Comment on AN67-Proposed Rule-Kansas Bankers Association

Kansas Bankers Association 610 Corporate View, Topeka, KS 66615 May 18, 2010 Office of Personnel Management RIN 32-6-AM17 Railroad Retirement Board RIN 3220-AB63 Social Security Administration RIN 0960-AH18 Department of the Treasury RIN 1505-AC20 Department of Veterans Affairs RIN 2900-AN67 Re: Proposed Safe Harbor on Garnishment of Accounts Containing Exempt Federal Benefit Funds Concerned Federal Agencies: Thank you for the opportunity to present comments on the above-referenced proposal. The Kansas Bankers Association is a non-profit trade organization with 317 of the 320 Kansas banks as members. We appreciate the concern with regard to garnishments procedures and the hardship that a garnishment may cause on account holders when exempt Federal benefit funds are involved. In turn, we believe that the proposal of a “safe harbor” acknowledges the difficulty many institutions will have in meeting these standards as they sift through the thousands of garnishments received daily. We would like to start out by reviewing a typical garnishment procedure from the bank’s perspective. When a bank receives a garnishment to be processed, it is because one of its customers has been on the receiving end of a judgment. The garnishing party is the judgment creditor and the garnished customer is the judgment debtor. The bank (garnishee) is in no way privy to the cause of action or any of the court proceedings as it is not a party to the case. It becomes involved in the process merely because it is the holder of the funds which are subject to the judgment. In other words, the bank does not receive any benefit from the judgment, nor have any knowledge of the cause of action. The bank serves a purpose to the lawsuit only because it is the keeper of the funds. As the proposal acknowledges in the background information, the procedures that Kansas banks must follow with regard to processing garnishments on customers of the bank are found in the Kansas Code of Civil Procedure. State law is very specific with regard to the actions a bank must take after receiving a garnishment. Under Kansas law, a garnishee (bank being garnished) must file an Answer with the Clerk of the Court within ten days of receiving the garnishment. Within ten days of receiving the Answer, the Clerk of the Court must send a Notice to the garnished customer/judgment debtor which explains the garnishment process and the types of funds that are exempt from attachment or execution by the judgment creditor. Kansas law specifically places the burden to claim that the funds in the garnished account are exempt from garnishment on the shoulders of the garnished customer. At the very latest, this claim could be made before the Court within 20 days of the funds being temporarily frozen. In most cases, all required notices are sent prior to the ten-day deadline and so a claim of exemption could be registered even earlier. Kansas, like most states, also has a body of case law on the subject of garnishments that supplements the state civil procedure code. Every bank is charged with the knowledge of this as well, as case law has provided guidance on such issues as joint accounts and priorities among competing creditors. It is possible that some states have not adequately addressed the prompt identification of the exemption of funds that are the subject of a garnishment, however, we believe it is a matter for state legislatures to decide. As mentioned before, the role of the garnishee is purely procedural. Once a procedure is established by state law through the state’s civil procedure code, it is the obligation of the garnishee to follow that law to the letter. If a garnishee fails to comply, there are penalties in place that serve as punishment. We believe that the proposed safe harbor is well-intentioned as stated above. However, the volume of garnishments received daily by many of our member institutions will preclude them from being able to seek the safety that these guidelines propose. Rather, we would urge the concerned agencies to consider examining state laws in place, and recognizing those that have developed procedures that ensure the speedy acknowledgement of an exemption from garnishment. We firmly believe that it should be the obligation of the owner of those funds or the garnishing creditor to determine the nature of the funds and whether an exemption applies. In conclusion, we would strongly urge the concerned agencies to recognize the work that the state legislatures have done in this area. We believe that procedural matters such as these are the purview of the state lawmakers. Regardless of a safe harbor preemption issued as a result of this proposal, every bank is still bound to comply with the state law in submitting its Answer to the Court and ultimately, submitting funds in accordance with the Court’s Order. As described, Kansas law does provide protection to the garnished customer having exempt funds in the account which is the subject of the garnishment, and penalties for the garnishee for noncompliance. As stated above, it is unfortunate, but our members find that they are inundated with garnishments on any given day. It would be unduly burdensome for many institutions/as the garnishee, to monitor the contents of every garnished account. Again, thank you for the opportunity to present comments on this very important issue. Sincerely, Charles A. Stones Terri D. Thomas Kathleen Taylor Olsen President SVP-Director of Legal SVP-General Counsel