Trades Have Different Critiques of New Garnishment Rules
CUNA contends that proposed federal rules requiring credit unions and banks to perform an extensive account review when it receives a garnishment order would be burdensome while NAFCU just wants credit unions to have more time to conduct the review.
Those are among the differences between the associations' opinion on the proposed rule, as expressed in separate letters sent last week to the Treasury Department.
The rules are aimed at clarifying the procedures that financial institutions use to evaluate how much of the funds in an account are exempt from being garnished. It is aimed at closing a loophole creditors have used to seize deposits of federal benefits from accounts at credit unions and banks.
CUNA Senior Assistant General Counsel Jeffrey Bloch wrote that the requirement that a credit union review an account for the previous 60 days to determine if there has been a deposit of federal benefits would be difficult for all credit unions, especially those without such data processing capabilities.
Bloch added that the rule would also be burdensome if an accountholder uses their account, a great deal and instead the department should allow financial institutions to use a flat amount that an accountholder would have access to. Also, Bloch suggested credit unions have five days to notify members of their rights and protections, rather than two days as specified under the proposed rule.
Further, Bloch wrote that the provision exempting garnishment orders obtained by the United States should be changed because CUNA believes that all creditors should be treated equally and the exemption would make it harder to calculate which benefits are exempt.
NAFCU Associate Director of Regulatory Affairs Dillon Shea wrote that his association is "generally supportive," of the changes but suggested that the department clarify and change some of the provisions.
Shea requested that the final rule clarify the definition of an account to make it clear that "protected funds need not be tracked from one sub account to another." He also suggested that credit unions be given two business days to conduct the 60-day account review, rather than the one business day mandated by the proposed rule. Shea added that the final rule should clarify the definition of a business day.
He also requested that the final proposal clarify the language so credit unions continue to have the right to enforce legal and statutory liens. He explained that these rules are "important business planning risk management tools for credit unions."