CUNA’s compliance staff went back to basics in a recent CompBlog post highlighting what credit unions should do when they receive a garnishment notice. The entry covers 5 steps credit unions should follow.
Determine whether a “Right to Garnish Federal Benefits” is attached
This must be done no later than 2 business days after receiving the order and prior to any action. If such a notice is included, the credit union must follow its customary procedures.
If no such notice is included, the credit union must perform an account review to determine whether the account holds any federal benefit payments, and if necessary, protect such federal benefit funds from garnishment.
Perform a Federal Benefits Account Review
This must occur no later than 2 business days following receipt of the order. The credit union will examine the deposits made into the account for the previous 2-month period (lookback period) to determine if a benefit agency has deposited a benefit payment into the account during that time.
If the account review shows that a benefit agency did not deposit a benefit payment, the credit union must follow its customary procedures for handling the garnishment order.
If the account review shows that a benefit agency deposited a benefit payment into the account during the lookback period, the credit union must protect the benefit funds as required by this regulation.
The credit union must perform the account review separately for each account in the name of an account holder named on the garnishment.
Protect the member’s benefit payments
The credit union must immediately calculate and establish the protected amount for each account in the name of an account holder and ensure that the account holder has full and customary access to any protected funds.
The credit union must not freeze federal benefits in response to the garnishment order. The credit union may not charge or collect a garnishment fee against a protected amount.
Notify the member
A notice must be directly sent to the member named in the garnishment order within 3 business days of the account review when:
The notice must answer a number of specific questions, which can be found in the CompBlog post, as well as in Appendix A to the rule itself.
A credit union must retain records of account activity and actions taken in response to a garnishment order for a period of not less than two years from the date on which the credit union receives the garnishment order.