The Office of Personnel Management, Railroad Retirement Board, Social Security Administration, U.S. Treasury Fiscal, and Department of Veterans Affairs (“the Agencies”) issued an interim final rule and request for comments on garnishment of accounts containing federal benefit payments.
The rule is effective May 1, 2011, but credit unions have until May 24, 2011, to submit comments.
The interim final rule restricts the garnishment of certain federal benefit payments. Social Security and Supplemental Security Income benefits; veterans benefits; federal railroad retirement, unemployment, and sickness benefits;
and Civil Service Retirement System and Federal Employee Retirement System benefits have been identified as protected benefits.
All institutions that accept protected benefit payments via direct deposit must comply. The rule doesn’t apply to federal benefit payments received by check.
When a credit union receives a garnishment order, it must first determine if that order was issued by the United States or by a state child support enforcement agency. If so, the protections benefit payments receive under this rule wouldn’t apply, and the credit union would complete its normal garnishment process. If not, then the credit union must follow the procedures set forth in the rule.
After receiving a garnishment order, the credit union has two business days from the date of receipt to perform an account review. The rule provides additional time when a credit union receives a garnishment order with insufficient information or batched garnishment orders.
During the account review, the credit union
is required to review
two months of account activity (the “look-back period”) to determine if protected benefit payments have been deposited to the account(s).
The “look-back period” begins on the date preceding the date of the account review and ends on a corresponding date of the month two months earlier. For example, if the credit union begins the account review on Sept. 15 it would review activity on the account back to July 15.
The Agencies revised this period under the interim final rule to ensure that in most cases, the protected amount would include two benefit payments. Consult Appendix C of the rule for an explanation of
how to calculate the “look-back period” and the protected amount.
Credit unions are required to maintain records of account activity and document actions taken when handling the garnishment orders for a period of two years from the date the institution receives the order.
Institutions are only allowed to perform the account review once, even in instances where the same garnishment order has been served more than once on the institution. Also, the rule prohibits continual garnishment of an account. So where additional amounts have been deposited or credited to an account after a garnishment order has been processed, the credit union may not subsequently freeze those amounts unless it has been served with a new or different garnishment order.
Credit unions are prohibited from charging a garnishment fee against protected funds and are prohibited from charging a fee after the date of the account review. Credit unions can process a garnishment fee against any unprotected funds in the account during the account review period.
If exempted benefit payments have been deposited to the account(s), the credit union must ensure that the accountholder has access to the sum of the payments or current balance on the account(s), whichever is lower.