Are we allowed to take a garnishment/levy fee and cause an overdraft on an account that does NOT have federal benefits?

It wouldn't fall under the garnishment rules for federal benefit accounts, but I would not see why you woudl overdraw the account....wouldn't you just give what is available (i.e. bring to a zero balance)? Or is there more to the story that I am missing?

We charge a fee of $75.00 to process a levy. We hold the available funds in the account for the Levy only, we cannot include the fee in the hold amount. Once we charge the levy amount, there is no money left for the fee however the account is still open. Can we charge the fee and cause an overdraft on the account? Or can we take the fee at a later date when funds are deposited. Again, this is NOT a federal government deposit account.

That is a tough one, I think we better wait for someone with more knowledge in this area to answer. Sorry.

I would not think so. Very few States deal with allowable normal service charges on deposit accounts. If you contract - you can charge.

Here is what a my manual from the 2012 WBA Deposit Complaince School says

"Bank may impose fees by contract on account holders in connection with garnishments, provided such fees are disclosed in the deposit account schedule of fees and charges delivered to the account holder.

However, such fees may not be taken from any amount that must be frozen and any "protected amount" under the Garnishment of Account Containing Federal Benifit Payment interim rule. Also, such fees may not be imposed agter the date of account review."

The manual did not give a citation to the above statement.

So my interpitation is NO you can not take your fee. I am not a lawyer just a small town complaince officer with a manual Good Luck

I would sure like to see a citation for that. That would be like saying you could not overdraw an account with a monthly service charge - it is the same contractual type of arrangement.

"such fees may not be imposed agter(sp)the date of account review."

If you are dealing with protected funds, I agree, you probably could not wait until such time later to assess the fee when you thought non-protected funds were then in the account.

I can't find my book with the citation in it but the legal theory is that if the bank is willing to overdraw the account to collect a fee, it should be willing to overdraw the account to pay the full levy.

Charlie

This all depends on what type of a levy it is. I prepared training on this for our staff so looked up all the laws/rules, but didn't include citations in the training so don't have them handy.

But, in general, for DOR and CPC Levies, the fee can be charged against levy proceeds (i.e. levy proceeds are reduced by the amount of the fee). For all others, we would overdraw the account if it is at $0 once the levy is taken out; just like with any other fee there is no issue overdrawing the account as long as it was disclosed and/or included in the account agreemet.