Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

Recently, the Treasury Department, Social Security Administration, Department of Veterans Affairs, Railroad Retirement Board, and the Office of Personnel Management (the Agencies) issued a final rule on the garnishment of accounts containing federal benefit payments.  An interim final rule which established procedures that financial institutions must follow when they receive a garnishment order for an account holder has been in effect since May 1, 2011.

The final rule makes several revisions of interest.  For example, the definition of “garnishment order” has been revised to include orders or levies issued by a State or State agency or municipality.  This revision will bring levies issued directly by a State agency, such as a State revenue department, under the scope of the rule.

Another issue of particular interest to credit unions is how the rule applies to “master” and “sub” accounts.  The preamble to the final rule discusses the application of the rule: 

“The requirement to perform an account review applies to the deposit account to which a Federal payment is routed and credited. In cases where a payment recipient is assigned a member number that doesn’t represent an account per se, but that serves as a ‘‘prefix’’ for individual sub accounts, it is the individual sub account (and not the ‘‘master account’’) that is subject to the account review and lookback.”

Other revisions include amendments regarding the identification of federal benefit payments, the ability to collect a garnishment fee for 5 days following the account review if nonprotected funds subsequently become available, and a revision to the notice requirements to only require notice in cases where there are funds in the account in excess of the protected amount.

The final rule is effective June 28, 2013.