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I have reviewed the text of the Proposed Joint Guidance to financial institutions on handling garnishment of accounts holding exempt Federal Benefit Funds (72 FR 55273-76).
Summary of my comment: Financial institutions should be required to determine whether an account holds exempt funds and should required to keep electronically deposited exempt funds available to the recipient.
I am glad that the governing agencies are beginning to address the long-standing problem of the practice of financial institutions to freeze garnished accounts that contain exempt funds, thus causing serious financial distress to vulnerable recipients of Social Security Act (SSA) funds, as rent checks bounce and bank fees accrue.
The practice of freezing the account may have made sense and protected financial institutions years ago, but now most SSA funds are electronically deposited so the financial institution can easily determine that the account contains exempt funds Indeed it must do so every time it chooses to freeze rather than to release the funds to the requesting court. There is no exception to SSA funds freedom from execution, levy, attachment, garnishment or other legal process; section (c) of 42 U.S.C. 407 addresses the withholding of taxes from an SSA benefit and is thus not applicable in the judicial garnishment context. Given the changes in technology, banks should be prohibited from freezing exempt SSA funds (at least those electronically deposited) pursuant to garnishment.
I wholeheartedly agree that a bank should not charge resulting NSF or other fees for those few cases in which it feels it should freeze an account in order to protect itself.
Ellen Holland Keller,
|Last Updated 11/27/2007||Regs@fdic.gov|