Iowa Banking Law Blog

PROPOSED LEGISLATION ON ISSUING UNFAIR AND DECEPTIVE PRACTICES RULES

The House Committee on Financial Services recently introduced proposed legislation - H.R. 3526 sponsored by Representative Barney Frank (D-MA) - that would enable all banking agencies to write rules governing unfair and deceptive practices pursuant to the Federal Trade Commission Act.  Currently, only the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration had this rulemaking authority.  The proposed bill would now allow the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to also issue rules regarding unfair and deceptive practices for those institutions that they each oversee.

While some would argue that the proposed legislation is advantageous because it creates more protections for consumers - for example, credit card practices at national banks overseen by the OCC can be regulated to prevent unfair and deceptive practices - opponents of the bill argue that it would deprive the Federal Reserve of its industrywide authority.

A copy of the full text of the bill can be found here. LINK

When Federal and State Law Collide in Garnishment Procedures

The Agencies have issued a proposed guidance concerning garnishment orders received by financial institutions.

Generally, federal law protects certain federal benefits – such as Social Security, Supplemental Security income, Veterans’ benefits, Federal Civil Service retirement benefits, and Federal Railroad retirement benefits – from inclusion in garnishment orders.  Unfortunately, however, when garnishment orders are sought in state court by creditors and debt collectors, either some orders may not provide that certain funds are exempt from garnishment due to federal law or the customer’s account is a commingled mixture of exempt and non-exempt funds.  Financial institutions, in an effort to comply with the state court order, typically put a freeze on the account until the issue can be resolved but because these exempt federal benefits are sometimes the only source of income for individuals, even a temporary freeze on the account can wreak havoc on an individual’s financial security. 

The proposed guidance is intended to solicit comments regarding how to comply with both federal and state laws.  The proposed guidance also proposes best practices, such as promptly notifying the customer of a garnishment order, determining whether accounts contain only exempt funds, notifying the creditor that the account may contain exempt funds, minimizing the cost to the customer by refraining from charging certain fees, and lifting the freeze as soon as permissible.

Comments can be made via the Federal Reserve’s website or by email, fax, or snail mail.

For further information contact Mary Zambreno.

No Farm Credit System Expansion in 2007 Farm Bill

On Thursday, the House approved an amendment to the 2007 Farm Bill removing expansionist Farm Credit System provisions that may have allowed the FCS to move into commercial and residential lending.  State and National Bankers Associations lobbied hard for this amendment and consider it a significant victory.  Anyone who has seen Schoolhouse Rock, however, knows that this is “Just a Bill” and has a long way to go before becoming the law.  For those under 40, here is a link to the YouTube video of Schoolhouse Rock's “I’m Just a Bill”).