FDIC Federal Register Citations

From: Jodie Beyer [mailto:jmbeyer@ssbank.com]
Sent: Tuesday, November 27, 2007 12:07 PM
To: Comments
Subject: Garnishment Statement - 9/28/07

In the proposed guidance issued on 9/28/07, there are many items that will place a large amount of unnecessary burden on many banks. The hardest hit will be banks of limited size and resources. First of all, determining the source of funds on deposit accounts will be a manual process that will be very costly to banks. Not to mention the added time required to satisfy a request by a court for a garnishment which will cause further frustration within the courts. The proposed rule recommends that banks require customers to open separate accounts for the deposit of federally exempt funds in order to offset the burden of identifying the funds. Once again, the cost and burden associated with this practice will be detrimental to banks, especially community banks with limited resources. Unless a bank is large enough to house and maintain their own core systems, they will have to utilize a system provided by a third party. The majority of core system providers charge a monthly per account fee for maintaining the accounts on their system. By forcing the bank to open multiple accounts for an individual that may not be a profitable relationship in the first place, the agencies are placing unnecessary financial burden on banks. Furthermore, the burden of identifying the source of funds will not only cause a strain on banks, but will also place a strain on consumers. It is not the banks or the governments place to determine the manner in which a consumer manages their finances and by forcing them to maintain separate accounts for certain funds, we will be doing just that. As banks, we are to act as advisors in this area and not to force our customers to manage their finances in a certain manner.

The matter of garnishments is already heavily regulated at the state level and the addition of this rule will, at minimum, double the cost of compliance in this area. There is no legitimate reason for implementing this regulation.

The proposed rule is designed to allow recipients of federally exempt funds to be spared hardship caused by garnishment but does not address the fact that garnishment on any funds, regardless of the origin, can cause hardship for the individual whose account is subject to the garnishment. From a working man's point of view, this gives the average person one more reason to utilize a system that is already over burdened and under funded and will result in future strain on social security and other similar programs that were intended to help the average worker plan for retirement as well as for unforeseen disability or other catastrophe and is contradictory to the purpose of these programs. Instead of encouraging people to reap undue benefits from these programs, should we not be encouraging them to learn how to contribute to them and to the communities and economies that support them?

The proposed rule will result in discrimination towards the individuals who do legitimately benefit from federally exempt funds. Lenders will be less likely to loan to recipients of these benefits knowing that they will have no secondary source of repayment should the borrower default. In the current lending environment brought on by sub prime and predatory lending practices, lenders are already more wary of their practices and the result has been a decline in readily available credit. To put this rule into law would mean further decline in this availability to the individuals who need it the most. This law could have a very detrimental and longstanding effect on an already strained economy.

I hope that the agencies will recognize the implications of this rule and will see that the only solution is to do away with it completely. The burden that will be placed on the consumer as well as the banks serving them is in no way justified by the intent of the rule. As the old saying goes, there is a certain road paved with good intentions and this regulation is riding it.

Jodie Beyer
Compliance Officer
Security State Bank