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Proposed rule would limit Fed. benefit garnishments
WASHINGTON (4/22/10)—The U.S. Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Personnel Management this week issued for public comment a proposed rule” to implement statutory restrictions on the garnishment of Federal benefit payments.” The notice, as published in the Federal Register, states that the rule is a 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, which would affect all financial institutions, including federal- and state-chartered credit unions, 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 the account or to the current balance of the account, whichever is lower.” The proposed rule aims to “ensure that benefit recipients have access to exempt funds” while garnishment orders are being resolved. The rule also attempts to protect credit unions and other financial institutions that are involved in cases where accounts that are receiving federal benefit payments have also received garnishment orders. The rule provides “a safe harbor” and protects credit unions and other financial institutions that follow these federally established 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.” However, under the proposal, credit unions and other financial institutions would not be permitted to charge garnishment fees “against protected amounts.” 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 added. Comments on the proposed rule must be submitted by June 18. For the proposed rule, as published in the Federal Register, use the resource link. The Credit Union National Association will soon issue a comment call asking for credit union remarks regarding the plan.
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