Answer by John Burnett: I'd start by familiarizing the person or persons who currently handle garnishments for your bank with the new Treasury rule that goes into effect on May 1. Then I'd suggest that one or more of those persons draft a revised procedural document that incorporates the new requirements, and that it be reviewed by the bank's compliance officer and/or legal counsel. The interplay between state laws and regulations and the new rule is something that you should get resolved with bank counsel as part of the procedure drafting process.
Fortunately, the regulation itself is well organized so that it should be relatively easy to follow it step-by-step. But make very sure that whoever drafts your procedures understands the key definitions in the regulation before putting pen to paper.
Answer by Ken Golliher: Widening the view somewhat, your institution should have written procedures for handling all third party claims for customer funds and information. Although critical and essential to a good faith defense, your procedures for identifying "protected" amounts should be a single strand in a web of internal controls.
First published on BankersOnline.com 6/6/11