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Garnishment Rule

Understand your bank's obligations when a creditor requests an account holder's funds be garnished - including which requests must be honored, and how to handle disputes.

Certain Federal benefit payments are exempt from garnishment. However, there has been no reliable means by which a bank is able to know which funds that have been deposited into an account are Federal benefit payments. Banks are caught between the competing interests of the account holder (who expects the bank not to honor a garnishment order) and creditors (who expect the bank to honor the court's instructions). Thus, banks have no choice often except to place a hold on an account and let the debtor and creditor resolve the dispute. However, this can result in hardships for the payment recipient, who often needs the payment to live on.

ABA supports putting in place a system that preserves the customer's access to funds needed to live on while minimizing the burden on the banking industry.

ABA has worked closely with Treasury and the banking agencies on trying to address the needs of all parties. Treasury issued a final rule on May 29, 2013. While any change in garnishment procedures will result in additional burden for the industry, we supported the Treasury proposal (with several suggested changes) because it attempts to address the industry's concerns in a manner that appears workable and less burdensome than other alternatives under consideration.

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