WASHINGTON APPLESEED
CENTER FOR LAW IN THE PUBLIC INTEREST

1900 N. Northlake Way Suite 215
Seattle, WA 98103
Phone:  206.632.7197
www.waappleseed.org

November 26, 2007

OCC - Office of the Comptroller of the Currency
250 E Street, S.W.
Mail Stop 1-5
Washington, DC 20219

E-Mail:  regs.comments@occ.treas.gov 

Re:  Docket ID OCC-2007-0015

Dear Comptroller:

Washington Appleseed Center for Law in the Public Interest ("Washington Appleseed") appreciates the opportunity to comment on the "Proposed Guidance on Garnishment of Exempt Federal Funds" (the "Proposed Guidance"). 

Washington Appleseed is a non-partisan, non-profit social justice center that leverages the talents and resources of Washington's legal, professional, academic and business communities to find systemic, long-term solutions to the particular problems faced by disadvantaged individuals and groups within Washington State.  Working locally, but assisted by a national network of Appleseed Centers, Washington Appleseed identifies specific, actionable public policy challenges and then assembles and coordinates local teams of volunteer pro bono lawyers, business leaders, academicians, and other community experts to understand the problem, develop recommendations, educate the public and decision-makers, and advocate for change, whether in the courthouse, the state house, or the media.  To date, we have focused on issues in education, federal work supports for small businesses, affordable housing, economic self-sufficiency for low-income families, and juvenile justice.  We have several projects focused on financial literacy and helping low-income families.

From our work with disadvantaged people in the State of Washington, we know that writs of garnishment are often issued against accounts that contain only social security benefits or other pension assets that are exempt from garnishment.  Moreover, we know that it is frequently the case that debtors who have only exempt funds in their bank accounts do not know how to protect their accounts from garnishment.  As a result, account holders do not always receive the benefits that Congress and the Washington State Legislature intended to protect when they passed our existing exemption laws.

However, the bank does or should know that Federal benefits such as Social Security cannot be garnished and should have policies and procedures in place to deal with a situation where such an order has been served.  While we understand that banks are businesses, not consumer protection agencies, they are taking the accountholder's money and thus in return for that they could at least make a minimal effort to assist in protecting the accountholder's exempt Federal benefits from garnishment.  The banks have more ability to deal with a debt collector on an equal basis than would an individual subsisting largely or solely on Social Security or other Federal exempt benefits.

We endorse the nine proposed "best practices" set out in the Proposed Guidance as the minimum that should be prescribed.  For example, more timely notification should lessen the chance of the accountholder bouncing checks to creditors because he or she had not received prompt notice that the account had been frozen. 

As noted in some of the proposed best practices, providing information to the consumer is of critical importance.  The banking agencies should develop a proposed booklet explaining protection of these Federal benefits from garnishment and offer it on their websites for banks to access and print.  That booklet, or something substantively similar drafted by the bank itself, would be handed to a customer establishing a new account, sent annually with a bank statement, and sent with any notice of a garnishment order provided to an accountholder receiving Federal benefits exempt from garnishment.  Perhaps there could be draft forms provided on the bank's website or available at the bank for use by consumers that could be used in that state to challenge such a garnishment order.  Tellers and customer service representatives at bank branches should receive training on these issues and be ready to assist when approached by an accountholder who has had funds frozen in advance of a garnishment order.

While we see no need for a bank to segregate exempt funds in a different bank account, the banks often clearly code Federal benefit deposits as such in their systems.  When served with a garnishment order, it should be fairly easy for the bank to access the account immediately to determine whether it contains exempt funds.

Banks, though, are only one part of the solution to this problem. As First Senior Deputy Comptroller and Chief Counsel Julie Williams said in her testimony in September before the Senate Finance Committee, "resolution of these issues will require coordinated action by multiple parties on multiple fronts."  We agree -- we see an opportunity for additional persons and institutions to play their parts:

Social Security Administration and the Veterans Administration:  These agencies should review closely their current laws and regulations to determine if there is legal authority that would allow them to be more proactive in this area to protect their constituents: the poor, the elderly, veterans, rather than assert that they have no authority or responsibility once the payment is deposited in the customer’s account.   If the two agencies conclude that there is insufficient legal authority in this area, then it should promptly draft proposed legislation to provide such authority.

Federal Banking Agencies: The OCC and the other agencies need to finalize and issue the Guidance as soon as possible after the comment period closes.  A review of a bank's policies and procedures in this area always should be reviewed at the time of a bank's annual safety and soundness examination, and/or separate consumer compliance examination, in order to ascertain the bank's level of compliance.

Conference of State Bank Supervisors ("CSBS"): CSBS, the trade association of state banking regulators, could form a task force to review state garnishment laws and the role state banks could play in being of more assistance to consumers in these areas.  Using some of the more consumer-friendly laws in this area, such as California's, a model state law could be developed regarding the exemption from garnishment of these Federal benefits.  State banking departments could work with their state attorneys general and their governors' legislative offices to promote such a model law.

In summary, we strongly support the finalization of the Proposed Guidance, but we see this only as a first step.  It appears that legislative and regulatory action needs to be taken at both the state and federal levels.  We urge the banking agencies to advocate on behalf of the accountholder, who has the tiniest voice in this chorus of discussion, but has the most to lose. 

We are joined in these comments by South Carolina Appleseed. We would be happy to discuss these comments with you further. Please feel free to contact Diana Stone, our Senior Fellow working on this issue at dstone@waappleseed.org.

Sincerely yours,

Sue Donaldson

Executive Director

Washington Appleseed Center for Law in the Public Interest