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New Federal Regulation-Garnishment/Protected Funds

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Question: 
On page 13 of the handout for the new federal regulations, the 7th paragraph states "...the claim may serve as a continuing lien against future deposits that do not involve "benefit payments...". <i>Federal Register</i> Volume 76 Issue 36 page 18 paragraph 4 states "A small number of States authorize the issuance of a "continuing" garnishment order, i.e., an order requiring the garnishee to monitor, preserve and remit funds coming into the garnishees custody on an ongoing basis. The rule operates to prohibit a financial institution that is served with a continuing garnishment from complying with the order's ongoing requirements." My questions are: Do we monitor the account for 30 days as the garnishment states for deposits that are not protected funds? On page 9 of the same volume in the 8th(?) paragraph it states "The Agencies intend ... to ensure that after a garnishment order is received, the account holder continues to have the same degree of access to the protected funds that was provided prior to the receipt of the order." Does that mean that we cannot leave a hold on the account to avoid withdrawal of unprotected funds, still covering checks with protected funds? Also, would suspending the customer's debit card be against this?
Answer: 

It would be helpful to have quotation marks so I would know exactly what the order says and whether it's a part of your state's standard form or simply inserted by an attorney who is trying to create a loophole. Supplementary information accompanying a regulation is not the law, let's go with what the regulation says:(g) No continuing or periodic garnishment responsibilities. The financial institution shall notcontinually garnish amounts deposited or credited to the account following the date of account review, and shall take no action to freeze any funds subsequently deposited or credited, unless the institution is served with a new or different garnishment order, consistent with the requirements of this part. That's about as clear as it can get; i.e. no continuing responsiblities without a new order. Regardless, your bank's attorney should put the issue in front of your local court and ask for instructions. No opinion offered here will mean anything. The judge actually could find that the language in the garnishment order can be complied with without violating the federal regulation. Clearly that would require daily monitoring by your bank. Such a ruling would be the impetus behind unilaterally closing affected accounts for many banks. (Customers receiving federal benefit payments via direct deposit are entitled to advance notice of account closure.) If the account contains a protected amount, you cannot disable the debit card and impair the customer's access to the funds. However, leaving the debit card active could eliminate your ability to comply with any continuing responsibilites you might have under the garnishment order. Catch 22.

First published on BankersOnline.com 01/02/12

First published on 01/02/2012

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