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FDIC Federal Register Citations
[Federal Register: September 28, 2007 (Volume 72, Number 188)]
[Notices]              
[Page 55273-55276]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28se07-150]                        

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket ID OCC-2007-0015]

FEDERAL RESERVE SYSTEM

[Docket No. OP-1294]

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

[ID-OTS-2007-0018]

NATIONAL CREDIT UNION ADMINISTRATION

 
Proposed Guidance on Garnishment of Exempt Federal Benefit Funds

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
Treasury (OTS); and National Credit Union Administration (NCUA)
(collectively, the Agencies).

ACTION: Notice with request for comment.

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SUMMARY: The Agencies are proposing guidance entitled Garnishment of
Exempt Federal Benefit Funds. This proposed guidance has been developed
to encourage financial institutions to have policies and procedures in
place with respect to handling garnishment orders and sets forth best
practices, including procedures designed to expedite notice to the
consumer of the garnishment process and release of funds to the
consumer as quickly as possible.

DATES: Comments must be submitted on or before November 27, 2007.

ADDRESSES: The Agencies will jointly review all of the comments
submitted. Therefore, interested parties may send comments to any of
the Agencies and need not send comments (or copies) to all of the
Agencies. Please consider submitting your comments by e-mail or fax,
since paper mail in the Washington area and at the Agencies is subject
to delay. Interested parties are invited to submit comments to:
    OCC: You may submit comments by any of the following methods:
     E-mail: regs.comments@occ.treas.gov.
     Fax: (202) 874-4448.
     Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2007-0015'' in your comment. In general, OCC will enter
all comments received into the docket without change, including any
business or personal information that you provide such as name and
address information, e-mail addresses, or phone numbers. Comments,
including attachments and other supporting materials, received are part
of the public record and subject to public disclosure. Do not enclose
any information in your comment or supporting materials that you
consider confidential or inappropriate for public disclosure.
    You may review comments and other related materials by any of the
following methods:
     Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC's Public Information Room, 250 E
Street, SW., Washington, DC. For security reasons, the OCC requires
that visitors make an appointment to inspect comments. You may do so by
calling (202) 874-5043. Upon arrival, visitors will be required to
present valid government-issued photo identification and submit to
security screening in order to inspect and photocopy comments.
     Docket: You may also view or request available background
documents and project summaries using the method described above.
    Board: You may submit comments, identified by Docket No. OP-1294,
by any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm
.
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include the
docket number in the subject line of the message.
     Fax: 202/452-3819 or 202/452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be

[[Page 55274]]

edited to remove any identifying or contact information. Public
comments may also be viewed in electronic or paper form in Room MP-500
of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m.
and 5 p.m. on weekdays.
    FDIC: You may submit comments by any of the following methods:
     Agency Web Site: http://www.fdic.gov/regulations/laws/
federal
. Follow instructions for submitting comments on the Agency Web
Site.
     E-mail: Comments@FDIC.gov. Include ``Garnishment
Statement'' in the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m. (EST).
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
    Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal including any
personal information provided. Comments may be inspected and
photocopied in the FDIC Public Information Center, 3501 North Fairfax
Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m.
(EST) on business days. Paper copies of public comments may be ordered
from the Public Information Center by telephone at (877) 275-3342 or
(703) 562-2200.
    OTS: You may submit comments, identified by ID OTS-2007-0018, by
any of the following methods:
     E-mail: regs.comments@ots.treas.gov. Please include ID
OTS-2007-0018 in the subject line of the message and include your name
and telephone number in the message.
     Fax: (202) 906-6518.
     Mail: Regulation Comments, Chief Counsel's Office, Office
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,
Attention: ID OTS-2007-0018.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days. Address
envelope as follows: Attention: Regulation Comments, Chief Counsel's
Office, Attention: ID OTS-2007-0018.
    Instructions: All submissions received must include the agency name
and docket number for this proposed Guidance. All comments received
will be posted without change to the OTS Internet Site at http://
www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1
, including any
personal information provided.
    In addition, you may inspect comments at the Public Reading Room,
1700 G Street, NW., by appointment. To make an appointment for access,
call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, or
send a facsimile transmission to (202) 906-7755. (Prior notice
identifying the materials you will be requesting will assist us in
serving you.) We schedule appointments on business days between 10 a.m.
and 4 p.m. In most cases, appointments will be available the next
business day following the date we receive a request.
    NCUA: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/
RegulationsOpinionsLaws/proposed--regs/proposed--regs.html
. Follow the
instructions for submitting comments.
     E-mail: Address to regcomments@ncua.gov. Include ``[Your
name] Comments on Proposed Guidance (Garnishment of Federal Benefit
Payments)'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT:
    OCC: Michael Bylsma, Director, Community and Consumer Law Division,
(202) 874-5750 or Ann Jaedicke, Deputy Comptroller, Compliance, (202)
874-4428, Office of the Comptroller of the Currency, 250 E Street, SW.,
Washington, DC 20219.
    Board: Legal Division: Kara L. Handzlik, Attorney (202) 452-3852,
Board of Governors of the Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington, DC 20551. Users of
Telecommunication Device for Deaf only, call (202) 263-4869.
    FDIC: Patricia Cashman, Senior Policy Analyst, Division of
Supervision and Consumer Protection, (202) 898-6534, Mark Mellon,
Counsel, Legal Division, (202) 898-3884 or Patricia Colohan, Senior
Examination Specialist, Division of Supervision and Consumer
Protection, Federal Deposit Insurance Corporation, 550 17th Street,
NW., Washington, DC 20429.
    OTS: Stacy Messett, Senior Project Manager, Compliance and Consumer
Protection, (202) 906-6241 or Richard Bennett, Senior Compliance
Counsel, Regulations and Legislation Division, (202) 906-7409, Office
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
    NCUA: Ross Kendall, Staff Attorney, Office of General Counsel,
(703) 518-6540 or Matthew Biliouris, Program Officer, Office of
Examination and Insurance, (703) 518-6360, National Credit Union
Administration, 1775 Duke Street, Alexandria, VA 22314-3428.

SUPPLEMENTARY INFORMATION:

I. Background

    The Agencies developed this proposed guidance, Garnishment of
Exempt Federal Benefits Funds, to address concerns associated with
garnishment of exempt federal benefit payments, such as Social Security
benefits, Supplemental Security Income benefits, Veterans' benefits,
Federal Civil Service retirement benefits, and Federal Railroad
retirement benefits. These benefits, which are generally exempt under
federal law from garnishment orders and the claims of judgment
creditors, often constitute an important part, 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 funds, the recipients of these funds can face
significant hardship. At the same time, financial institutions are
required by state law to comply with garnishment orders, which may
necessitate placing a freeze on an account that contains federal
benefit payments. The agencies have developed this proposed guidance to
encourage financial institutions to minimize the hardships encountered
by federal benefit funds recipients and to do so while remaining in
compliance with applicable law.

II. Request for Comment

    The Agencies request comment on all aspects of the proposed
guidance. In addition, the Agencies seek comment on the following
issues:
    1. Are there practices that would enable an institution to avoid
freezing funds altogether by determining at the time of receipt of a
garnishment order that the funds are federally protected and not
subject to an exception?
    2. Are there other permissible practices that would better serve
the

[[Page 55275]]

interests of consumers who have accounts containing federal benefit
payments? Are there ways to provide consumers with reasonable access to
their funds during the garnishment process?
    3. Are customers adequately informed of their rights when a
creditor attempts to garnish their funds? What could be done to provide
consumers with better information?
    4. Institutions often charge customers a fee for freezing an
account. How do these fees compare to those charged separately when an
account holds insufficient funds to cover a check presented for
payment? Are there operational justifications for both types of fees to
be assessed?

III. Text of Proposed Joint Guidance

Garnishment of Exempt Federal Benefit Funds

    Social Security benefits, Supplemental Security Income benefits,
Veterans' benefits, Federal Civil Service retirement benefits, and
Federal Railroad retirement benefits often constitute an important
part, and sometimes all of an individual's income. Consequently,
federal law protects these benefit payments from garnishment orders and
the claims of judgment creditors.\1\ For example, Section 207 of the
Social Security Act provides that, with certain exceptions, 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, Veterans' 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 Civil Service pension benefits are similarly protected
under federal law.\4\ These federal provisions are subject to certain
exceptions, such as garnishment orders relating to alimony or child
support payments.\5\
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    \1\ See 42 U.S.C. 407(a); 42 U.S.C. 1383(d)(1); 38 U.S.C. 5301;
5 U.S.C. 8346(a); and 45 U.S.C. 231m(a).
    \2\ 42 U.S.C. 407.
    \3\ 38 U.S.C. 5301.
    \4\ 5 U.S.C. 8346.
    \5\ See, e.g., 42 U.S.C. 659.
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    The Social Security Administration (SSA) and Department of Veterans
Affairs (VA) have not to date specified rules outlining the scope of
these protections. However, a number of court decisions have addressed
aspects of these protections. This statement, issued by the Board of
Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency, Office of
Thrift Supervision, and National Credit Union Administration
(Agencies), represents guidance on best practices for financial
institutions to protect consumers' funds while remaining in compliance
with state laws and court orders governing garnishment, attachment, and
other legal process.
    Creditors and debt collectors are often able to obtain enforceable
orders from state courts on an ex parte basis garnishing funds in a
consumer's account. To comply with state court garnishment orders,
financial institutions often place a temporary freeze or hold on an
account upon receipt of a garnishment order. Although the freeze will
preserve the funds in the account and provide the account owner with an
opportunity to assert any rights, exemptions, and challenges to the
garnishment order, including the exemptions under applicable federal
benefits laws, the freeze can also cause significant hardship for the
account owner. This is especially true when, as is often the case, the
recipients of federal benefits, such as SSA and VA benefits, depend on
these funds as their primary source of income.
    At the same time, financial institutions are required by state law
to comply with garnishment orders, and in many states, are liable for
any funds that are withdrawn by a consumer after the financial
institution has received a garnishment order for a particular account.
State garnishment orders may not provide sufficient information to
allow financial institutions to know if the order is subject to one of
the exceptions in federal law allowing garnishment of federal benefit
funds. Moreover, consumer accounts may include both funds that may be
protected by federal law from garnishment and other funds that are not
protected.
    The interplay of federal law and state garnishment laws raises
difficult and complex issues. A freeze is designed to preserve the
funds in an account until the legal status of the funds can be
determined. The Agencies are aware, however, of the hardship that
recipients of exempt federal benefit funds may face when a freeze is
placed on their accounts. In order to minimize this hardship and ensure
compliance with applicable law, the Agencies encourage financial
institutions to have policies and procedures in place to address
garnishment orders, including procedures designed to expedite notice to
the consumer of the garnishment process and release funds to the
consumer as quickly as possible.
    Among the best practices in this area are the following:
     Promptly notify a consumer when a financial institution
receives a garnishment order and places a freeze on the consumer's
account;
     Provide the consumer with information about what types of
federal benefit funds are exempt, including SSA and VA benefits, in
order to aid the consumer in asserting federal protections;
     Promptly determine, as feasible, if an account contains
only exempt federal benefit funds such as SSA or VA benefits;
     Notify the creditor, collection agent, or relevant state
court that the account contains exempt funds in cases in which the
financial institution is aware that the account contains exempt funds;
     If state law or the court order will permit a freeze not
to be imposed if the account is determined to contain only exempt
federal benefit funds, act accordingly if that determination is made;
     Minimize the cost to a consumer when the consumer's
account containing exempt federal benefit funds is frozen, such as by
refraining from imposing overdraft, NSF, or similar fees while the
account is frozen or refunding such fees when the freeze has been
lifted;
     Allow the consumer access to a portion of the account
equivalent to the documented amount of exempt federal benefit funds as
soon as the financial institution determines that none of the
exceptions to the federal protections against garnishment of exempt
federal benefit funds are triggered by the garnishment order;
     Offer consumers segregated accounts that contain only
federal benefit funds without commingling of other funds; and
     Lift the freeze on an account as soon as permissible under
state law.
    The Agencies encourage financial institutions to stay apprised of
any future guidance issued by the SSA or VA regarding garnishment
practices and of developments in the courts in their jurisdiction
regarding garnishment practices.

    Dated: September 21, 2007.
John C. Dugan,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve
System, September 19, 2007.
Jennifer J. Johnson,
Secretary of the Board.

    Dated at Washington, DC, the 19th day of September, 2007.


[[Page 55276]]


    By order of the Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

    Dated: September 19, 2007.

    By the Office of Thrift Supervision.
John Reich,
Director.

    Dated: September 19, 2007.

    By the National Credit Union Administration.
JoAnn M. Johnson,
Chairman.
[FR Doc. 07-4783 Filed 9-27-07; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P; 7535-01-P


    

Last Updated 09/28/2007 Regs@fdic.gov