CUNA Comment Letter
Garnishment of Accounts With Federal Benefit Payments
June 18, 2010
Mr. Gary Grippo
Deputy Assistant Secretary
Fiscal Operations and Policy
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W. Room 2112
Washington, DC 20220
|RE:||Garnishment of Accounts With Federal Benefit Payments Department of the Treasury (RIN 1501-AC20), Office of Personnel Management (RIN 3206-AM17), Railroad Retirement Board (RIN 3220-AB63), Social Security Administration (RIN 0960-AH18), and Department of Veterans Affairs (RIN 2900-AN67)|
Dear Mr. Grippo:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed rule with regard to Federal benefit payments that was issued by the Department of the Treasury, Office of Personnel Management, the Railroad Retirement Board, Social Security Administration, and the Department of Veterans Affairs (collectively the Agencies). This proposal would implement the current statutory restrictions on the garnishment of Federal benefit payments and, specifically, would establish procedures that financial institutions must follow when a garnishment account order is received for an account in which there is a direct deposit of Federal benefit payments. CUNA represents approximately 90 percent of our nations 7,800 state and federal credit unions, which serve approximately 92 million members.
Summary of CUNAs Comments
- Credit unions have serious concerns with the proposal, including the provisions that would require credit unions to review the account history during a 60-day period preceding the receipt of the garnishment order. Many credit unions simply do not have the data processing capability to conduct such a review. This means that if this proposal is adopted, such credit unions would have to perform this review manually, diverting them from serving members and placing additional strains on their limited resources.
- Even credit unions that have the data processing capabilities may not have the capability to review a 60-day historical period.
- Rather than such a labor intensive review, we believe the preferable approach would be to allow financial institutions to use a flat amount that the account holder would have access to, such as the lesser of $2,200 or the balance in the account. This approach and amount was considered by the Agencies, as outlined in the Supplementary Information in the proposed rule, and we urge the adoption of this approach, rather than the 60-day review.
- Also, financial institutions should have up to five days to provide the required garnishment notices to consumers.
- CUNA supports the provisions of the proposal that would not require further review if funds are transferred to a second account.
- The proposed rule would not apply to garnishment orders obtained by the United States. CUNA does not agree that these orders should be excluded as it contradicts the goal of ensuring that beneficiaries retain their exempt benefits.
The proposed rule would require a financial institution to take certain actions when it receives a garnishment order. If these actions are followed, the institution will be protected from the risk of liability, contempt of court, or civil actions in these situations. While we applaud this objective, we have serious concerns with the proposal.
The first step in the proposed process would be to determine if the United States is the plaintiff that obtained the order against the account holder; the rule would not apply in situations in which the United States is the creditor. The second step would be for the financial institution to review the account history during the 60-day period preceding the receipt of the garnishment order. If during this lookback period one or more exempt Federal payments were made by direct deposit, the institution must then allow the account holder to have access to an amount that is the lesser of the sum of such exempt payments or the balance of the account on the date of the review.
Credit unions strongly oppose this 60-day lookback period because of significant operation issues. Many credit unions do not have the data processing capability, which means they would have to conduct this review manually. This would require substantial time and human resources and many credit unions, especially the smaller ones, simply do not have the staff to devote to these efforts. This would be even more burdensome and time consuming for accounts with substantial transactional activity, such as for those account holders who use debit cards on a frequent, if not daily, basis.
The 60-day lookback period would be onerous even for those credit unions with the data processing capability because these systems may not have the capability to review a 60-day historical period. Rather than a requirement for a sixty-day review period, we urge the Agencies to allow financial institutions to use a flat amount that the account holder would have access to, as opposed to reviewing the amount of exempt Federal payments that were deposited in the account over a 60-day period. Specifically, as the Supplementary Information indicates, the Agencies considered requiring access to an amount that was the lesser of $2,200 or the balance in the account on the date of the account review. While we support the flat amount approach, we are curious as to why the Agencies identified $2,200 as the appropriate threshold and not a more rounded amount, such as $2,000.
We believe this would be the preferable approach as it would eliminate the need for credit unions and others to conduct a time-intensive manual review of the account history. In our view, this approach would not necessarily be any less accurate than the proposed 60-day lookback approach since specific funds are not tracked after they are deposited.
For example, under the proposed approach, funds are often deposited and withdrawn constantly so there are often situations in which Federal payments are deposited and then a similar amount is withdrawn shortly thereafter. A later calculation under the proposed approach could then indicate an amount that should be protected from garnishment, even though it may appear that the funds were effectively withdrawn shortly after they were deposited. Again, there is no way to determine this conclusively, since deposited funds are not specifically tracked.
Under the proposal, an additional review of the account would not be required when funds are transferred to a second account. Instead, a separate review process would be required for each account that the account holder has at a specific financial institution, which includes a separate calculation for the amount that would be protected from garnishment. We agree this would be the reasonable approach for those with more than one account at a financial institution and would provide the appropriate protections for account holders.
Also, for accounts in which exempt Federal payments were deposited during the lookback period, the financial institution must, within two business days, notify the account holder of the rights and protections from garnishment that apply to these exempt funds. Considering the significant burdens that this review and notification process will place on credit unions that have few resources to devote to these efforts, we believe it would be very reasonable to allow financial institutions up to five days to provide the required notice.
The proposed rule would not apply to garnishment orders obtained by the United States. We do not agree that these orders should be excluded as it contradicts the goal of ensuring that beneficiaries retain their exempt benefits. We do not believe any specific creditor should be treated differently from others and providing such an exemption would also detract from the specific goal of the proposed rule, which is to provide a relatively simple method for calculating these exempt benefits.
Thank you for the opportunity to comment on the proposed rule that would implement the current statutory restrictions on the garnishment of Federal benefit payments. If you have questions about our comments, please contact Senior Vice President and Deputy General Counsel Mary Dunn or me at (202) 638-5777.
Jeffrey P. Bloch
Senior Assistant General Counsel