Comptroller of the Currency
Administrator of National Banks

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration (the agencies) are requesting comments on proposed guidance regarding the garnishment of exempt federal benefit funds.

Federal law protects federal benefit payments—such as Social Security benefits, Supplemental Security Income benefits, Veterans’ benefits, Federal Civil Service retirement benefits, and Federal Railroad benefits—from garnishment orders and the claims of judgment creditors subject to certain exceptions, such as garnishment orders relating to alimony or child support payments. These benefits, which are generally exempt under federal law from garnishment orders and the claims of judgment creditors, often constitute an important part, and sometimes all of a person’s income. As a result, when financial institutions receive garnishment orders and place freezes on accounts containing exempt federal benefit funds, the recipients of these funds can face significant hardship. At the same time, financial institutions are required by state law to comply with garnishment orders, which may necessitate placing a freeze on an account that contains federal benefit payments.

The agencies have developed proposed guidance to encourage financial institutions to minimize the hardships encountered by federal benefit funds recipients and to do so while remaining in compliance with applicable law. The guidance lists best practices followed by financial institutions in this area and invites suggestions on other practices the agencies should consider. A copy of the proposed guidance is attached. Comments received by November 27, 2007, will be accepted.

For further information, contact Mike Bylsma, Director for Community and Consumer Law, at (202) 874-5750 or Ann Jaedicke, Deputy Comptroller for Compliance Policy, at (202) 874-4428.

/signed/           Julie L. Williams First Senior Deputy Comptroller and Chief Counsel

Attachment:   Proposed Guidance

                        [http://www.occ.treas.gov/fr/fedregister/72fr55273.pdf]