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#1216766 - 07/13/09 09:44 PM Garnishment, levy, subpoena - MIA joint owner
BBoyd Offline
Diamond Poster
BBoyd
Joined: Mar 2002
Posts: 2,494
MI
Suppose we have accounts that have been set up with two names in the title, but no "connected" relationship or CIF record for the secondary owner. In other words, when looking at the account on the system, it reads:

John Smith
Mary Smith

but we only have a CIF for John. Mary's name just "appears" on the title. If Mary were to walk in and ask if she had an account, we would not be able to find her.

That said - what happens if the bank gets a garnishment, levy, subpoena, or any other legal request to provide information on Mary's accounts. Searching for Mary - we find none and state that on the request. THEN - it's discovered that we withheld information because our accounts weren't titled correctly. What's our liability? Is there a penalty? Can we get by by saying, "Oops - our Banker messed up...."?

I'm discussing this with someone and need to know if we should push ahead to get this identified and corrected ASAP or if it can wait.

Thanks!
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#1216775 - 07/13/09 10:05 PM Re: Garnishment, levy, subpoena - MIA joint owner BBoyd
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,199
Illinois
Obviously consult with your bank's counsel regarding this matter.
If it can be proven that the bank held funds for Mary and did not comply due to the method of record keeping on joint owners, the plaintifs who served the original document could then seek judgement against the bank for the amount the full amount of the judgement.
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#1216838 - 07/14/09 01:01 PM Re: Garnishment, levy, subpoena - MIA joint owner BBoyd
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
In my home state, failure to find an asset in the name of the garnishee makes the bank liable for the entire amount of the judgment, not just the funds it had on deposit. For example, the garnishor has a $25,000 judgment and serves a garnishment on your bank, but you only held $500 in the name of the garnishee. If you mistakenly return that garnishment "no assets found" your bank owes $25,000.

That provides a more than adequate incentive for conducting a diligent search, including a manual search. As for being able to defend your bank's failure to locate an asset by pointing out an acknowledged weakness in your system, I do not like your chances.

In C Notice processing the IRS imposes a standard that translates to: Look as hard as you would if you were processing a claim on behalf of your bank. So in training sessions I use the anecdote: The CEO stops by your office and says, "I am going to have to charge off a loan, see if this borrower is on any accounts where we can claim a right of offset." Would your bank really just do a numeric search and then drop it? Whatever you would do if the CEO asked you to find an account is what you should do in response to a demand from a third party.

Check to see what the penalty is in your state. FYI, failure to turn over assets rightfully seized by the IRS generates a penalty equal to the amount of assets you held plus 50%, regardless of whether you still hold those assets. In the above example, you would owe the IRS $750 even if the customer had closed his account.

Do your homework on the penalties under state law. Then, start talking about the risks involved and doing manual searches vs. updating your record keeping system and the ancillary benefits that effort might offer. When you are talking about both options, the second is going to sound a lot more desirable than the first.

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