16 Hoosier Banker November 2014 COMPLIANCE CONNECTION aBout ComplianCe ConneCtion In order to address compliance inquiries from members, IBA provides Compliance Connection, an assistance program offering advice on Indiana-specific compliance questions. If the matter requires legal advice, IBA Compliance Connection will refer the bank to a law firm. The material in this issue was prepared by Larry C. Tomlin, partner with Krieg DeVault LLP, Indianapolis, and IBA compliance consultant. Submit Compliance Connection questions to IBA’s Amber R. Van Til at avantil@indianabankers.org. Question: We received a telephone call from an attorney indicating that his client obtained a judgment against one of our depositors, and that we should immediately place a hold on the funds in the depositor’s account. Are we required to take any action based upon the attorney’s instructions? Answer: Based upon the facts presented above, the Indiana Depository Financial Institutions Act (the “Act”) does not require the bank to take any action at this time. In essence the attorney is claiming that his client is a “money judgment creditor” of the bank’s depositor.1 This verbal claim is not sufficient to trigger any obligation on the part of the bank. The bank’s obligation to process a garnishment does not arise until the bank receives:2 • Notice of the garnishment proceeding; • Notice of the unpaid amount of the judgment; • Sufficient identifying information to be able to reasonably verify that the judgment defendant is a depositor; • An order to answer interrogatories; • A copy of the “Notice of Certain Exemptions and Your Right to a Prompt Hearing,” if the judgment defendant is an individual; • A court order expressly directing the bank to place a hold on a deposit account identified in the order when the above conditions are satisfied; and • Payment of $5 for each judgment defendant relating to the identifying information.3 Once the bank has received all of the documentation indicated above, it should complete a diligent search of the bank’s customer files to determine if the judgment defendant has an account with the bank. When searching the bank’s customer files for a matching account, the bank should consider the ownership and type of each possible account. Some forms of account ownership (e.g. trustee, custodian, power of attorney, payable on death, estate, escrow) may not be subject to attachment, despite being in the judgment defendant’s name, because of the judgment defendant’s role in relation to the account. The bank also should consider the Interim Final Rule regarding “Garnishment of Accounts Containing Federal Benefit Payments” jointly issued by the Department of the Treasury, Social Security Administration, Department of Veterans Affairs, Railroad Retirement Board and Office of Personnel Management.4 If the bank has a deposit account owned by the judgment defendant, the bank must do the following: • Deduct the full fee allowed by statute.5 The current fee is $20, or the balance in the account if the balance is less than $20.6 • Restrict the withdrawal of funds from the account in an amount equal to the lesser of (1) the unpaid amount of the judgment as indicated in the documentation or (2) the balance in the account at the time of receipt of the documents, less one-half of the fee discussed above.7 • Complete and return the interrogatories, indicating the balance of the account immediately prior to deducting the fee discussed above.8 • If the judgment defendant is an individual, send the judgment defendant a (1) a copy of the Notice of Certain Exemptions and Your Right to a Prompt Hearing and (2) a written notice that the hold has been placed on the account. If the judgment defendant is not an individual, only the written notice that the hold has been placed on the account is required to be sent. The notices must be provided to each depositor whose account is affected and should be sent to the last known address of the depositor within one working day after the hold is placed.9 The bank is responsible to the judgment creditor for the balance in any account (up to the amount of the garnishment) belonging to the judgment defendant at the time the bank receives the garnishment documents. The Act, however, does not require the bank to make such payment from the account, until it receives a final order in garnishment directing it to make a payment.10 If you are unsure of your bank’s obligations with respect to a particular garnishment, it is advisable to consult with your bank’s legal counsel. t This information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. 1 The procedures that the bank would follow for an adverse claim by someone who is not a money judgment creditor would vary from the procedures described herein. See Ind. Code § 28-9-3-3. 2 See Ind. Code § 28-9-3-4(b). 3 Id. § 28-9-3-4(d). 4 See Garnishment of Accounts Containing Federal Benefit Payments, 76 Fed. Reg. 9939 (February 23, 2011), to be codified at 31 C.F.R. pt. 212). 5 Ind. Code § 28-9-4-2(a)(1). 6 Id. § 28-9-4-3(b). 7 Id. § 28-9-4-2(a)(2)(A) and (B). 8 Id. § 28-9-4-3(c). 9 Id. § 28-9-4-2(a)(3) and (4). 10 Id. § 28-9-3-4(f).
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