Last Reviewed: April, 2019

A garnishment order is a notice, summons, judgment, levy or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account.

What must credit unions do to comply?

When a credit union receives a garnishment order, it must first determine if the order has been issued by the United States or a State child support enforcement agency. If it has, the exempt benefit status provided under the "Garnishment of Accounts Containing Federal Benefits Payments" rule does not apply and the institution must process the garnishment order in accordance with its normal process.

If the garnishment order has not been issued by the United States or a child support enforcement agency, the credit union must review the account history for the prior two-month period (referred to as the "lookback period") to determine if exempt benefit payments have been deposited to the account.  The credit union may use certain ACH identifiers to determine whether the payment is an exempt payment.

If protected benefits are present, the credit union must provide the account holder with access to the protected amount in the account. The credit union is not allowed to collect garnishment fees from the protected amount, however, a 2013 amendment to the rule provides credit unions with an opportunity, for 5 days following the account review, to impose a garnishment fee in the event that nonprotected funds become available following the account review.

Notice of the garnishment must be provided to accountholders. The notice must provide, among other things, a brief discussion of what a garnishment is and advise the accountholder of his/her rights. Credit unions may choose to use the model notice included in the rule. Credit unions who use this notice will be deemed to have complied with the notice content requirements.

Steps to comply include:

Initial Action - Determine if the garnishment involves Federal benefits.

Within two business days of when an order for garnishment is received, the credit union must determine how to proceed. If the United States or child support enforcement agency has attached a Notice of Right to Garnish Federal Benefits, then the credit union may process the garnishment order without further account review. When such a notice is attached to the order the credit union is not required to take any other action. If such a notice is not attached to the order then the credit union must proceed with an account review.

Account review

When a garnishment order is received that does not include a Notice of Right to Garnish Federal Benefits, the credit union must perform an account review no later than two business days after receipt of the garnishment order. Later dates may be negotiated with the court if a large batch of orders is received by the credit union.

Lookback Period

The lookback period includes a review of the two months prior to the date of review. For example, if the credit union receives a court ordered garnishment on May 17 and the credit union chooses to review the account the same day. The look back period begins on May 16 and ends two months prior on March 16. Examples of the lookback period are provided in Appendix C of the rule.

Federal Benefit Determination

If the account review shows no Federal benefits paid to the account, then the credit union will follow the customary garnishment procedures by freezing the account and carrying out the instructions of the order.

If the account review reveals Federal benefits paid, then the credit union must follow the established procedures in the rule. For complete procedures, visit the Treasury’s Guide,“Guidelines for Garnishment of Accounts Containing Federal Benefit Payments”.

Record Retention

Financial institutions must maintain records of account activity and actions taken in response to a garnishment order for two years from the date of receipt of the order.

Note: The rule does not prevent a credit union from honoring an account holder’s express written instruction, that is both dated and provided by the account holder to the credit union following the date on which it has been served a particular garnishment order, to use an otherwise protected amount to satisfy the order.