WASHINGTON — Senate Finance Committee Chairman Max Baucus said Thursday that he is dissatisfied with proposed guidance issued by federal banking and thrift regulators on bank procedures for garnishing an account containing government benefits.

At a committee hearing on the issue, the Montana Democrat urged regulators to issue stronger guidelines and said they should clarify rules to preempt state laws that order the garnishment of accounts which may include protected federal benefits.

"I was disappointed yesterday with the draft guidance that they released for public comment," Sen. Baucus said. "The fundamental question is: Do banks have to follow court orders to freeze Social Security and other benefits, even though federal law says that garnishment of such funds is not permitted? The answer should be 'no, they do not have to follow the court orders.' But the answer in the guidance is 'go ahead and freeze the accounts.' "

Banking regulators responded by saying they lack authority to take stronger action. Only the Social Security Administration or Congress has such power, they said. "What we would like to see is either regulatory or statutory change," said Sarah Kelsey, the general counsel of the Federal Deposit Insurance Corp.

Federal banking and thrift regulators issued guidance Wednesday on the eve of the hearing proposing best practices for institutions that handle debt garnishment orders when a person also has protected Social Security benefits. The proposed guidance stopped short of telling banks they need not comply with garnishment orders when an account holds federally protected Social Security benefits but instead advised banks to promptly notify a customer when a garnishment order is placed; disclose to the customer what types of federal benefits are exempt; and promptly determine whether an account contains exempted federal benefits and, if so, notify a creditor or state court.

Federal law protects certain federal benefits, such as Social Security, veterans', and federal civil service benefits, from being subject to creditors' garnishment orders. However, certain state laws require financial institutions to comply with garnishment orders, and in many states banks are made liable for any funds withdrawn by a customer after the bank has received a garnishment order.

In addition many people commingle funds protected from garnishment by federal law in the same accounts with nonexempt funds, making it difficult for creditors to distinguish the two. Currently, consumers are required to distinguish which funds are protected, but consumer advocates want banks to do the distinguishing and protect exempt federal benefits from any freeze.

The Social Security Act, which establishes the protection of federal benefits, does not address what depository institutions should do when faced with a garnishment order. Banking regulators said it is the Social Security Administration — not bank regulators — that possesses authority to issue rules clarifying garnishment procedures. But Margot Saunders, a counsel to the National Consumer Law Center, said regulators have preempted state laws before and have authority to do so again.

"We don't quite understand the hesitation of so many of these regulators to preempt state law," she said. "These regulators have preempted state law regulations on predatory mortgage lending, electronic deposits, [and] foreclosure prevention."

Julie Williams, the senior deputy comptroller and chief counsel of the Office of the Comptroller of the Currency, said bank regulators have authority under the National Bank Act to preempt state law in those instances but that the Social Security Act is outside bank regulators' jurisdiction.

"The federal banking agencies are addressing the aspects of the issue that are within their respective authorities, but a comprehensive resolution will require action by other key federal agencies," Ms. Williams said.

Since the Social Security Administration has not clarified its statute, the FDIC's Ms. Kelsey said, it is up to Congress to act. But Sen. Baucus declined to call for a legislative fix. Instead, he said, banking regulators must act. "It is my view that all you agencies should go the extra mile to protect consumers," he said. "I urge you to find a way to do what's right."

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