Back 2 Basics: 5 Steps to Follow When You Receive a Garnishment Notice

1. Determine whether a “Right to Garnish Federal Benefits” is Attached - Prior to taking any other action related to a garnishment order, and no later than two business days after receiving the order, a credit union must review 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. If such a notice is attached or included with the garnishment order, then the credit union must

follow its customary procedures for handling garnishments. If no such notice is attached or included, then 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.

2. Perform a Federal Benefits Account Review - No later than two business days following receipt of the order the credit union must perform an account review. In an account review the credit union will examine the deposits made into the account for the previous two-month period (the lookback period) to determine if a benefit agency has deposited a benefit payment into the account during that time. For example, the credit union receives a garnishment order on Wednesday, March 17 and begins the account review that same day. The lookback period begins on Tuesday, March 16 (the day preceding the beginning of the account review) and ends two months earlier, on January 16. If the account review shows that a benefit agency did not deposit a benefit payment into the account during the lookback period, then 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, then the credit union must protect the benefit funds as required by this regulation. (31 CFR Part 212—Garnishment Of Accounts Containing Federal Benefit Payments). The credit union must perform an account review regardless of:  

(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.

The credit union must perform the account review separately for each account in the name of an account holder named on the garnishment.

3. Protect Your Members’ 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. For any funds in an account in excess of the protected amount, the credit union must follow its customary procedures for handling garnishment orders, including the freezing of funds. The credit union must perform the account review only one time upon the initial service of a garnishment order. If the credit union is subsequently served a new or different garnishment order against the same account holder, the credit union must perform a separate and new account review. The credit union must not continually garnish amounts deposited or credited to the account following the date of account review, and must not freeze any funds subsequently deposited or credited, unless the credit union is served with a new or different garnishment order. The credit union may not charge or collect a garnishment fee against a protected amount. The credit union may charge or collect a garnishment fee up to five business days after the account review if funds other than a benefit payment are deposited to the account within this period, provided that the fee does not exceed the amount of the non-benefit deposited funds.

4. Notify Your Member - The credit union must send a notice to the member named in the garnishment order when: 

(1) A benefit agency deposited a benefit payment into an account during the lookback period;

(2) The balance in the account on the date of account review was above zero dollars and the credit union established a protected amount; and

(3) There are funds in the account in excess of the protected amount.

The credit union must send the notice, within 3 business days from the date of the account review, directly to the account holder. 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. The credit union may issue one notice with information related to multiple accounts of an account holder. The notice must provide information to your member explaining:

• Why am I receiving this notice?

• What is garnishment?

• What has happened to my account?

• Do I need to do anything to access my protected funds?

• Who garnished my account?

• What types of Federal benefit payments are protected from garnishment?

Sample notices are available in Appendix A to the rule.

5. Retain Your Records - 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.

 

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