United States

CFPB publishes consumer advisory on benefits protected frm garnishment


The Consumer Financial Protection Bureau (CFPB) recently released a consumer advisory alerting individuals of their rights in a garnishment situation, and providing both a letter template they can use to notify debt collectors of their protected income rights, as well as a link for free legal advice (for those who qualify). The CFPB indicated that numerous complaints received from older Americans are directly related to debt collection, including garnishment efforts.

The publication advises consumers that, in general, two months of certain exempt federal benefits are protected from garnishment and garnishment fees. Exempt or protected federal benefits payments include Social Security (SS) benefits, Supplemental Security Income (SSI) payments, Veterans Affairs (VA) benefits, federal Railroad Retirement benefits, federal Railroad Unemployment and Sickness benefits, Civil Service Retirement System benefits and federal Employees Retirement System benefits. These protected federal benefits can be identified in ACH records by the character `XX' encoded in positions 54 and 55 of the Company Entry Description field of the Batch Header Record and "2" encoded in the Originator Status field."

The CFPB also advises garnishment fees can only be assessed at the time incurred. If there are not enough unprotected funds to cover the fees, they cannot be assessed later once the funds are available. Protection of these funds and notice of garnishment is the responsibility of the bank. The advisory does clarify that certain income, such as SS and SS Disability Income, is not protected from government debt garnishments such as back taxes and federal student debts, as well as child or spousal support. Other, means-tested benefits, such as SSI payments, are protected from government debt and child or spousal support garnishment.