In a recent consent order with a national bank, the CFPB found that the bank committed UDAAP violations in its process for handling garnishment orders and by including certain waiver language in its deposit account agreements. We discuss the specific aspects of the bank’s process that the CFPB found to be improper and what banks should consider when reviewing their own garnishment procedures in light of the consent order. … Continue Reading
CFPB fines bank $10 million for conduct related to bank account garnishments and account agreements
The CFPB recently ordered a bank to cancel garnishment fees, review its system for processing garnishment orders, cease using contracts which limit consumer rights, and pay a $10 million penalty to the CFPB’s Civil Penalty Fund.
The garnishment process is a method for creditors to recover amounts that a judgment debtor owes from a third party that holds the judgment debtor’s assets, such as a deposit account held by a bank. … Continue Reading
Protection of federal stimulus payments from creditors
In the federal government’s ongoing effort to revive the U.S. economy and help people harmed by the economic damage wrought by the coronavirus pandemic, an important detail has gone under-noticed: the most recent set of federal stimulus payments to individuals are subject to garnishment by creditors. And this fact is creating legal and operational challenges for the banking industry.… Continue Reading
This week’s podcast: CARES Act Economic Impact Payments for individuals and Paycheck Protection Program loans for small businesses: are they subject to garnishment or setoff?
We look at the impact of federal and state law including relevant CARES Act provisions, state garnishment directives, and federal preemption, identify issues banks should consider in handling garnishments or exercising setoff rights, and offer suggestions for mitigation measures banks can take as they decide how to address the challenges in this area.… Continue Reading