MINNEAPOLIS, Minn.-New guidelines make it imperative that CUs pay close attention to how they handle garnished accounts that receive federal benefits, reminds Wolters Kluwer.
In May, federal agencies adopted a final rule amending their regulation and the procedures governing the garnishment of certain federal benefit payments. The final rule became effective on June 28, 2013. A regulatory alert sent earlier this summer by NCUA outlines the rules.
Senior Attorney Ted Dreyer explained the intent of the rules is not new, it's just that now there is clear guidance. "Payments like Social Security and Veteran's benefits to some extent are protected by law from garnishment," said Dreyer. "There is now a procedure financial institutions must follow with garnished accounts-they have to determine within two business days (of receiving the garnishment order) whether the account is receiving federal benefits and then must determine if the benefits, or certain parts of them, are protected from garnishment."
'Hoops To Jump Through'
The FI must look back at the account history over the last two-month period to see whether or not the benefits have been received and then calculate what is subject to garnishment, and send a notice to the account holder, added Dreyer. The new rules address how to make the calculations. "There are hoops the FI must jump through."
Dreyer stated that prior to the guidelines, "in theory," federal benefits within a garnished account were supposed to be protected. "But there were no standards for what needed to be done, no time frames, no specific guidelines. Sometimes the proper attention was given and sometimes it was not."
