[Federal Register Volume 75, Number 74 (Monday, April 19, 2010)]
[Proposed Rules]
[Pages 20299-20314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8899]
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 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: Joint notice of proposed rulemaking.
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SUMMARY: Treasury, SSA, VA, RRB and OPM (Agencies) are publishing for
comment a proposed rule to implement statutory restrictions on the
garnishment of Federal benefit payments. The Agencies are taking this
action in response to recent developments in technology and debt
collection practices that have led to an increase in the freezing of
accounts containing Federal benefit payments. The proposed rule would
establish procedures that financial institutions must follow when a
garnishment order is received for an account into which Federal benefit
payments have been directly deposited. The proposed rule would require
financial institutions that receive a garnishment order for an account
to determine whether any Federal benefit payments were deposited to the
account within 60 calendar days prior to receipt of the order and, if
so, would require the financial institution to ensure that the account
holder has access to an amount equal to the sum of such payments in
[[Page 20300]]
the account or to the current balance of the account, whichever is
lower.
DATES: Comments must be received on or before June 18, 2010.
ADDRESSES: The Agencies invite comments on all aspects of this proposed
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, or e-mail questions to
[email protected].
SUPPLEMENTARY INFORMATION: The Agencies are proposing to adopt a rule
to address concerns associated with the garnishment of 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
Employees Retirement System benefits. These benefits, which are
generally exempt under Federal law from garnishment orders and the
claims of judgment creditors, often constitute a major portion, and
sometimes all, of an individual's income. As a result, when financial
institutions receive garnishment orders and place freezes on accounts
containing exempt Federal benefit payments, the recipients of these
funds can face significant hardship. At the same time, financial
institutions are required by law to comply with garnishment orders,
which may necessitate placing a freeze on an account that contains
Federal benefit payments. The Agencies are proposing to adopt a rule
that would set forth straightforward, uniform procedures for financial
institutions to follow in order to minimize the hardships encountered
by Federal benefit payment recipients whose accounts are frozen
pursuant to a garnishment order.
I. Background
Social Security benefits, SSI benefits, VA benefits, Federal
Railroad Retirement benefits, Federal Railroad unemployment and
sickness benefits, Civil Service Retirement System benefits and Federal
Employees Retirement System benefits are protected under Federal law
from garnishment and the claims of judgment creditors.\1\ For example,
Section 207 of the Social Security Act provides that moneys paid or
payable as Old-Age, Survivors, and Disability Insurance (OASDI)
benefits are not ``subject to execution, levy, attachment, garnishment,
or other legal process.'' \2\ Similarly, VA benefits are exempt, in
most cases, from ``attachment, levy, or seizure by or under any legal
or equitable process whatever, either before or after receipt by the
beneficiary'' under a separate section of the United States Code.\3\
Federal Railroad Retirement benefits, Federal Railroad unemployment and
sickness benefits, Civil Service Retirement System benefits and Federal
Employees Retirement System benefits are similarly protected under
Federal law.\4\
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\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.
\2\ 42 U.S.C. 407.
\3\ 38 U.S.C. 5301(a)(1).
\4\ 45 U.S.C. 231m(a); 45 U.S.C. 352(e); 5 U.S.C. 8346; 5 U.S.C.
8470.
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Creditors and debt collectors are often able to obtain court orders
garnishing funds in an individual's account at a financial institution.
Neither the creditor nor the court issuing the order may know whether
an account contains Federal benefit payments. To comply with court
garnishment orders and preserve funds subject to the orders, financial
institutions often place a temporary freeze on an account upon receipt
of a garnishment order. 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. This is especially true when, as is often the case, the
recipient of Federal benefits depends on these funds as his or her
primary or sole source of income. Recent statistics show that 32
percent of Social Security beneficiary married couples or nonmarried
persons age 65 or older reported receiving 90 percent or more of their
income from Social Security. In addition, Social Security benefits are
the primary source of income (representing 50 percent or more of total
income) for 64 percent of beneficiary married couples or nonmarried
persons age 65 or older.\5\ If their accounts are frozen, these
individuals may find themselves without access to the funds in their
account unless and until they contest the garnishment order in court, a
process that can be confusing, protracted and expensive.
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\5\ Annual Statistical Supplement to the Social Security
Bulletin, 2008 Social Security Administration Office of Retirement
and Disability Policy Office of Research, Evaluation, and Statistics
SSA Publication No. 13-11700. Released: March 2009.
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At the same time, financial institutions are required by law to
comply with garnishment orders. A financial institution that fails to
preserve and remit funds may be at risk of being held in contempt of
court. In many cases, a financial institution would be liable for any
funds that are withdrawn by an account holder after the financial
institution has received a garnishment order for the account.
It can be difficult for a financial institution to determine
whether an account contains Federal benefit payments that are exempt
from garnishment (``exempt funds'' or ``exempt payments''). A financial
institution may not understand the
[[Page 20301]]
Automated Clearing House \6\ (ACH) batch header fields that accompany
direct deposit payments and identify different Federal benefit
programs, and thus the institution will not necessarily conclude from
the information available to it that a direct deposit payment is an
exempt payment. Identifying exempt payments can be even more
challenging when an account holder deposits checks representing benefit
payments to an account. To determine whether a check representing
exempt funds was deposited to an account, a financial institution would
have to review images of the deposit tickets and the checks deposited
to the account--a manual, time-consuming, and costly process.
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\6\ The Automated Clearing House is the nationwide electronic
fund transfer system that provides for the inter-bank clearing of
direct deposit transactions and for the exchange of payment-related
information among participating financial institutions.
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One of the biggest obstacles to determining whether an account
contains exempt funds arises when both exempt funds and non-exempt
funds have been deposited to an account. In such cases, there is no
single, consistently applied accounting standard to determine the
proportion of the commingled funds that should be protected from
garnishment. For example, if a $1000 exempt payment is deposited to
John Doe's account on May 1, followed by a $300 withdrawal on May 2, a
$200 deposit of non-exempt funds on May 3, and a $400 withdrawal on May
4, it is not clear what amount of money is exempt from a garnishment
order received on May 5. If a first-in, first-out method of identifying
funds is used, $300 would be exempt.\7\ An alternative approach would
result in the determination that $500 would be exempt.\8\ Yet a third
approach would result in a determination that $389 would be exempt.\9\
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\7\ There are $1000 in exempt funds at end of May 1; $700 in
exempt funds at end of May 2; and $700 in exempt funds and $200 in
non-exempt funds at end of May 3. On May 4, the $400 withdrawal is
applied against the first funds that were deposited to the account,
i.e., the remaining $700 exempt amount. Under this approach, there
would be an exempt amount of $300 on May 5.
\8\ There are $1000 in exempt funds at end of May 1; $700 in
exempt funds at end of May 2; and $700 in exempt funds and $200 in
non-exempt funds at end of May 3. The May 4 $400 withdrawal is
allocated equally to the exempt and non-exempt funds, i.e., $200 is
treated as being withdrawn from the exempt funds and $200 is treated
as being withdrawn from the non-exempt funds, for an exempt amount
of $500 on May 5.
\9\ There are $1000 in exempt funds at end of May 1; $700 in
exempt funds at end of May 2; $700 in exempt funds and $200 in non-
exempt funds at end of May 3. On May 4, the $400 withdrawal is
treated as occurring in proportion to the nature of the funds in the
account, i.e., \7/9\ of the withdrawal, or $311, is treated as
withdrawn from the exempt funds and \2/9\ of the withdrawal, or $89,
is treated as withdrawn from the non-exempt funds. Under this
approach, $389 would be exempt on May 5.
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In addition, garnishment orders may not provide sufficient
information to allow financial institutions to know if an order is
subject to one of the exceptions allowing garnishment of Federal
benefit payments.
As a result of these complexities, many financial institutions have
concluded that they are not in a position to evaluate the extent to
which funds in an account are protected from garnishment, and that
attempting to do so may expose them to liability. The account holder is
thus left to assert in court any Federal law protections that may be
available to exempt funds in an account, resulting in the hardships
discussed above.
II. Overview of Proposed Rule
To address the foregoing problems, the Agencies are proposing to
adopt a new rule. The primary goals of the proposed rule are (1) to
ensure that benefit recipients have access to exempt funds while
garnishment orders are complied with, adjudicated, or otherwise
resolved; (2) to protect financial institutions from liability when,
having received a garnishment order for an account receiving Federal
benefit payments, they allow the account holder access to exempt funds
in the account; and (3) to establish straightforward, uniform, cost
effective procedures addressing the extent to which financial
institutions may, pursuant to garnishment orders, freeze or seize funds
in accounts that contain Federal benefits. The rule would protect
financial institutions that follow specified procedures from the risk
of liability, contempt of court, or civil penalties when they permit
account holders to access funds in the account in accordance with the
requisite procedures. The rule would not limit an account holder's
right to assert any additional protections against garnishment that
might be available under Federal or state law. The Agencies seek
comment on all aspects of the proposed rule.
Procedural Instructions for Financial Institutions
The proposed rule is largely structured as a series of
straightforward actions that a financial institution must carry out
upon receipt of a garnishment order. The first step in the sequence is
to determine if the United States is the plaintiff that obtained the
order against an account holder. For the reasons discussed in more
detail below, the proposed rule has an exclusion for those cases where
a Federal entity is the creditor.
Account Review and Lookback Period
The second step for a financial institution that receives a
garnishment order for an account would be to 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 must
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 must notify the account holder of the protections
from garnishment that apply to exempt funds. The Agencies are proposing
that the lookback period be 60 calendar days to provide financial
institutions with a reasonable and easily applied boundary for the
account review, and so that the last two cycles of benefit payments
under any of the Agencies' programs are generally covered. The Agencies
welcome comment on the definition and effects of the proposed lookback
period.
The Agencies considered using a uniform, flat amount in the
definition of the protected amount that would apply in all cases where
a benefit payment was deposited to an account during the lookback
period. For example, the Agencies considered a policy that the
protected amount would mean the lesser of (i) $2,200 or (ii) the
balance in the account on the date of account review. This approach of
establishing a standard protected amount of $2,200 would provide
certainty, clarity, and administrative simplicity for all parties.
However, the Agencies are concerned that such a definition may go
beyond the underlying statutory authorities to protect ``moneys paid''
and would result in the unauthorized over-protection of funds when
benefit payments were less than the flat amount, or when the funds in
the account could not be reasonably traced back to earlier benefit
payments. The Agencies welcome comment on the underlying statutory
authority and the definition of the protected amount.
If an individual has multiple accounts at a financial institution,
the proposed rule would require a separate account review, and the
establishment of a separate protected amount, for each account.
Further, in some cases an individual with multiple accounts may make
one-time or recurring transfers between accounts. If an exempt payment
is directly deposited into one
[[Page 20302]]
account and funds from that account are subsequently transferred to a
second account, the financial institution would have no requirement to
trace funds into the second account or to establish a protected amount
in the second account as a result of the transfer. The account review
on the second account would be performed independent of the first
account based on an examination for directly deposited Federal benefit
payments, not account transfers. The Agencies request comment on this
aspect of the proposed rule.
Process for Identifying Exempt Funds
The Agencies will do two things to assist financial institutions to
determine whether exempt funds were directly deposited during the
lookback period. First, Treasury will encode an ``X'' in position 20 of
the ``Company Name'' Field of the Batch Header Record for each Agency
exempt benefit Automated Clearing House (ACH) payment. For example, a
typical Social Security benefit payment would have a company name of
``US TREASURY 303X.'' This encoding, along with the current practice of
encoding a ``2'' in the ``Originator Status Code'' Field in the Batch
Header Record to designate payments originated from the Federal
government, will allow financial institutions to identify Federal
exempt payments through either manual or systems inspection.
Second, the Agencies will publish a list of the unique ``Entry
Detail Description'' Fields in the Batch Header Record for all of their
exempt benefit payments. For example, the ``SUPP SEC'' entry denotes an
exempt Supplemental Security Income benefit payment, and ``VA CH31''
denotes an exempt VA Vocational Rehabilitation & Education benefit
payment.
Because information in the ``Company Name'' and the ``Entry Detail
Description'' Fields is typically included on the account holder's bank
statement, financial institutions should also be able to visually
identify an exempt payment using a standard customer service or account
maintenance screen.
Treasury will update the Green Book, A Guide to Federal Government
ACH Payments and Collections, to reflect these mechanisms for
identifying exempt Federal payments, and financial institutions will be
able to rely on this combination of identifiers to determine whether
exempt payments were deposited to an account during the lookback
period.
Financial institutions would not be required to research checks to
determine whether a Treasury check representing an exempt payment was
deposited to an account. The Agencies are not proposing to address
checks within the rule for two reasons. First, checks do not appear to
raise the same concerns raised by the direct deposit of exempt funds. 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 contrast, direct
deposit by its very definition involves the depositing of the payment
to an account without the intermediate step in which the payment
beneficiary receives the payment instrument and has physical control of
its disposition through endorsement and negotiation. Second, there is
no way currently for financial institutions to readily identify whether
a Treasury check that was deposited to an account represents exempt
funds. Whereas the Agencies are proposing the inclusion of identifiers
for directly deposited payments, there is no 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 way for an identifier to be included on a Treasury
check, a financial institution would need to manually pull up images or
copies of recent items to find Treasury checks and visually inspect
them.
The fact that the rule would 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. Indeed, nothing in the proposed rule in any way limits or
restricts an account holder's right to assert a claim that any or all
funds in an account are protected from garnishment under Federal or
state law, including funds deposited by check or a balance in the
account in excess of the protected amount.
Discretionary Account Freezes
The Agencies are aware that a minority of jurisdictions may permit,
but not require, financial institutions to respond to a garnishment
order by placing a freeze on the judgment debtor's entire account or on
an amount of account funds greater than that which the financial
institution is directed to sequester by court order. The proposed rule
would preclude financial institutions from placing freezes on protected
funds in all circumstances, even when the freeze is discretionary in
the sense of not being compelled by court order or state statute or
regulation. Financial institutions may undertake such ``discretionary''
freezes covering amounts in excess of the judgment debt as a protective
measure to limit the financial institution's liability for releasing
other funds to the account holder, or because the financial institution
is unaware of which funds in the account are exempt from garnishment.
As already discussed, Federal law protects Federal benefits
payments from garnishment, seizure, or other legal process.\10\ Some
federal and state courts have found that in certain circumstances a
temporary freeze on an account containing exempt funds may violate
Federal anti-garnishment statutes. See, e.g., Finberg v. Sullivan, 634
F.2d 50 (3d Cir. 1980); Mayers v. N.Y. Cmty. Bancorp, Inc., No. CV-03-
5837, 2005 U.S. Dist. LEXIS 20279 (E.D.N.Y. Aug. 13, 2005); Brosamer v.
Mark, 540 N.E.2d 652 (Ind. Ct. App. 1989). Although the Agencies
considered limiting the rule to only those freezes mandated by court
order or state statute or regulation, there is concern that in light of
the legal uncertainty such a limited rule could not be fashioned in a
manner that would protect exempt funds from being frozen. The Agencies
have therefore determined that the only way to protect exempt funds
from being subjected to garnishment, seizure, or other legal process is
to preclude financial institutions from placing freezes on protected
funds in all circumstances.
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\10\ 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.
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Direct Service on Agencies for Alimony and Child Support Obligations
Under the proposed rule, financial institutions would not be
responsible for determining the purpose of a garnishment order,
including whether the order seeks to collect child support or alimony
obligations. Financial institutions would calculate the protected
amount and ensure that the protected amount is not frozen, and would be
protected from any liability for taking this action.
Parties seeking to garnish Federal benefit payments for alimony or
child support obligations would not be foreclosed from recovering these
amounts, however, as they can pursue these benefits directly by
garnishing benefit payments before they are made by the Agency issuing
the payment. See 42 U.S.C. 659. SSA, VA, RRB and OPM each accept
service of process of garnishment orders for child support and alimony,
and will give effect to such orders if the payments that are the
[[Page 20303]]
subject of the order can legally be garnished for these purposes.\11\
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\11\ See 5 CFR part 581; see also, 20 CFR 404.1820; SSA Program
Operations Manual System GN 02410.200-.210; 20 CFR part 350; and VA
Veterans Benefits Administration Manual Rewrite M21-1MR, part III,
subpart v, chapter 3, section C.13.
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Protected Amount
The Agencies are proposing that the protected amount be the lesser
of (1) the sum of all benefit payments directly deposited to the
account during the lookback period, or (2) the balance in the account
on the day when the financial institution reviews the account
history.\12\ As described above, the intent of the 60-day lookback
period is to ensure that two benefit payment cycles are generally
captured and thus produce in most cases a protected amount equal to
twice the monthly benefit amounts. The Agencies welcome comment on this
definition of the protected amount.
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\12\ If the balance in the account is zero or if the account
balance is negative, there would be no protected amount.
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It is important to note that the protected amount is not the same
as the amount of funds that may ultimately be exempt from garnishment.
The proposed rule would not prevent or limit a benefit recipient from
challenging a garnishment order; it would simply prevent the freezing
of a lifeline amount of exempt funds. Thus, if a benefit recipient
believed that an account contained exempt funds in excess of the
protected amount, the recipient could follow the procedures established
under the applicable law to contest the garnishment.
Continuing Garnishments
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.\13\ Under the proposed rule, a financial institution
that receives a garnishment order for an account containing a protected
amount would have no continuing obligation to garnish amounts deposited
or credited to the account following the date of account review, and
would not be permitted to take any action to freeze any amounts
subsequently deposited or credited unless served a new or different
garnishment order. In effect, the proposed rule would partially preempt
state law by converting an ongoing garnishment order into a one-time
garnishment order and prohibiting the financial institution from
complying with the order's ongoing requirements.
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\13\ See, e.g., NY Civil Prac L & R 5222(b); Pa. R. Civil P.
3111(c).
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This partial preemption is necessary to give effect to the
protections in the anti-garnishment statutes, since it is not feasible
to implement both a protected amount and to permit continuing
garnishment. Unlike one-time garnishment orders, with respect to which
a financial institution may comply by reviewing prior deposits in an
accounting system during a defined lookback period, continuing
garnishment orders would require financial institutions to take action
on each future deposit. That is, a benefit payment could be protected
only if financial institutions monitored new deposits in real time, or
at least daily, to assess which are exempt and which are not exempt
from garnishment, to be sure that exempt funds are never frozen. The
Agencies believe that a policy of requiring financial institutions to
monitor deposits daily would be neither operationally nor economically
feasible, and would put financial institutions in the untenable
position of having to choose between noncompliance with the rule, by
freezing accounts, or noncompliance with the continuing garnishment
order, by allowing the account holder access to all funds. Even if it
were possible to implement such a policy in a manner consistent with
the anti-garnishment statutes, its costs and burdens could result in
benefit recipients finding it difficult to obtain banking services.
Accordingly, the proposed rule necessarily preempts the requirements of
continuing garnishment in cases where a benefit payment was deposited
into an account during the lookback period. The Agencies note, however,
that while the proposed rule preempts the continuing garnishment of an
account pursuant to one court order, creditors are not restricted from
obtaining, and courts are not prohibited from issuing, discrete new
garnishment orders against the same account over time.
Garnishment Fees
The proposed rule would prohibit financial institutions from
charging garnishment fees against protected amounts. For an account
that contains 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. Financial institutions would not be permitted to charge
garnishment fees that are specific to accounts to which exempt payments
are deposited. 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. Thus, a financial
institution could not defer a garnishment fee until future deposits are
received in the account.
Notice to Account Owner
To ensure that recipients are aware of their rights to challenge a
garnishment order, financial institutions would be required to deliver
a notice explaining these rights to the owner of any account for which
the financial institution conducted an account review and to which an
exempt payment was directly deposited during the lookback period. The
notice, which would have to include certain information set forth in
the proposed rule, would be required to be sent within two business
days of the completion of the account review. The proposed rule
contains a model notice. Financial institutions would not be required
to use the model notice, but those that choose to do so would be deemed
to be in compliance with the notice content requirements set forth in
the rule.
Safe Harbor for Financial Institutions
The proposed rule would provide a safe harbor for financial
institutions that comply with the required procedures. A financial
institution that makes available the protected amount to an account
holder in accordance with the rule's requirements would not be at risk
of contempt of court or liability to a judgment creditor. The proposed
rule would preempt any state or local government law or regulation that
is inconsistent with the proposed rule, but only to the extent that an
inconsistency would prevent a financial institution from complying with
the requirements of the proposed rule. Some state laws, for example,
may protect from garnishment funds in a bank account in an amount that
exceeds the protected amount. The proposed rule does not displace or
supersede such a state law requirement.
Treatment of Garnishment Orders Obtained by the United States
As described above, in cases where the United States is the
plaintiff that has obtained a garnishment order against an account
holder, the proposed rule would not require the financial institution
to perform an account review or establish a protected amount. The
Agencies are adopting this categorical exclusion of garnishment orders
[[Page 20304]]
obtained by the United States for two reasons.
First, while the statutes that prohibit the garnishment of Federal
benefit payments apply in some instances when the United States is a
creditor, there are several Federal statutes that expressly permit the
United States to garnish such payments in other instances. These
statutes permitting the United States to garnish Federal benefits
payments include 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 which
authority applied in a given instance.
Second, garnishments obtained by the United States are already
governed by a comprehensive Federal statute that would overlap with
certain provisions in the proposed rule and conflict with others. The
Federal Debt Collection Procedures Act (FDCPA), 28 U.S.C. 3001 et seq.,
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. See H.R. Rep. No. 101-736, at 32 (1990) (``the purpose of
[the FDCPA] is to create a comprehensive statutory framework for the
collection of debts owed to the United States government. Creation of a
uniform Federal framework for the collection of Federal debts in the
Federal Courts will improve the efficiency and speed in collection of
those debts* * *'').
While the proposed 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. For example, the FDCPA includes numerous
procedural protections for debtors who owe money to the United States
that are intended to achieve similar goals as the proposed rule. It
allows a debtor to exempt certain property from a money judgment based
on either bankruptcy law or other non-bankruptcy Federal, State and
local law, including the debtor's right to receive various benefits,
maintenance payments, and pensions and annuities. See 28 U.S.C. 3014
and 11 U.S.C. 552(d). In addition, section 212.6(f) of the proposed
rule would conflict with the FDCPA by providing that financial
institutions shall have no continuing or periodic garnishment
responsibilities. The FDCPA requires garnishment orders to be
continuing. See 28 U.S.C. 3104(a), 3205(a). If both the FDCPA and the
proposed rule applied to the same garnishment orders, confusion would
likely arise from the overlapping and conflicting provisions.
Additional procedural steps are needed to harmonize the two
authorities.
Therefore, in light of the express authority of the United States
to garnish Federal benefit payments in certain instances, the
protections already guaranteed debtors under the FDCPA in all
instances, and the confusion that would arise from having a rule with
exceptions to comply with conflicting Federal statutes, the Agencies
have chosen to establish a bright-line, procedural exclusion for
garnishment orders obtained by the United States.
With such orders, financial institutions would not be required to
perform an account review or take actions otherwise required by the
proposed rule. Rather, the proposed rule would direct financial
institutions to follow their customary procedures for garnishment
orders and treat the relevant account(s) as if no Federal benefit
payment were present. Financial institutions could rely on the naming
of the ``United States of America,'' ``United States,'' or ``U.S.'' as
the plaintiff in the caption of the order, or on a standard
certification that a Federal entity attaches to the order, to easily
determine if the garnishment order was obtained by the United States.
The proposed rule would provide a safe harbor for financial
institutions that comply with the procedures required by the proposed
rule.
Finally, the Agencies note that the United States obtains all
garnishment orders in Federal court. Thus, although the proposed rule
establishes an exclusion for garnishment orders obtained by the United
States, it still fulfills the goal of providing financial institutions
with a uniform national policy for handling garnishment orders issued
by all state courts. The Agencies invite comments on all aspects of
this policy on garnishment orders obtained by the United States.
Notwithstanding the need for this exclusion, to the extent that a
Federal benefit payment is exempt from a garnishment order obtained by
the United States, this exclusion does not alter such exempt status, or
an individual's right to assert an exemption, that may exist under
Federal law.
Enforcement
The Federal banking agencies (the Comptroller of the Currency,
Federal Deposit Insurance Corporation, Federal Reserve Board, and
Office of Thrift Supervision) and the National Credit Union
Administration have authority under the Federal Deposit Insurance Act
(12 U.S.C. 1818) and the Federal Credit Union Act (12 U.S.C. 1786),
respectively, to pursue enforcement actions against insured depository
institutions and insured credit unions for violations of law, rule or
regulation. The provisions of the rule that would be applicable to
insured depository institutions and insured credit unions would be
subject to such enforcement authority.
III. Section-by-Section Analysis for 31 CFR Part 212
The provisions of the proposed rule would be set forth in a new
part 212 to 31 CFR. SSA, VA, RRB and OPM are each proposing to amend
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 proposed rule.
Section 212.2
The proposed rule would apply 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 proposed regulation are defined in
section 212.3. ``Account'' is defined to mean any account held by a
financial institution to which benefit payments can be delivered by
direct deposit. If a financial institution holds an account that does
not have the capability to receive direct deposit payments, then that
account would not fall within the definition, and the proposed rule
would not apply to the financial institution's handling of the order.
For the reasons discussed above, ``benefit payment'' is defined as
a direct deposit payment, and not a check payment. Accordingly,
financial institutions would not need to identify benefit checks
deposited to an account, and any such deposits would not be considered
in determining whether there is a protected amount.
``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 Agencies
[[Page 20305]]
request comment on whether the proposed definition is appropriate.
The definition of ``garnish'' and ``garnishment'' are based on the
wording of Agency statutes establishing the exemption of certain
Federal benefit payments from garnishment. ``Garnishment fee'' is
broadly 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.
``Lookback period'' is defined to mean the 60 calendar-day period
preceding the date on which a financial institution is served a
garnishment order. The Agencies are proposing that the lookback period
be 60 calendar days long in order to generally cover the last two
cycles of benefits paid under any of the Agencies' programs.
``Protected amount'' is defined as the lesser of (i) the sum of all
benefit payments deposited to the account during the lookback period or
(ii) the balance in an account on the date of account review. Under
this definition, there would not be a protected amount if the account
balance is zero or the account is overdrawn.
``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.
Section 212.4
Section 212.4 of the proposed 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. In most cases, garnishment orders obtained by the United States
will be readily identifiable by the caption on the first page of the
order, which will read ``United States of America,'' or ``United
States,'' or ``U.S.'' In some cases, however, this will not be the
case. Accordingly, financial institutions must also check to see
whether the order is accompanied by a Notice of Garnishment by the
United States, as set forth in Appendix B. Financial institutions may
rely on this two-step test to determine if an order was obtained by the
United States. For orders obtained by the United States, the financial
institution would follow its otherwise customary procedures for
handling the order. For all other orders, the financial institutions
would be required to follow the procedures in sections 212.5 and 212.6.
Section 212.5
Proposed 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.
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. If 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.
Proposed 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, such as alimony
or child support obligations.
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 against which 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.
Section 212.6
Proposed 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 proposed section 212.3. A financial institution may not freeze, or
otherwise restrict the account holder's access to, the protected
amount. 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(c) 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(d) 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(e) provides that a financial institution has no
continuing obligation to 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 proposed
rule would operate to prohibit a financial institution that is served
with a continuing garnishment from complying with the order's ongoing
requirements.
Section 212.6(f) provides that a financial institution may collect
a garnishment fee only against funds in the account in excess of the
protected amount on the date of account review. Such a fee may be
charged only if the financial institution generally imposes a fee of
this nature and amount for its accounts. The fee may not be imposed
only on accounts to which benefit payments are deposited.
Section 212.6(g) prohibits a financial institution from charging a
garnishment
[[Page 20306]]
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
Proposed section 212.7(a) 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 proposed rule, in
which case they will be deemed to be in compliance with the
requirements of section 212.7(a). However, use of the model notice is
optional.
The financial institution must deliver the notice separately from
the account holder's periodic account statement. This is to ensure that
the account holder does not inadvertently disregard the notice.
However, the financial institution may deliver the notice concurrently
with other garnishment notices or forms required under state or local
law. The notice must be sent within two business days from the date of
account review. The notice must be sent in any case where a benefit
payment was deposited into the account during the lookback period, even
if the financial institution does not freeze any funds in the account.
This could be the case where the account balance is zero.
Section 212.8
Proposed 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 proposed 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 proposed rule does not limit or
change the protected status of those funds.
Proposed 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 proposed rule. The
requirements of the proposed rule may not be changed by agreement,
except in the narrow circumstance permitted under proposed section
212.10(c), i.e., where an account holder expressly instructs a
financial institution to use exempt funds to satisfy a garnishment
order after being notified of the order and the account holder's
rights. 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
proposed rule. However, the section 212.6(b) 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,\14\ or a
limitation on withdrawal applicable to a time deposit, the proposed
rule would not override or affect those limitations.
---------------------------------------------------------------------------
\14\ 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
Proposed section 212.9 preempts any State or local government law
or regulation that is inconsistent with any provision of the proposed
rule. Section 212.9(b) makes it clear that such a preemption occurs
only to the extent that an inconsistency between the proposed rule and
state law would prevent a financial institution from complying with the
requirements of the proposed rule. Some state laws, for example, may
protect from garnishment funds in a bank account in an amount that
exceeds the protected amount. The proposed rule does not displace or
supersede such a state law requirement. Section 212.9(c) allows a state
to protect funds in an account from freezing or garnishment to a
greater extent than is required under the proposed rule.
Section 212.10
Proposed 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 one 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. Under
proposed section 212.10(c), this protection exists for a financial
institution despite the occurrence of a bona fide error or a settlement
adjustment.
Proposed section 212.10(c) 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 would 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 proposed 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.
Section 212.12
Proposed section 212.12 provides that the proposed rule may be
amended only by a joint rulemaking issued by Treasury, SSA, VA, RRB and
OPM.
Appendix A to Part 212
Appendix A sets forth proposed model language that would satisfy
the notice requirements of section 212.7(a). Financial institutions are
not required to use this model language. However, financial
institutions that use the model notice would be deemed to be in
compliance with the requirements of section 212.7(a).
Appendix B to Part 212
Appendix B contains the form of Notice of Garnishment by the United
States which is referred to in section 212.4(a)(2).
[[Page 20307]]
IV. Regulatory Analysis
A. Executive Order 12866
It has been determined that this rule is a significant regulatory
action as defined in E.O. 12866. The Office of Management and Budget
has reviewed this regulation.
B. Joint Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) requires
agencies either to provide an Initial Regulatory Flexibility Analysis
with a proposed rule or to certify that the proposed rule will not have
a significant economic impact on a substantial number of small
entities. In accordance with section 3(a) of the RFA, the Agencies have
reviewed the proposed regulation, which affects all financial
institutions, regardless of size. While the Agencies believe that the
proposed rule likely would not have a significant economic impact on
financial institutions (5 U.S.C. 605(b)), the Agencies do not have
complete data at this time to make this determination. Therefore, a
joint Initial Regulatory Flexibility Analysis has been prepared in
accordance with 5 U.S.C. 603. The Agencies request comment on the
rule's impact on small entities. The Agencies will, if necessary,
conduct a final regulatory flexibility analysis after consideration of
comments received during the public comment period.
1. Reasons for Proposed Rule
As discussed above, the Agencies are publishing the proposed rule
to implement statutory restrictions on the garnishment of exempt
Federal benefit payments. Social Security benefits, Supplemental
Security Income benefits, VA benefits, Federal Railroad retirement
benefits, Federal railroad unemployment and sickness benefits, and
Civil Service Retirement System benefits and Federal Employees
Retirement System benefits are generally exempt under Federal law from
garnishment orders. These benefits often constitute a major portion and
sometimes all of an individual's income. As a result, when financial
institutions receive garnishment orders and place freezes on accounts
containing exempt Federal benefit payments, the recipients of these
funds can face significant hardship. At the same time, financial
institutions are required by law to comply with garnishment orders and
may be at risk of being held in contempt of court if they fail to
preserve and remit funds according to the order. In many cases a
financial institution would be liable for any funds that are withdrawn
by an account holder after the financial institution has received a
garnishment order for the account.
Furthermore, it can be difficult for a financial institution to
determine whether or the extent to which an account contains Federal
benefit payments that are exempt for garnishment. If, for instance, an
account contains deposits of both exempt and non-exempt funds, there
may be no established accounting rules to determine the proportion of
the comingled funds that should be protected from garnishment.
2. Statement of Objectives and Legal Basis
The Agencies are proposing this new rule to give force and effect
to the Federal anti-garnishment statutes and to provide financial
institutions with straightforward rules on the handling of garnishment
orders. The rule is designed to address the hardships that recipients
of Federal benefit payments are encountering when a financial
institution places a freeze on an account and the difficulties that
financial institutions have in determining whether funds deposited into
an account are exempt from garnishment. As discussed above, the primary
goals of the proposed rule are (1) to ensure that benefit recipients
have access to exempt funds while garnishment orders are complied with,
adjudicated, or otherwise resolved; (2) to protect financial
institutions from liability when, having received a garnishment order
for an account receiving Federal benefit payments, they allow the
account holder access to exempt funds in the account; and (3) to
establish straightforward, uniform, cost effective procedures
addressing the extent to which financial institutions may, pursuant to
garnishment orders, freeze or seize funds in accounts that contain
Federal benefits.
3. Description and Estimate of Small Entities Affected by the Proposed
Rule
The proposed rule would apply to financial institutions, including
national banks, savings associations, state member banks, and Federal
and state credit unions. The proposed rule would affect all financial
institutions, regardless of size, that might hold an account to which
Federal benefits may be directly deposited. For purposes of the RFA, a
``small entity'' is a national bank, savings association, State member
bank, or State or Federal credit union with assets of $175 million or
less. The Agencies estimate that there are 8,082 national banks,
savings associations, and state member banks, of which 56% have assets
equal or less than $175 million.\15\ In addition, the Agencies estimate
that there are 7,689 National and State credit unions of which 88% have
assets equal or less than $175 million. The proposed rule would apply
to all of these institutions.
---------------------------------------------------------------------------
\15\ See FDIC Bank Find (Number of Small Banks), http://www2.fdic.gov/idasp/main_bankfind.asp (last visited Nov. 19, 2009);
see also NCUA, Credit Union Data (Number of Small Credit Unions),
http://webapps.ncua.gov/customquery/ (last visited Nov. 19, 2009).
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4. Projected Recordkeeping, Reporting, and Other Compliance
Requirements
Financial institutions currently administer and respond to
garnishment orders, and already maintain records related to the actions
they take in response to garnishment orders, and so the basic
requirements embodied in the proposed rule do not represent new
activities. Furthermore, the proposed rule would not require
investments in new equipment or modification to systems. Financial
institutions would, however, have new requirements under the rule. They
will need to modify their garnishment operating procedures to determine
whether orders are obtained by the United States and ascertain whether
benefit payments were deposited to an account within 60 calendar days
of receiving a garnishment order. If so, they would be required to
establish a protected amount which cannot be frozen and to issue a
notice to the account holder disclosing facts and information about the
garnishment order.
Financial institutions would be able to utilize existing systems to
comply with the rule. As discussed above in the Overview of this
proposed rule, Treasury will encode an ``X'' in position 20 of the
``Company Name'' Field of the Batch Header Record for each Agency
exempt benefit Automated Clearing House (ACH) payment. This encoding,
along with the current practice of encoding a ``2'' in the ``Originator
Status Code'' Field in the Batch Header Record to designate payments
originated from the Federal government, will allow financial
institutions to readily identify Federal exempt payments through either
manual or systems inspection without additional resources or equipment.
In addition, the Agencies will publish a list of the unique ``Entry
Detail Description'' Fields in the Batch Header Record that can be used
to identify exempt benefit payments.
Given the existing burden under law to handle garnishment orders,
coupled with the simplicity, uniformity, and certainty of the
requirement to establish a protected amount under the proposed rule,
the Agencies conclude that
[[Page 20308]]
modifications to financial institution operating procedures represent a
one-time administrative change that would require new internal
documentation and employee training but would not result in substantive
additional on-going activities. The requirement to issue a notice
entails mailing a one-page standard document and the Agencies conclude
that this requirement entails minimal resources.
Therefore, the Agencies believe that any costs incurred as a result
of the proposed rule will be minimal. Furthermore, the Agencies believe
that financial institutions will benefit from the clarity and
uniformity the proposed rule will bring to the handling of garnishment
orders, and from the safe harbor protections against liability. In
addition, the rule should result in fewer customer service issues
arising from account freezes and garnishment orders generally. Finally,
the Agencies are aware that, for a variety of reasons, some financial
institutions already attempt to review account histories and issue
notices to account holders upon receipt of a garnishment order. To the
extent that these activities already occur, the proposed rule should
have little or no impact.
The Agencies seek information and comment on any costs, compliance
requirements, or changes in operating procedures arising from the
application of the proposed rule and the extent to which those costs,
requirements, or changes are in addition to or different from those
arising from current processes in effect when a court ordered
garnishment is served. The Agencies invite comment and data on the size
of the incremental burden on small financial institutions in
instituting procedures not currently part of the institution's
practices. In addition, the Agencies are interested in knowing whether
particular aspects of the proposed rule would be especially costly or
burdensome. We also invite comment on Treasury's plans to encode its
ACH entries with a garnishment identifier in the ``Company Name'' Field
and to publish a list of unique ``Entry Detail Description'' Fields to
facilitate the identification of exempt Federal benefit payments.
The Agencies anticipate contacting trade groups representing
participants that qualify as small entities and encouraging them to
provide comments during the comment period to ascertain, among other
things the costs imposed on the regulated small entities.
5. Identification of Duplicative, Overlapping, or Conflicting Federal
Rules
The Agencies reviewed current law and have constructed the proposed
rule so that no Federal statutes or rules would overlap or conflict
with the proposed rule. The Agencies seek comment and information about
any such statutes or rules, as well as any other State, local, or
industry rules or policies that require a financial institution to
implement business practices that would conflict with the requirements
of the proposed rule.
6. Discussion of Significant Alternatives
The proposed rule would apply to all financial institutions that
maintain accounts to which Federal benefit payments may be deposited.
One approach to minimizing the burden on small entities would be to
provide a specific exemption for small institutions. The Agencies
propose that the requirements in this rule be applicable to all
entities regardless of size, because an exemption for small entities
would diminish the usefulness of the policies and procedures laid out
to ensure that all benefit recipients nationwide have access to a
certain amount of lifeline funds. An exemption might result in the
continuation of the current practice of account freezes for some
recipients.
On behalf of the Agencies, Treasury has worked over the past two
years with major trade associations and various Federal regulators to
devise a balanced, uniform rule that will resolve the problems
surrounding garnishment and Federal benefits. In consultation with
these organizations, the Agencies have attempted to minimize burden by
proposing a single rule that would apply to all types of exempt Federal
benefit payments and establish a consistent set of practices for all
financial institutions to follow. In addition, the Agencies have
attempted to ensure that financial institutions will not incur legal
liability including in the proposed rule a safe harbor provision and an
express preemption of inconsistent state law. The result should be a
straightforward rule that can be implemented in a cost-effective
manner. The Agencies welcome comments on any significant alternatives
to the proposed rule.
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 proposed 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. 212.4)
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 proposed 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 proposed 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.
[[Page 20309]]
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 Employees 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 proposed 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 proposed rule will not result in expenditures by state,
local, and tribal governments, or 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 proposal
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 proposed rule clearly stated?
If not, how could the rule be more clearly stated?
Does the proposed 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 collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)). 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 the Office of the Deputy
Assistant Secretary, Fiscal Operations and Policy, Department of the
Treasury, 1500 Pennsylvania Avenue, NW., Room 2112, Washington, DC
20220. Comments on the collection of information must be received by
June 18, 2010. Comments are specifically requested concerning:
Whether the proposed 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 proposed
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 proposed 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 proposed regulations are
found in Sec. Sec. 212.5 and 212.9.
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.
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
[[Page 20310]]
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 proposes to add
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.
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 Garnishment by the United
States.
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 financial institutions must follow when a garnishment order is
received for an account into which Federal benefit payments have been
directly deposited.
Sec. 212.2 Scope.
This part applies to:
(a) Entities. All financial institutions, as defined in Sec.
212.3.
(b) Funds. Benefit payments issued under the following Federal
programs:
(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 at a financial institution to which
benefit payments can be delivered by direct deposit.
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 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 under a Federal program listed
in Sec. 212.2(b).
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, or other
legal process to enforce a money judgment.
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, or
similar written instruction issued by a court to effect a garnishment.
Lookback period means the 60-calendar-day period preceding the date
on which a financial institution is served a garnishment order.
Protected amount means the lesser of the sum of all benefit
payments deposited to an account during the lookback period or the
balance in an account on the date of account review.
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.
Sec. 212.4 Initial action upon receipt of a garnishment order.
(a) Examination for orders obtained by the United States. Prior to
taking any other action related to a garnishment order issued against
an account, and no later than one business day following receipt of the
order, a financial institution shall examine the order to determine if
it was obtained by the United States. A garnishment order shall
conclusively be considered to have been obtained by the United States
if:
(1) The plaintiff named in the caption on the front page of the
order is ``United States of America,'' or ``United States,'' or
``U.S.''; or
(2) The order is served on the financial institution accompanied by
a Notice of Garnishment by the United States, as set forth in Appendix
B.
(b) United States obtained the order. If an order meets either of
the criteria set forth in Sec. 212.4(a)(1) or (2), then the financial
institution shall follow its otherwise customary procedures for
handling the garnishment order and
[[Page 20311]]
shall not follow the procedures in Sec. 212.5 and Sec. 212.6.
(c) United States did not obtain the order. If an order does not
meet either of the criteria set forth in Sec. 212.4(a)(1) or (2), then
the financial institution shall follow the procedures in Sec. 212.5
and Sec. 212.6.
Sec. 212.5 Account review.
(a) Review for benefit payment. No later than one business day
following receipt of a garnishment order issued against an account, a
financial institution shall perform an account review.
(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 garnishment order; or
(6) The nature of the debt or obligation underlying the garnishment
order, including whether the order seeks to collect alimony or child
support obligations.
(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.
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 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.
(b) 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 (e) and (f) of this section.
(c) Notice. The financial institution shall issue a notice to the
account holder, in accordance with Sec. 212.7.
(d) 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
garnishment order if the same garnishment 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.
(e) No continuing or periodic garnishment responsibilities. The
financial institution shall have no continuing obligation to 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.
(f) Permissible garnishment fee. The financial institution may
collect a garnishment fee only against funds in the account in excess
of the protected amount on the date of account review, provided that
the nature and amount of the fee is customary for the financial
institution's accounts generally and is not specific to accounts with
benefit payments.
(g) 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(c) in accordance with the following provisions.
(a) Notice content. The financial institution shall notify the
account holder of the following facts and events in readily
understandable language.
(1) The financial institution's receipt of a garnishment order
against the account holder.
(2) The date on which the garnishment order was served.
(3) A succinct explanation of garnishment orders.
(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 60 calendar days.
(5) The protected amount, if any, established by the financial
institution.
(6) The financial institution's potential requirement pursuant to
other law to freeze other amounts in the account to satisfy the
garnishment order.
(7) An exemplary list of Federal, State, and other benefits
generally exempt from garnishment.
(8) The account holder's right to assert a further garnishment
exemption for amounts above the protected amount, by completing
exemption claim forms, contacting the court of jurisdiction, or
contacting the judgment creditor, as customarily applicable for a given
jurisdiction.
(9) Means of contacting the judgment creditor.
(10) Means of contacting the court of jurisdiction.
(11) Means of contacting the financial institution.
(b) Notice delivery. The financial institution shall not include
the notice with the delivery of a periodic account statement, but must
deliver it under separate cover. The financial institution may deliver
the notice concurrently with other garnishment notices or forms
pursuant to State or local government law.
(c) Notice timing. The financial institution shall send the notice
to the account holder within 2 business days from the date of account
review.
(d) Notice requirement. The financial institution shall send the
notice in all cases where a benefit agency deposited
[[Page 20312]]
a benefit payment into the account during the lookback period,
including cases where the financial institution does not freeze any
funds in the account.
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 an 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. To the extent that any state or
local government law or regulation is inconsistent with a provision of
this part, it is hereby preempted.
(b) Consistent law not preempted. Nothing in this part shall be
construed to preempt any state or local government law or regulation in
the field of garnishment that is not inconsistent with this part,
including but not limited to procedures to determine the disposition of
funds in excess of a protected amount.
(c) Higher protected amount. Notwithstanding any provision of this
part, a state may by law or regulation protect funds in an account from
freezing or garnishment at a higher protected amount than is required
under this part, provided that such law or regulation is not
inconsistent with any other provision of this part.
Sec. 212.10 Safe harbor.
(a) Protection during examination and review. A financial
institution that complies in good faith with this part shall not be
liable to a judgment creditor 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 for account activity during the one business day
following the financial institution's receipt of a garnishment order.
(b) General protection for financial institutions. A financial
institution that complies in good faith with this part shall not be
liable to a judgment creditor 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 an order was
obtained by the United States by following the procedures in Sec.
212.4(a)(1) and (2).
(c) Protection for financial institution from other potential
liabilities. A financial institution that complies in good faith with
this part shall not 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
(3) Honoring an account holder's express written instructions,
received by 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 garnishment 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
garnishment orders sufficient to demonstrate compliance with this part.
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.
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(a). Although use of this model
is not required, a financial institution using it properly is deemed
to be in compliance with Sec. 212.7(a).
Notice of Garnishment
On [insert date of garnishment order receipt], [insert financial
institution name] received an order of garnishment to freeze or
remove funds from your account.
If you owe money to a creditor, garnishment is the legal process
that allows your creditor to obtain a court order directing your
financial institution to freeze or turn over funds in your account
to pay the debt you owe the creditor.
However, you have certain protections from garnishment if the
funds in your account include Federal benefit payments such as
Social Security benefits, Supplemental Security Income benefits,
benefits administered by the Department of Veterans Affairs,
Railroad retirement benefits, Railroad Unemployment Insurance
benefits, Civil Service Retirement System benefits or Federal
Employees Retirement System benefits. We are required by Federal
regulation to review your account and determine whether any such
benefits were directly deposited to your account within 60 calendar
days preceding our receipt of the garnishment order. If so, the sum
of all such benefits (or your full account balance, if it is less
than that amount) cannot be turned over to your creditor or frozen,
and you may withdraw or use these funds as you normally would.
If your account contains funds in excess of the sum of the
benefits directly deposited during the 60-day period, those funds
are subject to the garnishment order and may be frozen or turned
over to your creditors.
Protected Funds in Your Account
We have determined that one or more Federal benefit payments
were deposited to your account within 60 calendar days preceding our
receipt of the garnishment order. The balance in your account when
we conducted our review was $----. Of this amount, [insert protected
amount] is protected under Federal law from garnishment or freezing.
You may continue to access these funds as usual.
[Additional Funds in Your Account
Your account also contains additional funds. We have placed a
hold on these funds and may turn them over to your creditor as
directed by the garnishment order. If you believe that some or all
of these additional funds are also Federal benefit payments, you may
have additional rights to protect these funds. In addition, you may
have rights to protect other funds in your account from garnishment,
such as public assistance (welfare), disability benefits, workers'
compensation benefits, and pension benefits.
You can make a claim for these rights by (insert, as applicable
and required for the jurisdiction, a standard instruction or a
reference to the jurisdiction's notice for completing an exemption
claim form, process for contacting the court, or process for
contacting the judgment creditor).]
Contact Information
The creditor that obtained the garnishment order against your
account is [insert name] and may be contracted at [insert phone
number].
The court that issued the garnishment order is [insert name] and
their general information line is [insert phone number].
You may call us at [insert phone number].
Appendix B to Part 212--Form of Notice of Garnishment by the United
States
Notice of Garnishment by the United States
The attached garnishment order was obtained by the United
States.
Accordingly, the garnishee is hereby notified that the
procedures established under 31 CFR Part 212 for identifying and
[[Page 20313]]
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 the court.
I, the undersigned, certify that my organization is part of the
United States, as defined in 28 U.S.C. 3002(15), and has authority
to conduct litigation for the collection of debts on behalf of the
United States.
Signature:-------------------------------------------------------------
Title:-----------------------------------------------------------------
Organization:----------------------------------------------------------
Date:------------------------------------------------------------------
Social Security Administration
20 CFR Parts 404 and 416
Authority and Issuance
For the reasons set forth in the preamble, the Social Security
Administration proposes to amend 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
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)).
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 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, the Social Security Administration, the
Department of Veterans Affairs, the Railroad Retirement Board, and the
Office of Personnel Management.
PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND
DISABLED
Subpart E--Payment of Benefits, Overpayments, and Underpayments
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.
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, the Social Security Administration, the
Department of Veterans Affairs, the Railroad Retirement Board, and the
Office of Personnel Management.
Department of Veterans Affairs
Authority and Issuance
For the reasons set forth in the preamble, the Department of
Veterans Affairs proposes to amend Part 1 of Title 38 of the Code of
Federal Regulations as follows:
PART 1--GENERAL PROVISIONS
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.
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, the Social Security Administration,
the Department of Veterans Affairs, the Railroad Retirement Board and
the Office of Personnel Management.
Railroad Retirement Board
Authority and Issuance
For the reasons set forth in the preamble, the Railroad Retirement
Board proposes to amend 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
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).
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, the Social Security Administration, the
Department of Veterans Affairs, the Railroad Retirement Board and the
Office of Personnel Management.
Office of Personnel Management
Authority and Issuance
For the reasons set forth in the preamble, the Office of Personnel
Management proposes to amend parts 831 and 841 of Title 5 of the Code
of Federal Regulations as follows:
PART 831--RETIREMENT
1. The authority citation for part 831 is revised to read as
follows:
Authority: Sec. 831.2203 also issued under section 7001(a)(4) of
Pub. L. 101-508, 104 Stat. 1388-328; Secs. 831.115 and 831.116 also
issued under 5 U.S.C. 8346(a).
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.
3. Add a new section 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, the Social
[[Page 20314]]
Security Administration, the Department of Veterans Affairs, the
Railroad Retirement Board and the Office of Personnel Management.
PART 841--FEDERAL EMPLOYEES RETIREMENT SYSTEM--GENERAL
ADMINISTRATION
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; 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;
Secs. 841.110 and 841.111 also issued under 5 U.S.C. 8470(a).
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.
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, the Social Security Administration,
the Department of Veterans Affairs, the Railroad Retirement Board and
the Office of Personnel Management.
By the Department of the Treasury.
Richard L. Gregg,
Acting Fiscal Assistant Secretary.
By the Social Security Administration.
Michael J. Astrue,
Commissioner of Social Security.
Dated: April 9, 2010.
By the Department of Veterans Affairs.
John R. Gingrich,
Chief of Staff.
Dated: April 6, 2010.
By the Railroad Retirement Board.
Beatrice Ezerski,
Secretary to the Board.
By the Office of Personnel Management.
John Berry,
Director.
[FR Doc. 2010-8899 Filed 4-14-10; 4:15 pm]
BILLING CODE 4810-25-P