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First State Bank
From: Jacqueline Bend
Sent: Thursday, October 11, 2007 1:50 PM
To: Colohan, Patricia A.
Comments on the proposed guidance:
1. The burden of determining whether funds are exempt should not be placed upon the financial institutions. Seldom are the funds in an account entirely exempted. A mix of income sources makes a determination difficult, costly and leaves the financial institution liable for the probability of an incorrect determination. Financial institutions should not have to act as interpreters of the federal vs state laws regarding such funds. The processing of garnishments is already a highly manual and expensive requirement placed on financial institutions. To force them to make judgments on the status of funds within an account and to further burden them with allowing "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" is adding another layer of liability for the banks to both the consumer and to the originator of the garnishment. This is a legal concern between the originator and the customer and needs to remain that way. The following is a recent example of an account on which a freeze was placed due to a garnishment: a customer of this institution was the recipient of Social Security funds monthly. In addition to these funds, he received retirement benefits as well as interest from investments on a monthly basis. To attempt to sort out what percentage of the balance of the account was due to Social Security, retirement benefits and investment income would not be possible. In this case, the customer was referred to the law firm and they made a suitable determination between the two parties involved.
2. Consumers could be required to open a new account specifically stated as being exclusively for funds exempt under federal law from garnishment orders. This could be an industry-wide requirement and would place the responsibility of identifying the purpose and source of such funds on the consumer. The government has encouraged recipients to have funds electronically deposited. At the time a consumer registers for such benefits, the government organization with whom they have registered would be required to confirm with the consumer that such an exclusive account has been established. If the funds are not in such an account they would be subject to garnishments. The proposal states "offer consumers segregated accounts." This would not be sufficient to lift the burden that this proposal places upon the financial institutions. It must be a requirement that it is the responsibility of the customer and the originator of such exempt funds to establish such an account.
3. I believe customers are properly notified. The garnishments clearly state the exempt funds and the actions they can take to assure the funds are not held. In cases where such an exemption exists, I have referred our customer to the law firm stated on the garnishment. It is between the customer and the law firm to determine a solution. In addition to a copy of the garnishment being mailed to them by the legal originator, our institution, upon placing the freeze, immediately mails the customer a notification of the action taken by the bank as well as a copy of the document which initiated this action.
4. There are fees assessed when a freeze is placed on an account. The fee is the same as that assessed when there are insufficient funds to cover a check presented for payment. Upon completion of the freeze, if there are sufficient funds, a final fee is assessed for the handling of the garnishment. This fee is disclosed annually in our Schedule of Charges. To place restrictions on the assessment of such fees is once again placing a costly burden on financial institutions as this would require manual intervention to override automated systems that are in place. In addition to this, it would prohibit the financial institution from recovering a small portion the costs involved in performing these legally required services.
|Last Updated 10/12/2007||Regs@fdic.gov|