On September 19, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration (collectively, the Banking Agencies) issued a proposed statement encouraging the financial institutions they regulate to follow “best practices” to protect federal benefit payments (such as Social Security benefits, Supplemental Security Income benefits, veterans’ benefits, etc.) from garnishment orders and the claims of judgment creditors (the Proposed Statement).

According to the Banking Agencies, federal benefit payments often account for a large part of a recipient’s income and the recipient of such funds often faces significant difficulties when an institution, pursuant to a court order, places a freeze on a consumer’s account which contains such funds. The development of the Proposed Statement, however, is intended to “encourage financial institutions to minimize the hardships encountered by federal benefit funds recipients and to do so while remaining in compliance with applicable law.” Comments are invited and are due 60 days after publication of the Proposed Statement in the Federal Register.