order'' are defined to
mean a writ, order notice, summons, or similar written instruction
issued by a court to effect a garnishment, as well as an order issued
by a State child support enforcement agency.
``Lookback period'' is defined to mean the two month period that
(i) begins on the date preceding the date of account review and (ii)
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. For example, under this definition, the lookback period
that begins on November 15 would end on September 15. On the other
hand, the lookback period that begins on April 30 would end on February
28 (or 29 in a leap year), to reflect the fact that there are not 30
days in February.
``Protected amount'' is defined as the lesser of (i) 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 (ii) the balance in an
account at the open of business on the date of account review.
``State'' is defined to mean a State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, American Samoa, Guam, or the United
States Virgin Islands.
``State child support enforcement agency'' means the single and
separate organizational unit in a State that has the responsibility for
administering or supervising the State's plan for child and spousal
support pursuant to 42 U.S.C. 654, Title IV, Part D of the Social
Security Act.
Section 212.4
Section 212.4 of the rule sets forth the first action that a
financial institution must take when it receives a garnishment order,
which is to determine whether the order was obtained by the United
States or a State child support enforcement agency. To make this
determination, financial institutions may rely on the inclusion of a
Notice of Right to Garnish Federal Benefits, as set forth in Appendix
B. For orders obtained by the United States or a State child support
enforcement agency, the financial institution is to follow its
otherwise customary procedures for handling the order. For all other
orders, the financial institution is required to follow the procedures
in sections 212.5 and 212.6.
Section 212.5
Section 212.5 outlines the account review a financial institution
must conduct if it has determined, pursuant to section 212.4, that a
garnishment order was not obtained by the United States or a State
child support enforcement agency. In such cases, a financial
institution must review the history of the account being garnished to
determine if a benefit payment was deposited into the account during
the lookback period. Generally, the account review must be completed
within two business days following receipt of the order. If there is
insufficient information included in the order to determine whether the
debtor is an account holder, the deadline for completing the account
review is extended until the financial institution is able to obtain
such information. In addition, in cases where the financial institution
is served a batch of a large number of orders, the deadline is extended
to whatever date is permitted under the terms of the garnishment
orders. This provision is intended to address situations in which a
single batch containing multiple garnishment orders is received. This
provision does not mean that a financial institution may extend the
deadline simply because a large number of separate orders are received
at one time.
If the account review shows that no benefit payments were deposited
to the account during the lookback period, then the financial
institution would follow its otherwise customary procedures for
handling the order. If a benefit payment was deposited into the account
during the lookback period, then the financial institution must follow
the procedures set forth in section 212.6.
Section 212.5(d) lists factors that are not relevant to a financial
institution's account review. The commingling of exempt and nonexempt
funds in the account is not relevant to the account review, and neither
is the existence of a co-owner on the account. Similarly, the fact that
benefit payments to multiple beneficiaries may have been deposited to
an account during the lookback period is not relevant, as could occur
if an individual receives payments on behalf of several beneficiaries.
Finally, any instructions or information in a garnishment order are not
relevant, including information about the nature of the debt or
obligation underlying the order.
Section 212.5(e) makes it clear that financial institutions must
perform the account review before taking any action related to the
garnishment order that may affect funds in an account. Section 212.5(f)
requires a separate account review for each account owned by an
individual against whom a garnishment order has been issued, even if an
individual holds more than one account at a financial institution. For
example, if an individual maintains two accounts at the same financial
institution, and payments issued under two different benefit programs
are directly deposited to each account, both accounts must be
separately reviewed and a separate protected amount must be calculated
and applied for each account. Under section 212.5(f), a benefit payment
that is directly deposited to an account and then subsequently
transferred to another account is not treated as a benefit payment for
purposes of the second account. For example, if a benefit
[[Page 9951]]
payment is directly deposited to an individual's checking account, and
then subsequently transferred to the individual's savings account, the
financial institution, in performing the account reviews, would treat
the payment as a benefit payment for purposes of the checking account,
but not for purposes of the savings account.
Section 212.6
Section 212.6 contains the provisions that apply if a financial
institution determines that one or more benefit payments were deposited
to an account during the lookback period. In such a case, the financial
institution must calculate the protected amount, as defined in section
212.3. A financial institution may not freeze, or otherwise restrict
the account holder's access to, the protected amount. The financial
institution must provide the account holder with ``full and customary
access'' to the protected amount. The Agencies intend by this language
to ensure that after a garnishment order is received, the account
holder continues to have the same degree of access to the protected
funds that was provided prior to the receipt of the order. The
protection against freezing triggered by the depositing of exempt funds
during the lookback period is automatic. A financial institution may
not require an account holder to assert any right to a garnishment
exemption or take any other action prior to accessing the protected
amount.
Section 212.6(b) requires the financial institution to calculate
and establish a protected amount for each account it holds in the name
of an account holder. Under section 212.6(c), a protected amount
calculated and established by a financial institution is conclusively
considered to be exempt from garnishment under law.
Section 212.6(e) requires the financial institution to send a
notice to the account holder. The content and timing required for the
notice are set forth in section 212.7.
Section 212.6(f) addresses the situation in which a financial
institution receives service of the same garnishment order more than
once. The financial institution must execute the account review one
time upon the first service of a given garnishment order. If the same
garnishment order is subsequently served again upon the financial
institution, the financial institution is not required to perform
another account review and is restricted from taking any action on the
account. If the financial institution is subsequently served a new or
different garnishment order against the same account, the financial
institution must execute a new account review.
Section 212.6(g) provides that a financial institution shall not
continually garnish amounts deposited or credited to the account
following the date of account review, and may not take any action to
freeze any amounts subsequently deposited or credited unless served a
new or different garnishment order. A small number of States authorize
the issuance of a ``continuing'' garnishment order, i.e., an order
requiring the garnishee to monitor, preserve and remit funds coming
into the garnishee's custody on an ongoing basis. The rule operates to
prohibit a financial institution that is served with a continuing
garnishment from complying with the order's ongoing requirements.
Section 212.6(h) prohibits a financial institution from charging a
garnishment fee against a protected amount, and further prohibits a
financial institution from charging or collecting such a fee after the
date of account review, i.e., retroactively.
Section 212.7
Section 212.7(a) requires the financial institution to send the
notice required under section 212.6(e) if a benefit payment was
deposited into an account during the lookback period and the balance in
the account on the date of account review was above zero dollars. There
is no requirement to send a notice if the balance in the account is
zero or negative on the date of account review. Section 212.7(b) sets
forth the content of the notice that financial institutions are
required to send to account holders. The financial institution must
notify the account holder that the financial institution has received a
garnishment order and must briefly explain what a garnishment is. The
notice must also include other information regarding the account
holder's rights. Financial institutions may choose to use the model
notice in Appendix A to the rule, in which case they will be deemed to
be in compliance with the requirements of section 212.7(b). However,
use of the model notice is optional.
Section 212.7(c) permits, but does not require, a financial
institution to include the following additional information in the
notice: Means of contacting a local free attorney or legal aid service;
means of contacting the financial institution; and a statement that the
financial institution is not providing legal advice by issuing the
notice. Also, under section 212.7(d), the financial institution may
modify the content of the notice to integrate information about a
State's garnishment rules and protections, to avoid confusion regarding
the interplay of the rule with State requirements, or to provide more
complete information about an account.
The financial institution must deliver the notice directly to the
account holder, and only information and documents pertaining to the
garnishment order may be included in the communication. The notice must
be sent within three business days from the date of account review. If
the account holder has multiple accounts, the financial institution may
send one notice with information related to all the accounts. Section
212.7(h) makes it clear that by issuing a notice, a financial
institution shall not be deemed to be providing legal advice or
creating any obligation to provide legal advice.
Section 212.8
Section 212.8 makes it clear that the rule is not to be interpreted
as limiting any rights an individual may have under Federal law to
assert an exemption from garnishment, or as altering the exempt status
of funds in the account. For example, although the rule does not
require a financial institution to review and identify Federal benefits
deposited by check to an account, those funds are protected under
Federal law and the account holder may assert a claim for that
protection in accordance with the procedures specified under the
applicable law. In addition, it is possible that an account holder
could have exempt funds on deposit in excess of the protected amount.
In that case, the account holder could assert the protection available
under Federal law for those funds. The rule does not limit or change
the protected status of those funds.
Section 212.8 provides that the rule is not to be construed to
invalidate any term or condition of an account agreement between a
financial institution and an account holder, as long as the term or
condition is not inconsistent with the rule. The requirements of the
rule may not be changed by agreement, except in the narrow circumstance
permitted under section 212.10(d)(3), i.e., where an account holder
instructs a financial institution, in written instructions dated after
the date of service of the garnishment order, to use exempt funds to
satisfy the order. Thus, a financial institution may not require an
account holder to waive any protection available under the rule, nor
may it include in an account agreement terms inconsistent with the
requirements of the rule. However, the section 212.6(b)
[[Page 9952]]
requirement that a financial institution ensure that the account holder
has access to the protected amount would be subject to any limitation
on funds availability to which the account is subject. For example, if
funds on deposit are subject to a hold consistent with Regulation
CC,\2\ or a limitation on withdrawal applicable to a time deposit, the
proposed rule would not override or affect those limitations.
---------------------------------------------------------------------------
\2\ Regulation CC, 12 CFR part 229, is the Federal Reserve's
regulation establishing rules covering the collection and return of
checks by banks.
---------------------------------------------------------------------------
Section 212.9
Section 212.9 preempts any State or local government law or
regulation that is inconsistent with any provision of the rule, but
only to the extent of the inconsistency. If a State law would prevent a
financial institution from complying with the requirements of the rule,
the State law is preempted. However, the rule does not preempt
requirements under State law that are in addition to the rule's
requirements. For example, some State laws may protect from garnishment
funds other than benefit payments, or may protect a higher amount of
benefit payments. Other State laws may require protection of a flat
amount without regard to the types of funds that are deposited to an
account. In such cases, the financial institution will need to satisfy
the rule's requirements and then determine what, if any, additional
obligations exist under State law. The rule does not displace or
supersede such State law requirements, provided that the financial
institution has complied with all the requirements of the rule.
Section 212.10
Section 212.10 provides a safe harbor for financial institutions
that comply in good faith with the rule. Thus, for example, if a
financial institution made available the protected amount to an account
holder in accordance with the rule, the financial institution would not
be liable even if a judgment creditor were able to establish in court
that funds in the account at the time the garnishment order was served
were attributable to nonexempt deposits. In addition, if a financial
institution performed an account review within the two business day
deadline, and funds were withdrawn from the account during this time,
the financial institution would not be liable to a creditor or court
for failure to preserve the funds in the account, even if there was no
protected amount for the account. This protection exists for a
financial institution despite the occurrence of a bona fide error or a
settlement adjustment.
Section 212.10(c) provides a safe harbor specifically to a
financial institution that provides in good faith any optional
information in the notice to the account holder, as permitted in
section 212.7(c) and (d). Section 212.10(d)(3) allows a financial
institution to follow an account holder's express instruction to use an
otherwise protected amount to satisfy the garnishment order. The
instruction must be in writing and must be delivered after the date on
which the financial institution received the garnishment order. This
provision does not permit an account holder to instruct a financial
institution, in advance or in a standing agreement, to use exempt funds
to satisfy a garnishment order.
Section 212.11
Under section 212.11, compliance with the rule will be enforced by
the Federal banking agencies. Financial institutions must maintain
records of account activity and actions taken in handling garnishment
orders sufficient to demonstrate compliance with the rule for a period
of not less than two years from the date on which the financial
institution receives the garnishment order.
Section 212.12
Section 212.12 provides that the rule may be amended only by a
joint rulemaking issued by Treasury and all of the agencies defined as
a ``benefit agency'' in 31 CFR 212.3.
Appendix A to Part 212
Appendix A sets forth proposed model language that would satisfy
the notice requirements of section 212.7(b). Financial institutions are
not required to use this model language. However, financial
institutions that use the model notice will be deemed to be in
compliance with the requirements of section 212.7(b).
Appendix B to Part 212
Appendix B contains the form of Notice of Right to Garnish Federal
Benefits which is referred to in section 212.4(a).
Appendix C to Part 212
Appendix C contains examples demonstrating how the Lookback Period
and Protected Amount are calculated.
V. Regulatory Analysis
A. Executive Order 12866
It has been determined that this interim final rule is a
significant regulatory action as defined in E.O. 12866. The Office of
Management and Budget has reviewed this regulation.
B. Regulatory Flexibility Acts
In the Regulatory Analysis to the proposed rule, the Agencies did
not certify that the proposed rule would not have a significant
economic impact on a substantial number of small entities, in
particular small financial institutions. While the Agencies believed
the proposed rule likely would not have a significant impact on small
financial institutions, the Agencies indicated they did not have
complete data to make a conclusive determination. Accordingly, the
Agencies prepared a joint Initial Regulatory Flexibility Analysis
(IRFA) in accordance with 5 U.S.C. 603 and specifically requested
comment on the proposed rule's impact on small entities, including
costs, compliance burden, and changes in operating procedures. The
Agencies stated an interest in knowing whether particular aspects of
the proposed rule would be especially costly or burdensome.
For purposes of the IRFA, a ``small entity'' was a national bank,
savings association, State member bank, or State or Federal credit
union with assets of $175 million or less, based on regulations
promulgated by the Small Business Administration (SBA). Using
information provided by the commenter or information available to the
Agencies regarding the asset size of a financial institution
commenting, the Agencies identified comment letters from seven credit
unions that qualified as a ``small entity'' under the SBA regulations.
The Agencies also received comment letters from several financial
institution industry associations whose membership could include small
entities.
No small entity submitted comments specifically quantifying its
projected costs. Neither did any small entity provide information on
the number of court ordered garnishments it received. All comments from
entities of all sizes on the burden of the proposed rule were
qualitative or subjective, in that no commenter offered empirical data
or statistical evidence to quantify the economic impact. The following
is a summary of comments and issues raised by the small entities and
industry associations that may represent small entities.
Bank trade associations, while critical of various aspects of the
proposed rule, generally acknowledged the need for a Federal regulation
and indicated they could comply with it, even as they offered numerous
suggestions for streamlining and simplifying its requirements. The
small credit unions,
[[Page 9953]]
and several but not all credit union trade associations, opposed the
proposed rule and objected to various provisions as time-intensive and
manual, and unreasonable given the required processing deadlines.
Two credit union trade associations indicated that many credit
unions would not have the data processing capability to conduct a 60
day account review and would have to conduct the review manually, and
suggested the length of the lookback period be reduced. One small
credit union objected to the 60 day lookback period indicating that it
would pose an undue operational burden requiring time, expense, and
manpower not readily available. (Several small credit unions also
objected to the 60 day lookback period on the policy grounds that, for
those who truly subsist on Federal benefits, 30 days was long enough
and sufficient to fund a dispute over other exempt benefits.) Several
credit union associations proposed allowing financial institutions to
use a uniform flat amount as the protected amount asserting that this
option negates the need to conduct an account review and becomes a much
more manageable process for credit unions with limited resources. One
credit union trade association indicated that 90% of its members felt
that requiring an account review within one business day of receipt of
a garnishment order was unreasonable, but that two days struck the
right balance between timeliness and flexibility. Many of the small
credit unions expressed concern that the proposed rule would not apply
to garnishment orders obtained by the United States. Commenters also
raised concerns about the requirement to issue a notice to the account
holder and the time allowed to produce the notice. One small credit
union commented on the $175 million threshold used in the SBA
definition for a small credit union, indicating that a credit union
with $55 million in assets had little in common with a credit union
with three times the assets, and that capabilities in staffing,
operations, and cost tolerance varied greatly across the range of
institutions under $175 million in assets.
Based on a thorough analysis of comments on the proposed rule, and
based on a survey of small Federal credit unions conducted by the
Treasury following the comment period,\3\ the Agencies certify that
this interim final rule will not have a significant economic impact on
a substantial number of small entities, in accordance with 5 U.S.C.
605(b).
---------------------------------------------------------------------------
\3\ Survey, Information on Processing Garnishment Orders, OMB
Control Number 1505-0225, expiration date 2/28/2011.
---------------------------------------------------------------------------
The Agencies' certification that the interim final rule will not
have a significant economic impact on a substantial number of small
financial institutions is based on three factual findings.
First, the Treasury surveyed a representative sample of the 3,457
active Federal credit unions with assets of $50 million or less, which
represents the three smallest asset strata tracked by the National
Credit Union Administration (NCUA): Assets of less than $2 million,
assets of at least $2 million but less than $10 million, and assets of
at least $10 million but less than $50 million. The survey sought
information about the number of garnishment orders served on these
small credit unions, their administrative procedures for handling
garnishment orders, and amount of time it took to process a typical
order. The survey sample was a statistically valid representation of
the entire population, reflecting the variations in asset size and
geographic location of all Federal credit unions with assets of $50
million or less.
The survey indicated that the mean number of garnishment orders
received annually by these small credit unions was five, and that both
the median and mode number of garnishment orders received annually was
less than one. The survey revealed that 97 percent of these smallest
credit unions received fewer than six garnishment orders per year, and
that the rate at which garnishment orders were served was at most a
function of one order per year per $5 million in assets. The Agencies
conclude from this empirical data that the interim final rule does not
represent a significant burden on these small entities. Even if a small
credit union with assets under $50 million processed a garnishment
order entirely manually and took an additional 2 hours to handle a
garnishment order by following the new procedures in the interim final
rule--including conducting an account review, establishing a protected
amount, and mailing a notice--the actual processing time would on
average represent marginal work on the order of 10 hours per year.
If the results of the survey are extrapolated to other financial
institutions with up to $175 million in assets, given a stable function
of one order per year per $5 million in assets, the burden of entirely
manual compliance for the average small entity would represent only
marginal workload for one employee, or approximately 70 hours or 3.4
percent of one annual full time equivalent. Therefore, even if a
financial institution must use entirely manual processes to comply with
the rule, the facts on the volume of garnishment orders typically
served on small credit unions demonstrate that the regulation will not
have a significant economic impact on a substantial number of small
entities.
Second, information provided by the NCUA indicates that only 2% of
small Federal credit unions with assets of $20 million or less (fewer
than 40 credit unions out of 1,924) use a manual accounting system to
maintain share accounts and loan transactions and would not be able to
perform an account review by accessing a system. Thus, nearly all
credit unions large and small would have a capability to search an
account history using an account processing system with stored data or
stored account statements to help identify exempt Federal benefit
payments. Therefore, the Agencies conclude that there are not many
credit unions that would not have the data processing capability to
conduct a two month account review and would have to conduct the review
entirely manually. In addition, based on inquiries made of the vendors
providing core processing systems to small credit unions, the Agencies
note that there are no significant problems to enhancing the systems to
include specific functionality for fully automating the measurement of
the lookback period and the conduct of the account review.
Third, as more fully discussed in the supplementary information
above, the Agencies carefully considered the comments on the proposed
rule and have made a number of specific changes in the interim final
rule based directly on comments designed to lessen the administrative
burden. These changes include among others:
Increasing the amount of time permitted to conduct an
account review from one business day to two business days following the
receipt of a garnishment order, and allowing further time to conduct
the account review if the financial institution has difficulty in
determining whether a debtor is an account holder at the institution.
Eliminating the requirement to issue a notice to the
account holder in cases where the balance in an account is zero or
negative on the date of account review, which based on comments from
financial institutions is a substantial proportion of cases.
Increasing the amount of time required to issue the notice
from two business days to three business days from the date of account
review.
[[Page 9954]]
Eliminating the requirement that the notice must contain a
means of contacting the financial institution, thereby reducing the
incidence of customer service calls related to debt disputes to which
the financial institution is not a party.
Eliminating the requirement to examine a garnishment order
to ascertain whether the plaintiff named in the caption of the order is
the United States, and allowing financial institutions to determine if
a garnishment order is excluded from the rule's administrative
requirements by relying solely on the presence of a garnishment
certification attached or included with the order.
Limiting record retention to 2 years, in lieu of an open
ended requirement to retain records to demonstrate compliance with the
regulation.
Revising the definition of the lookback period from 60
days to a two month ``date-to-date'' methodology, making the account
review easier to administer and less prone to errors.
Allowing financial institutions to rely solely and
conclusively on the exemption identifiers encoded in Federal ACH header
records to determine if a Federal benefit payment has been deposited to
an account. The Agencies again note that the garnishment exemption
identifiers in the Federal ACH header records will be included in a
field that is captured and appears on account statements, which will
facilitate both automated and visual searches for exempt Federal
benefit payments. Hence, even the smallest financial institutions that
do not maintain an automated processing system, but receive paper
reports from the organization that processes their ACH transactions,
will be able to perform the account review straightforwardly.
Thus, the administrative requirements of the rulemaking have been
substantively reduced based on comments from financial institutions.
For the foregoing reasons, the Agencies conclude the interim final
rule will not have a significant economic impact on a substantial
number of small entities.
C. Executive Order 13132 Determination
Executive Order 13132 outlines fundamental principles of
Federalism, and requires the adherence to specific criteria by Federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have these
Federalism implications must consult with State and local officials,
and describe the extent of their consultation and the nature of the
concerns of State and local officials in the preamble to the
regulation.
In the Agencies' view, the rule may have Federalism implications,
because it has direct, although not substantial, effects on the States,
the relationship between the national government and States, or on the
distribution of power and responsibilities among various levels of
government. The provision in the rule (Sec. 212.5) where the Agencies
establish a process for financial institutions' treatment of accounts
upon the receipt of a garnishment order could potentially conflict with
State garnishment laws prescribing a formula for financial institutions
to pay such claims.
The rule's central provision requiring a financial institution to
establish a protected amount will affect only a very small percentage
of all garnishment orders issued by State courts, since in the vast
majority of cases an account will not contain an exempt Federal benefit
payment. Moreover, States may choose to provide stronger protections
against garnishment, and the regulation will only override State law to
the minimum extent necessary to protect Federal benefits payments from
garnishment.
Under 42 U.S.C. 407(a) and 42 U.S.C. 1383(d)(1), Federal Old-Age,
Survivors, and Disability Insurance benefits and Supplemental Security
Income payments are generally exempt from garnishment. 42 U.S.C. 405(a)
provides the Commissioner of Social Security with the authority to make
rules and regulations concerning Federal Old-Age, Survivors, and
Disability Insurance benefits. The Social Security Act does not require
State law to apply in the event of conflict between State and Federal
law.
Under 38 U.S.C. 5301(a), benefits administered by VA are generally
exempt from garnishment. 38 U.S.C. 501(a) provides the Secretary of
Veterans Affairs with the authority to make rules and regulations
concerning VA benefits. The statutes governing VA benefits do not
require State law to apply in the event of conflict between State and
Federal law.
Under 45 U.S.C. 231m(a), Federal railroad retirement benefits are
generally exempt from garnishment. 45 U.S.C. 231f(b)(5) provides the
RRB with rulemaking authority over issues rising from the
administration of Federal Railroad retirement benefits. The Railroad
Retirement Act of 1974 does not require State law to apply in the event
of conflict between State and Federal law.
Under 45 U.S.C. 352(e), Federal railroad unemployment and sickness
benefits are generally exempt from garnishment. 45 U.S.C. 362(1)
provides the RRB with rulemaking authority over issues rising from the
administration of Federal railroad unemployment and sickness benefits.
The Railroad Unemployment Insurance Act does not require State law to
apply in the event of a conflict between State and Federal law.
Under 5 U.S.C. 8346, for the Civil Service Retirement System (CSRS)
and under 5 U.S.C. 8470, for the Federal Employee Retirement Systems
(FERS), Federal retirement benefits are generally exempt from
garnishment. 5 U.S.C. 8347 and 5 U.S.C. 8461, respectively, provide the
Director of OPM with the authority to make rules and regulations
concerning CSRS and FERS benefits. OPM benefits statutes do not require
State law to apply in the event of conflict between State and Federal
law.
In accordance with the principles of Federalism outlined in
Executive Order 13132, the Agencies consulted with State officials on
issues addressed in this rulemaking. Specifically, the Agencies sought
perspective on those matters where Federalism implications could
potentially conflict with State garnishment laws. The rule establishes
certain processes that provide a financial institution protection from
liability when a Federal benefit payment exempt from garnishment is
directly deposited into an account and the financial institution
provides a certain amount of lifeline funds to the benefit recipient.
D. Unfunded Mandates Reform Act of 1995 Determinations
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act) requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
Federal mandate that may result in expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. The Agencies have determined
that this rule will not result in expenditures by State, local, and
tribal governments, or
[[Page 9955]]
by the private sector, of $100 million or more. Accordingly, the
Agencies have not prepared a budgetary impact statement or specifically
addressed the regulatory alternatives considered.
E. Plain Language
In 1998, the President issued a memorandum directing each agency in
the Executive branch to use plain language for all new proposed and
final rulemaking documents issued on or after January 1, 1999. The
Agencies specifically invite your comments on how to make this interim
final rule easier to understand. For example:
Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
Does the rule contain language or jargon that is not
clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the rule easier to understand? If
so, what changes to the format would make them easier to understand?
What else could we do to make the rule easier to
understand?
F. Paperwork Reduction Act
The information collections contained in this interim final rule
have been reviewed and approved by the Office of Management and Budget
(OMB) under the Paperwork Reduction Act (44 U.S.C. chapter 35) and
assigned OMB control number 1510-0230. Under the Paperwork Reduction
Act, an agency may not conduct or sponsor, and an individual is not
required to respond to, a collection of information unless it displays
a valid OMB control number.
Comments on the collection of information should be sent to the
Office of Management and Budget, Attn: Desk Officer for the Department
of the Treasury, Office of Information and Regulatory Affairs,
Washington, DC 20503, with copies to [insert contact information],
Department of the Treasury, Washington, DC 20220. Comments on the
collection of information must be received by May 24, 2011. Comments
are specifically requested concerning:
Whether the collection of information is necessary for the proper
performance of the functions of the Agencies, including whether the
information will have practical utility;
The accuracy of the estimated burden associated with the collection
of information;
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the collection of information may
be minimized, including through the application of automated collection
techniques or other forms of information technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
The collection of information in these regulations are found in
Sec. Sec. 212.6 and 212.11 and Appendices A and B.
Estimated total annual reporting burden: 125,000 hours.
Estimated average annual burden per respondent: 8 hours.
Estimated number of respondents: 15,771.
Estimated frequency of responses: As needed.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
G. Authority To Issue Interim Final Rule
The Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA)
generally requires public notice before promulgation of regulations.
See 5 U.S.C. 553(b). The Agencies published a notice of proposed
rulemaking requesting comment on the proposed garnishment rule on April
19, 2010 (75 FR 20299). The Agencies have considered the comments
received in developing this interim final rule but also wish to provide
the public another opportunity to comment on it.
List of Subjects
5 CFR Part 831
Administrative practice and procedure, alimony, benefit payments,
claims, disability benefits, exempt payments, financial institutions,
firefighters, garnishment, government employees, income taxes,
intergovernmental relations, law enforcement officers, pensions,
preemption, reporting and recordkeeping requirements, retirement.
5 CFR Part 841
Administrative practice and procedure, air traffic controllers,
benefit payments, claims, disability benefits, exempt payments,
financial institutions, firefighters, garnishment, government
employees, income taxes, intergovernmental relations, law enforcement
officers, pensions, preemption, retirement.
20 CFR Part 350
Alimony, benefit payments, child support, exempt payments,
financial institutions, garnishment, preemption, railroad retirement,
railroad unemployment insurance, recordkeeping.
20 CFR Part 404
Administrative practice and procedure, aged, alimony, benefit
payments, blind, disability benefits, exempt payments, financial
institutions, garnishment, government employees, income taxes,
insurance, investigations, old-age, preemption, Survivors and
Disability Insurance, penalties, railroad retirement, reporting and
recordkeeping requirements, Social Security, travel and transportation
expenses, treaties, veterans, vocational rehabilitation.
20 CFR Part 416
Administrative practice and procedure, alcoholism, benefit
payments, drug abuse, exempt payments, financial institutions,
garnishment, investigations, Medicaid, penalties, preemption, reporting
and recordkeeping requirements, Supplemental Security Income (SSI),
travel and transportation expenses, vocational rehabilitation.
31 CFR Part 212
Benefit payments, exempt payments, financial institutions,
garnishment, preemption, recordkeeping.
38 CFR Part 1
Administrative practice and procedure, archives and records,
benefit payments, cemeteries, claims, courts, crime, flags, exempt
payments, financial institutions, freedom of information, garnishment,
government contracts, government employees, government property,
infants and children, inventions and patents, parking, penalties,
preemption, privacy, reporting and recordkeeping requirements, seals
and insignia, security measures, wages.
Department of the Treasury, Fiscal Service (Treasury)
Authority and Issuance
For the reasons set forth in the preamble, Treasury adds a new part
212 to Title 31 of the Code of Federal Regulations, to read as follows:
PART 212--GARNISHMENT OF ACCOUNTS CONTAINING FEDERAL BENEFIT
PAYMENTS
Sec.
212.1 Purpose.
212.2 Scope.
[[Page 9956]]
212.3 Definitions.
212.4 Initial action upon receipt of a garnishment order.
212.5 Account review.
212.6 Rules and procedures to protect benefits.
212.7 Notice to the account holder.
212.8 Other rights and authorities.
212.9 Preemption of State law.
212.10 Safe harbor.
212.11 Compliance and record retention.
212.12 Amendment of this part.
Appendix A to Part 212--Model Notice to Account Holder
Appendix B to Part 212--Form of Notice of Right to Garnish Federal
Benefits
Appendix C to Part 212--Examples of the Lookback Period and Protected
Amount
Authority: 5 U.S.C. 8346; 5 U.S.C. 8470; 5 U.S.C. 1103; 31
U.S.C. 321; 31 U.S.C. 3321; 31 U.S.C. 3332; 38 U.S.C. 5301(a); 38
U.S.C. 501(a); 42 U.S.C. 405(a); 42 U.S.C. 407; 42 U.S.C. 659; 42
U.S.C. 1383(d)(1); 45 U.S.C. 231f(b); 45 U.S.C. 231m; 45 U.S.C.
352(e); 45 U.S.C. 362(1).
Sec. 212.1 Purpose.
The purpose of this part is to implement statutory provisions that
protect Federal benefits from garnishment by establishing procedures
that a financial institution must follow when served a garnishment
order against an account holder into whose account a Federal benefit
payment has been directly deposited.
Sec. 212.2 Scope.
This part applies to:
(a) Entities. All financial institutions, as defined in Sec.
212.3.
(b) Funds. Federal benefit payments protected from garnishment
pursuant to the following authorities:
(1) SSA benefit payments protected under 42 U.S.C. 407 and 42
U.S.C. 1383(d)(1);
(2) VA benefit payments protected under 38 U.S.C. 5301(a);
(3) RRB benefit payments protected under 45 U.S.C. 231m(a) and 45
U.S.C. 352(e); and
(4) OPM benefit payments protected under 5 U.S.C. 8346 and 5 U.S.C.
8470.
Sec. 212.3 Definitions.
For the purposes of this part, the following definitions apply.
Account means an account, including a master account or sub
account, at a financial institution and to which an electronic payment
may be directly routed.
Account holder 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.
Account review 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.
Benefit agency means the Social Security Administration (SSA), the
Department of Veterans Affairs (VA), the Office of Personnel Management
(OPM), or the Railroad Retirement Board (RRB).
Benefit payment means a Federal benefit payment referred to in
Sec. 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 of the Batch Header Record of the direct deposit entry.
Federal banking agency means the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of the Currency, the Office of Thrift
Supervision, or the National Credit Union Administration.
Financial institution means a bank, savings association, credit
union, or other entity chartered under Federal or State law to engage
in the business of banking.
Freeze or account freeze 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.
Garnish or garnishment means execution, levy, attachment,
garnishment, or other legal process.
Garnishment fee 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.
Garnishment order or order means a writ, order, notice, summons,
judgment, or similar written instruction issued by a court or a State
child support enforcement agency, including a lien arising by operation
of law for overdue child support, to effect a garnishment against a
debtor.
Lookback period means the two month period that begins on the date
preceding the date of account review and 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. Examples
illustrating the application of this definition are included in
Appendix C to this part.
Protected amount means the lesser of 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 the balance in an account at the
open of business on the date of account review. Examples illustrating
the application of this definition are included in Appendix C to this
part.
State means a State of the United States, the District of Columbia,
the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, American Samoa, Guam, or the United States Virgin
Islands.
State child support enforcement agency means the single and
separate organizational unit in a State that has the responsibility for
administering or supervising the State's plan for child and spousal
support pursuant to Title IV, Part D, of the Social Security Act, 42
U.S.C. 654.
United States means:
(1) A Federal corporation,
(2) An agency, department, commission, board, or other entity of
the United States, or
(3) An instrumentality of the United States, as set forth in 28
U.S.C. 3002(15).
Sec. 212.4 Initial action upon receipt of a garnishment order.
(a) Examination of order for Notice of Right to Garnish Federal
Benefits. Prior to taking any other action related to a garnishment
order issued against a debtor, and no later than two business days
following receipt of the order, a financial institution shall examine
the order to determine if the United States or a State child support
enforcement agency has attached or included a Notice of Right to
Garnish Federal Benefits, as set forth in Appendix B to this part.
(b) Notice of Right to Garnish Federal Benefits is attached to or
included with the order. If a Notice of Right to Garnish Federal
Benefits is attached to or included with the garnishment order, then
the financial institution shall follow its otherwise customary
procedures for handling the order and shall not follow the procedures
in Sec. 212.5 and Sec. 212.6.
(c) No Notice of Right to Garnish Federal Benefits. If a Notice of
Right to Garnish Federal Benefits is not attached to or included with
the garnishment order, then the financial institution shall follow the
procedures in Sec. 212.5 and Sec. 212.6.
Sec. 212.5 Account review.
(a) Timing of account review. When served a garnishment order
issued against a debtor, a financial institution shall perform an
account review:
(1) No later than two business days following receipt of (A) the
order, and (B) sufficient information from the creditor that initiated
the order to
[[Page 9957]]
determine whether the debtor is an account holder, if such information
is not already included in the order; or
(2) In cases where the financial institution is served a batch of a
large number of orders, by a later date that may be permitted by the
creditor that initiated the orders, consistent with the terms of the
orders. The financial institution shall maintain records on such
batches and creditor permissions, consistent with Sec. 212.11(b),
(b) No benefit payment deposited during lookback period. 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 shall follow its otherwise customary procedures for
handling the garnishment order and shall not follow the procedures in
Sec. 212.6.
(c) Benefit payment deposited during lookback period. If the
account review shows that a benefit agency deposited a benefit payment
into the account during the lookback period, then the financial
institution shall follow the procedures in Sec. 212.6.
(d) Uniform application of account review. The financial
institution shall perform an account review without consideration for
any other attributes of the account or the garnishment order, including
but not limited to:
(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.
(e) Priority of account review. The financial institution shall
perform the account review prior to taking any other actions related to
the garnishment order that may affect funds in the account.
(f) Separate account reviews. The financial institution shall
perform the account review separately for each account in the name of
an account holder against whom a garnishment order has been issued. In
performing account reviews for multiple accounts in the name of one
account holder, a financial institution shall not trace the movement of
funds between accounts by attempting to associate funds from a benefit
payment deposited into one account with amounts subsequently
transferred to another account.
Sec. 212.6 Rules and procedures to protect benefits.
The following provisions apply if an account review shows that a
benefit agency deposited a benefit payment into an account during the
lookback period.
(a) Protected amount. The financial institution shall immediately
calculate and establish the protected amount for an account. The
financial institution shall ensure that the account holder has full and
customary access to the protected amount, which the financial
institution shall not freeze in response to the garnishment order. An
account holder shall have no requirement to assert any right of
garnishment exemption prior to accessing the protected amount in the
account.
(b) Separate protected amounts. The financial institution shall
calculate and establish the protected amount separately for each
account in the name of an account holder, consistent with the
requirements in Sec. 212.5(f) to conduct distinct account reviews.
(c) No challenge of protection. A protected amount calculated and
established by a financial institution pursuant to this section shall
be conclusively considered to be exempt from garnishment under law.
(d) Funds in excess of the protected amount. For any funds in an
account in excess of the protected amount, the financial institution
shall follow its otherwise customary procedures for handling
garnishment orders, including the freezing of funds, but consistent
with paragraphs (f) and (g) of this section.
(e) Notice. The financial institution shall issue a notice to the
account holder named in the garnishment order, in accordance with Sec.
212.7.
(f) One-time account review process. The financial institution
shall perform the account review only one time upon the first service
of a given garnishment order. The financial institution shall 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. If the financial institution is subsequently served a new
or different garnishment order against the same account holder, the
financial institution shall perform a separate and new account review.
(g) No continuing or periodic garnishment responsibilities. The
financial institution shall not continually garnish amounts deposited
or credited to the account following the date of account review, and
shall take no action to freeze any funds subsequently deposited or
credited, unless the institution is served with a new or different
garnishment order, consistent with the requirements of this part.
(h) Impermissible garnishment fee. The financial institution may
not charge or collect a garnishment fee against a protected amount, and
may not charge or collect a garnishment fee after the date of account
review.
Sec. 212.7 Notice to the account holder.
A financial institution shall issue the notice required by Sec.
212.6(e) in accordance with the following provisions.
(a) Notice requirement. The financial institution shall send the
notice in cases where:
(1) A benefit agency deposited a benefit payment into an account
during the lookback period; and
(2) The balance in the account on the date of account review was
above zero dollars and the financial institution established a
protected amount.
(b) Notice content. The financial institution shall notify the
account holder named in the garnishment order of the following facts
and events in readily understandable language.
(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 Federal
regulation to ensure that account balances up to the protected amount
specified in Sec. 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 Sec. 212.6.
(8) A list of the Federal benefit payments subject to this part, as
identified in Sec. 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.
[[Page 9958]]
(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.
(11) The name of the creditor, and, if contact information is
included in the order, means of contacting the creditor.
(c) Optional notice content. The financial institution may notify
the account holder named in the garnishment order of the following
facts and events in readily understandable language.
(1) Means of contacting a local free attorney or legal aid service.
(2) Means of contacting the financial institution,
(3) By issuing the notice required by this part, the financial
institution is not providing legal advice.
(d) Amending notice content. The financial institution may amend
the content of the notice to integrate information about a State's
garnishment rules and protections, for the purposes of avoiding
potential confusion or harmonizing the notice with State requirements,
or providing more complete information about an account.
(e) Notice delivery. The financial institution shall issue the
notice directly to the account holder, or to a fiduciary who
administers the account and receives communications on behalf of the
account holder, and only information and documents pertaining to the
garnishment order, including other notices or forms that may be
required under State or local government law, may be included in the
communication.
(f) Notice timing. The financial institution shall send the notice
to the account holder within 3 business days from the date of account
review.
(g) One notice for multiple accounts. The financial institution may
issue one notice with information related to multiple accounts of an
account holder.
(h) Not legal advice. By issuing a notice required by this part, a
financial institution creates no obligation to provide, and shall not
be deemed to be offering, legal advice.
Sec. 212.8 Other rights and authorities.
(a) Exempt status. Nothing in this part shall be construed to limit
an individual's right under Federal law to assert against a creditor a
further exemption from garnishment for funds in excess of the protected
amount, or to alter the exempt status of funds that may be protected
from garnishment under Federal law.
(b) Account agreements. Nothing in this part shall be construed to
invalidate any term or condition of an account agreement between a
financial institution and an account holder that is not inconsistent
with this part.
Sec. 212.9 Preemption of State law.
(a) Inconsistent law preempted. Any State or local government law
or regulation that is inconsistent with a provision of this part is
preempted to the extent of the inconsistency. A State law or regulation
is inconsistent with this part if it requires a financial institution
to take actions or make disclosures that contradict or conflict with
the requirements of this part or if a financial institution cannot
comply with the State law or regulation without violating this part.
(b) Consistent law not preempted. This regulation does not annul,
alter, affect, or exempt any financial institution from complying with
the laws of any State with respect to garnishment practices, except to
the extent of an inconsistency. A requirement under State law to
protect benefit payments in an account from freezing or garnishment at
a higher protected amount than is required under this part is not
inconsistent with this part if the financial institution can comply
with both this part and the State law requirement.
Sec. 212.10 Safe harbor.
(a) Protection during examination and pending review. A financial
institution that complies in good faith with this part shall not be
liable to a creditor that initiates a garnishment order, or for any
penalties under State law, contempt of court, civil procedure, or other
law for failing to honor a garnishment order, for account activity
during:
(1) The two business days following the financial institution's
receipt of a garnishment order during which the financial institution
must determine if the United States or a State child support
enforcement agency has attached or included a Notice of Right to
Garnish Federal Benefits, as set forth in Sec. 212.4; or
(2) The time between the financial institution's receipt of the
garnishment order and the date by which the financial institution must
perform the account review, as set forth in Sec. 212.5.
(b) Protection when protecting or freezing funds. A financial
institution that complies in good faith with this part shall not be
liable to a creditor that initiates a garnishment order for any
protected amounts, to an account holder for any frozen amounts, or for
any penalties under State law, contempt of court, civil procedure, or
other law for failing to honor a garnishment order in cases where:
(1) A benefit agency has deposited a benefit payment into an
account during the lookback period, or
(2) The financial institution has determined that the order was
obtained by the United States or issued by a State child support
enforcement agency by following the procedures in Sec. 212.4.
(c) Protection for providing additional information to account
holder. A financial institution shall not be liable for providing in
good faith any optional information in the notice to the account
holder, as set forth in Sec. 212.7(c) and (d).
(d) Protection for financial institutions from other potential
liabilities. A financial institution that complies in good faith with
this part shall not be liable for:
(1) Bona fide errors that occur despite reasonable procedures
maintained by the financial institution to prevent such errors in
complying with the provisions of this part;
(2) Customary clearing and settlement adjustments that affect the
balance in an account, including a protected amount, such as deposit
reversals caused by the return of unpaid items, or debit card
transactions settled for amounts higher than the amounts originally
authorized; or
(3) Honoring an account holder's express written instruction, that
is both dated and provided by the account holder to the financial
institution following the date on which it has been served a particular
garnishment order, to use an otherwise protected amount to satisfy the
order.
Sec. 212.11 Compliance and record retention.
(a) Enforcement. Federal banking agencies will enforce compliance
with this part.
(b) Record retention. A financial institution shall 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.
Sec. 212.12 Amendment of this part.
This part may be amended only by a rulemaking issued jointly by
Treasury and all of the benefit agencies as defined in Sec. 212.3.
Appendix A to Part 212--Model Notice to Account Holder
A financial institution may use the following model notice to
meet the requirements of Sec. 212.7. Although use of the model
notice is not required, a financial
[[Page 9959]]
institution using it properly is deemed to be in compliance with
Sec. 212.7.
Information in brackets should be completed by the financial
institution. Where the bracketed information indicates a choice of
words, as indicated by a slash, the financial institution should
either select the appropriate words or provide substitute words
suitable to the garnishment process in a given jurisdiction.
Parenthetical wording in italics represents instructions to the
financial institution and should not be printed with the notice. In
most cases, this wording indicates that the model language either is
optional for the financial institution, or should only be included
if some condition is met.
MODEL NOTICE:
[Financial institution name, city, and State, shown as
letterhead or otherwise printed at the beginning of the notice]
IMPORTANT INFORMATION ABOUT YOUR ACCOUNT
Date:
Notice to:
Account Number:
Why am I receiving this notice?
On [date on which garnishment order was served], [Name of
financial institution] received a garnishment order from a court to
[freeze/remove] funds in your account. The amount of the garnishment
order was for $[amount of garnishment order]. We are sending you
this notice to let you know what we have done in response to the
garnishment order.
What is garnishment?
Garnishment is a legal process that allows a creditor to remove
funds from your [bank]/[credit union] account to satisfy a debt that
you have not paid. In other words, if you owe money to a person or
company, they can obtain a court order directing your [bank]/[credit
union] to take money out of your account to pay off your debt. If
this happens, you cannot use that money in your account.
What has happened to my account?
On [date of account review], we researched your account and
identified one or more Federal benefit payments deposited in the
last 2 months. In most cases, Federal benefit payments are protected
from garnishment. As required by Federal regulations, therefore, we
have established a ``protected amount'' of funds that will remain
available to you and that will not be [frozen/removed] from your
account in response to the garnishment order.
(Conditional paragraph if funds have been frozen) Your account
contained additional money that may not be protected from
garnishment. As required by law, we have [placed a hold on/removed]
these funds in the amount of $[amount frozen] and may have to turn
these funds over to your creditor as directed by the garnishment
order.
The chart below summarizes this information about your
account(s):
Account Summary as of [date of account review]
----------------------------------------------------------------------------------------------------------------
Amount subject to
Account number Amount in account Amount protected garnishment (now [frozen/ Garnishment fee
removed]) charged
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
(If the account holder has multiple accounts, add a row for each account.)
Please note that these amount(s) may be affected by deposits or
withdrawals after the protected amount was calculated on [date of
account review].
Do I need to do anything to access my protected funds?
You may use the ``protected amount'' of money in your account as
you normally would. There is nothing else that you need to do to
make sure that the ``protected amount'' is safe.
Who garnished my account?
The creditor who obtained a garnishment order against you is
[name of creditor].
What types of Federal benefit payments are protected from
garnishment?
In most cases, you have protections from garnishment if the
funds in your account include one or more of the following Federal
benefit payments:
Social Security benefits
Supplemental Security Income benefits
Veterans benefits
Railroad retirement benefits
Railroad Unemployment Insurance benefits
Civil Service Retirement System benefits
Federal Employees Retirement System benefits
(Conditional section if funds have been frozen) What should I do
if I think that additional funds in my account are from Federal
benefit payments?
If you believe that additional funds in your account(s) are from
Federal benefit payments and should not have been [frozen/removed],
there are several things you can do.
(Conditional sentence if applicable for the jurisdiction) You
can fill out a garnishment exemption form and submit it to the
court.
You may contact the creditor that garnished your account and
explain that additional funds are from Federal benefit payments and
should be released back to you. (Conditional sentence if contact
information is in the garnishment order) The creditor may be
contacted at [contact information included in the garnishment
order].
You may also consult an attorney (lawyer) to help you prove to
the creditor who garnished your account that additional funds are
from Federal benefit payments and cannot be taken. If you cannot
afford an attorney, you can seek assistance from a free attorney or
a legal aid society. (Optional sentences) [Name of State, local, or
independent legal aid service] is an organization that provides free
legal aid and can be reached at [contact information]. You can find
information about other free legal aid programs at [insert ``http://www.lawhelp.org'' or other legal aid programs website].
(Optional section) How to contact [name of financial
institution].
This notice contains all the information that we have about the
garnishment order. However, if you have a question about your
account, you may contact us at [contact number].
Appendix B to Part 212--Form of Notice of Right to Garnish Federal
Benefits
The United States, or a State child support enforcement agency,
certifying its right to garnish Federal benefits shall attach or
include with a garnishment order the following Notice, on official
organizational letterhead.
Information in brackets should be completed by the United States
or a State child support enforcement agency, as applicable. Where
the bracketed information indicates a choice of words, as indicated
by a slash, the appropriate words should be selected from the
options.
Notice of Right to Garnish Federal Benefits
Date:------------------------------------------------------------------
[Garnishment Order Number]/[State Case ID]: ------------
The attached garnishment order was [obtained by the United
States, pursuant to the Federal Debt Collection Procedures Act, 28
U.S.C. Sec. 3205, or the Mandatory Victims Restitution Act, 18
U.S.C. Sec. 3613, or other Federal statute]/[issued by (name of the
State child support enforcement agency), pursuant to authority to
attach or seize assets of noncustodial parents in financial
institutions in the State of (name of State), 42 U.S.C. Sec. 666].
Accordingly, the garnishee is hereby notified that the
procedures established under 31 CFR Part 212 for identifying and
protecting Federal benefits deposited to accounts at financial
institutions do not apply to this garnishment order.
The garnishee should comply with the terms of this order,
including instructions for withholding and retaining any funds
deposited to any account(s) covered by this order, pending further
order of [name of the court]/[the name of the State child support
enforcement agency].
[[Page 9960]]
Appendix C to Part 212--Examples of the Lookback Period and Protected
Amount
The following examples illustrate this definition of lookback
period.
Example 1: Account review performed same day garnishment order
is served.
A financial institution receives garnishment order on Wednesday,
March 17. The financial institution performs account review the same
day on Wednesday, March 17. The lookback period begins on Tuesday,
March 16, the date preceding the date of account review. The
lookback period ends on Saturday, January 16, the corresponding date
two months earlier.
Example 2: Account review performed the day after garnishment
order is served.
A financial institution receives garnishment order on Wednesday,
November 17. The financial institution performs account review next
business day on Thursday, November 18. The lookback period begins on
Wednesday, November 17, the date preceding the date of account
review. The lookback period ends on Friday, September 17, the
corresponding date two months earlier.
Example 3: No corresponding date two months earlier.
A financial institution receives garnishment order on Tuesday,
August 30. The financial institution performs the account review two
business days later on Thursday, September 1. The lookback period
begins on Wednesday, August 31, the date preceding the date of
account review. The lookback period ends on Wednesday, June 30, the
last date of the month two months earlier, since June 31 does not
exist to correspond with August 31.
Example 4: Weekend between receipt of garnishment order and
account review.
A financial institution receives garnishment order on Friday,
December 10. The financial institution performs the account review
two business days later on Tuesday, December 14. The lookback period
begins on Monday, December 13, the date preceding the date of
account review. The lookback period ends on Wednesday, October 13,
the corresponding date two months earlier.
The following examples illustrate the definition of protected
amount.
Example 1: Account balance less than sum of benefit payments.
A financial institution receives a garnishment order against an
account holder for $2,000 on May 20. The date of account review is
the same day, May 20, when the opening balance in the account is
$1,000. The lookback period begins on May 19, the date preceding the
date of account review, and ends on March 19, the corresponding date
two months earlier. The account review shows that two Federal
benefit payments were deposited to the account during the lookback
period totaling $2,500, one for $1,250 on Friday, April 30 and one
for $1,250 on Tuesday, April 1. Since the $1,000 balance in the
account at the open of business on the date of account review is
less than the $2,500 sum of benefit payments posted to the account
during the lookback period, the financial institution establishes
the protected amount at $1,000.
Example 2: Three benefit payments during lookback period.
A financial institution receives a garnishment order against an
account holder for $8,000 on December 2. The date of account review
is the same day, December 2, when the opening balance in the account
is $5,000. The lookback period begins on December 1, the date
preceding the date of account review, and ends on October 1, the
corresponding date two months earlier. The account review shows that
three Federal benefit payments were deposited to the account during
the lookback period totaling $4,500, one for $1,500 on December 1,
another for $1,500 on November 1, and a third for $1,500 on October
1. Since the $4,500 sum of the three benefit payments posted to the
account during the lookback period is less than the $5,000 balance
in the account at the open of business on the date of account
review, the financial institution establishes the protected amount
at $4,500 and seizes the remaining $500 in the account consistent
with State law.
Example 3: Intraday transactions.
A financial institution receives a garnishment order against an
account holder for $4,000 on Friday, September 10. The date of
account review is Monday, September 13, when the opening balance in
the account is $6,000. A cash withdrawal for $1,000 is processed
after the open of business on September 13, but before the financial
institution has performed the account review, and the balance in the
account is $5,000 when the financial institution initiates an
automated program to conduct the account review. The lookback period
begins on Sunday, September 12, the date preceding the date of
account review, and ends on Monday, July 12, the corresponding date
two months earlier. The account review shows that two Federal
benefit payments were deposited to the account during the lookback
period totaling $3,000, one for $1,500 on Wednesday, July 21, and
the other for $1,500 on Wednesday, August 18. Since the $3,000 sum
of the two benefit payments posted to the account during the
lookback period is less than the $6,000 balance in the account at
the open of business on the date of account review, the financial
institution establishes the protected amount at $3,000 and,
consistent with State law, freezes the $2,000 remaining in the
account after the cash withdrawal.
Example 4: Benefit payment on date of account review.
A financial institution receives a garnishment order against an
account holder for $5,000 on Thursday, July 1. The date of account
review is the same day, July 1, when the opening balance in the
account is $3,000, and reflects a Federal benefit payment of $1,000
posted that day. The lookback period begins on Wednesday, June 30,
the date preceding the date of account review, and ends on Friday,
April 30, the corresponding date two months earlier. The account
review shows that two Federal benefit payments were deposited to the
account during the lookback period totaling $2,000, one for $1,000
on Friday, April 30 and one for $1,000 on Tuesday, June 1. Since the
$2,000 sum of the two benefit payments posted to the account during
the lookback period is less than the $3,000 balance in the account
at the open of business on the date of account review,
notwithstanding the third Federal benefit payment posted on the date
of account review, the financial institution establishes the
protected amount at $2,000 and places a hold on the remaining $1,000
in the account in accordance with State law.
Example 5: Account co-owners with benefit payments.
A financial institution receives a garnishment order against an
account holder for $3,800 on March 22. The date of account review is
the same day, March 22, when the opening balance in the account is
$7,000. The lookback period begins on March 21, the date preceding
the date of account review, and ends on January 21, the
corresponding date two months earlier. The account review shows that
four Federal benefit payments were deposited to the account during
the lookback period totaling $7,000. Two of these benefit payments,
totaling $3,000, were made to the account holder against whom the
garnishment order was issued. The other two payments, totaling
$4,000, were made to a co-owner of the account. Since the financial
institution must perform the account review based only on the
presence of benefit payments, without regard to the existence of co-
owners on the account or payments to multiple beneficiaries or under
multiple programs, the financial institution establishes the
protected amount at $7,000, equal to the sum of the four benefit
payments posted to the account during the lookback period. Since
$7,000 is also the balance in the account on the date of account
review, there are no additional funds in the account which can be
frozen.
Social Security Administration
20 CFR Parts 404 and 416
Authority and Issuance
For the reasons set forth in the preamble, the Social Security
Administration amends Parts 404 and 416 of Title 20 of the Code of
Federal Regulations as follows:
PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE
(1950- )
Subpart S--Payment Procedures
0
1. The authority citation for subpart S of Part 404 continues to read
as follows:
Authority: Secs. 205(a) and (n), 207, 702(a)(5) and 708(a) of
the Social Security Act (42 U.S.C. 405(a) and (n), 407, 902(a)(5)
and 909(a)).
0
2. Add Sec. 404.1821 to read as follows:
Sec. 404.1821 Garnishment of Payments After Disbursement.
(a) Payments that are covered by section 207 of the Social Security
Act
[[Page 9961]]
and made by direct deposit are subject to 31 CFR part 212, Garnishment
of Accounts Containing Federal Benefit Payments.
(b) This section may be amended only by a rulemaking issued jointly
by the Department of Treasury and the agencies defined as a ``benefit
agency'' in 31 CFR 212.3.
PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND
DISABLED
Subpart E--Payment of Benefits, Overpayments, and Underpayments
0
3. The authority citation for subpart E of part 416 continues to read
as follows:
Authority: Secs. 702(a)(5), 1147, 1601, 1602, 1611(c) and (e),
and 1631(a)-(d) and (g) of the Social Security Act (42 U.S.C.
902(a)(5), 1320b-17, 1381, 1381a, 1382(c) and (e), and 1383(a)-(d)
and (g)); 31 U.S.C. 3720A.
0
4. Add Sec. 416.534 to read as follows:
Sec. 416.534 Garnishment of Payments After Disbursement.
(a) Payments that are covered by section 1631(d)(1) of the Social
Security Act and made by direct deposit are subject to 31 CFR part 212,
Garnishment of Accounts Containing Federal Benefit Payments.
(b) This section may be amended only by a rulemaking issued jointly
by the Department of Treasury and the agencies defined as a ``benefit
agency'' in 31 CFR 212.3.
Department of Veterans Affairs
Authority and Issuance
For the reasons set forth in the preamble, the Department of
Veterans Affairs amends Part 1 of Title 38 of the Code of Federal
Regulations as follows:
PART 1--GENERAL PROVISIONS
0
1. The authority citation for part 1 continues to read as follows:
Authority: 38 U.S.C. 501(a), and as noted in specific sections.
0
2. Add Sec. 1.1000 and a new undesignated center heading preceding the
section to read as follows:
Procedures for Financial Institutions Regarding Garnishment of Benefit
Payments After Disbursement
Sec. 1.1000 Garnishment of payments after disbursement.
(a) Payments of benefits due under any law administered by the
Secretary that are protected by 38 U.S.C. 5301(a) and made by direct
deposit to a financial institution are subject to 31 CFR part 212,
Garnishment of Accounts Containing Federal Benefit Payments.
(b) This section may be amended only by a rulemaking issued jointly
by the Department of the Treasury and the agencies defined as a
``benefit agency'' in 31 CFR 212.3.
Railroad Retirement Board
Authority and Issuance
For the reasons set forth in the preamble, the Railroad Retirement
Board amends Part 350 of Title 20 of the Code of Federal Regulations as
follows:
PART 350--GARNISHMENT OF BENEFITS PAID UNDER THE RAILROAD
RETIREMENT ACT, THE RAILROAD UNEMPLOYMENT INSURANCE ACT, AND UNDER
ANY OTHER ACT ADMINISTERED BY THE BOARD
0
1. Revise the Authority citation to read as follows:
Authority: 15 U.S.C. 1673(b)(2); 42 U.S.C. 659; and 45 U.S.C.
231f(b)(5), 231m, 352(e), and 362(l).
0
2. Add a new Sec. 350.6 to read as follows:
Sec. 350.6. Garnishment of payments after disbursement.
Payments that are covered by 45 U.S.C. 231m or 45 U.S.C. 352(e) and
that are made by direct deposit are subject to 31 CFR part 212,
Garnishment of Accounts Containing Federal Benefit Payments. This
section may be amended only by a rulemaking issued jointly by the
Department of the Treasury and the agencies defined as a ``benefit
agency'' in 31 CFR 212.3.
Office of Personnel Management
Authority and Issuance
For the reasons set forth in the preamble, the Office of Personnel
Management amends part 831 and part 841 of Title 5 of the Code of
Federal Regulations 1 as follows:
PART 831-- RETIREMENT
0
1. The authority citation for part 831 is revised to read as follows:
Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; Sec.
831.108 also issued under 5 U.S.C. 8336(d)(2); Sec. 831.114 also
issued under 5 U.S.C. 8336(d)(2), and Sec. 1313(b)(5) of Pub. L.
107-296, 116 Stat. 2135; Secs. 831.115 and 831.116 also issued under
5 U.S.C. 8346(a); Sec. 831.201(b)(1) also issued under 5 U.S.C.
8347(g); Sec. 831.201(b)(6) also issued under 5 U.S.C. 7701(b)(2);
Sec. 831.201(g) also issued under Secs. 11202(f), 11232(e), and
11246(b) of Pub. L. 105-33, 111 Stat. 251; Sec. 831.201(g) also
issued under Secs. 7(b) and (e) of Pub. L. 105-274, 112 Stat. 2419;
Sec. 831.201(i) also issued under Secs. 3 and 7(c) of Pub. L. 105-
274, 112 Stat. 2419; Sec. 831.204 also issued under Sec. 102(e) of
Pub. L. 104-8, 109 Stat. 102, as amended by Sec. 153 of Pub. L. 104-
134, 110 Stat. 1321; Sec. 831.205 also issued under Sec. 2207 of
Pub. L. 106-265, 114 Stat. 784; Sec. 831.206 also issued under Sec.
1622(b) of Pub. L. 104-106, 110 Stat. 515; Sec. 831.301 also issued
under Sec. 2203 of Pub. L. 106-265, 114 Stat. 780; Sec. 831.303 also
issued under 5 U.S.C. 8334(d)(2) and Sec. 2203 of Pub. L. 106-235,
114 Stat. 780; Sec. 831.502 also issued under 5 U.S.C. 8337; Sec.
831.502 also issued under Sec. 1(3), E.O. 11228, 3 CFR 1965-1965
Comp. p. 317; Sec. 831.663 also issued under Secs. 8339(j) and
(k)(2); Secs. 831.663 and 831.664 also issued under Sec. 11004(c)(2)
of Pub. L. 103-66, 107 Stat. 412; Sec. 831.682 also issued under
Sec. 201(d) of Pub. L. 99-251, 100 Stat. 23; Sec. 831.912 also
issued under Sec. 636 of Appendix C to Pub. L. 106-554, 114 Stat.
2763A-164; Subpart V also issued under 5 U.S.C. 8343a and Sec. 6001
of Pub. L. 100-203, 101 Stat. 1330-275; Sec. 831.2203 also issued
under Sec. 7001(a)(4) of Pub. L. 101-508, 104 Stat. 1388-328.
0
2. Add a new Sec. 831.115 to Subpart A to read as follows:
Sec. 831.115 Garnishment of CSRS payments.
CSRS payments are not subject to execution, levy, attachment,
garnishment or other legal process except as expressly provided by
Federal law.
0
3. Add a new Sec. 831.116 to read as follows:
Sec. 831.116 Garnishment of payments after disbursement.
(a) Payments that are covered by 5 U.S.C. 8346(a) and made by
direct deposit are subject to 31 CFR part 212, Garnishment of Accounts
Containing Federal Benefit Payments.
(b) This section may be amended only by a rulemaking issued jointly
by the Department of the Treasury and the agencies defined as a
``benefit agency'' in 31 CFR 212.3.
PART 841--FEDERAL EMPLOYEES RETIREMENT SYSTEM--GENERAL
ADMINISTRATION
0
1. The authority citation for part 841 is revised to read as follows:
Authority: 5 U.S.C. 8461; Sec. 841.108 also issued under 5
U.S.C. 552a; Secs. 841.110 and 841.111 also issued under 5 U.S.C.
8470(a); subpart D also issued under 5 U.S.C. 8423; Sec. 841.504
also issued under 5 U.S.C. 8422; Sec. 841.507 also issued under
section 505 of Pub. L. 99-335; subpart J also issued under 5 U.S.C.
8469; Sec. 841.506 also issued under 5 U.S.C. 7701(b)(2); Sec.
841.508 also issued under section 505 of Pub. L. 99-335; Sec.
841.604 also issued under Title II, Pub. L. 106-265, 114 Stat. 780.
[[Page 9962]]
0
2. Add new Sec. 841.110 to read as follows:
Sec. 841.110 Garnishment of FERS payments.
FERS payments are not subject to execution, levy, attachment,
garnishment or other legal process except as expressly provided by
Federal law.
0
3. Add a new Sec. 841.111 to read as follows:
Sec. 841.111 Garnishment of payments after disbursement.
(a) Payments that are covered by 5 U.S.C. 8470(a) and made by
direct deposit are subject to 31 CFR part 212, Garnishment of Accounts
Containing Federal Benefit Payments.
(b) This section may be amended only by a rulemaking issued jointly
by the Department of the Treasury and the agencies defined as a
``benefit agency'' in 31 CFR part 212.
By the Department of the Treasury.
Dated: February 3, 2011.
Richard L. Gregg,
Fiscal Assistant Secretary.
By the Social Security Administration.
Michael J. Astrue,
Commissioner of Social Security.
Dated: January 31, 2011.
By the Department of Veterans Affairs.
John R. Gingrich,
Chief of Staff.
By the Railroad Retirement Board.
Beatrice Ezerski,
Secretary to the Board.
By the Office of Personnel Management.
John Berry,
Director.
[FR Doc. 2011-3782 Filed 2-22-11; 8:45 am]
BILLING CODE 4810-25-P