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CUNA Garnishments a state issue
WASHINGTON (11/28/07)—-How financial institutions respond to state court garnishment orders when exempt federal benefit funds are involved would best be addressed by federal policymakers coordinating with state officials to develop model statutory language that all states would be encouraged to adopt, according to the Credit Union National Association (CUNA). The objectives of such language would be to encourage greater uniformity in garnishment proceedings and to ensure adequate notice is provided to consumers by the courts that are reviewing claims for garnishment. It would also address that notice to consumers would spell out the exemptions for federal benefit funds and state that the courts should work with the parties through the hearing or review process to develop garnishment orders that recognize the amount of such funds that are exempt, CUNA wrote in a comment letter to the National Credit Union Administration (NCUA). The NCUA and other federal financial regulators proposed guidance on the issue in September, just as the Senate Finance Committee conducted a hearing on the subject. The agency’s proposed “Guidance on Garnishment of Exempt Federal Benefit Funds” is comprised of nine best practices. It seeks to address situations that arise when a financial institution should be encouraged to develop and maintain sound policies for dealing with garnishments in a pro-consumer manner while recognizing the practical constraints on their operations. However, the CUNA letter said that a number of legal concerns regarding the processing of garnishments are more appropriately the purview of state courts and the parties to the garnishment proceeding, rather than the third party financial institutions. “Credit unions want to uphold the law and make every effort to do so but should not be expected, even through best practices, to assume responsibilities that belong to others,” the CUNA letter said. The subject of garnishments also has received the attention of House members. Earlier this year House Financial Services Committee Chairman Barney Frank (D-Mass.) sent a letter to all the federal financial institution regulators asking them what actions they have taken to ensure compliance with the Social Security Act's prohibition against the garnishment of federal benefits. Frank, at that time, noted a lack of regulatory guidance on the issue. The CUNA comment letter also addressed each of the nine proposed best practices noting that a number of the proposals are simply not workable. The letter, soon to be posted on the CUNA website at www.cuna.org, may be read in its entirety by clicking on the Regulatory Advocacy page of the website.
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