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ARTICLE · 06 DECEMBER 2022

CFPB Targets Garnishment Practices: Banks Need A Robust Compliance Plan

Holland & Knight
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The Consumer Financial Protection Bureau (CFPB) entered into a consent order against a large national bank regarding the bank's garnishment-related practices.

United StatesFinance and Banking
Anthony E. DiResta
Anthony E. DiResta
Kwamina Williford
Kwamina Williford
Luis Garcia
Luis Garcia
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  • The Consumer Financial Protection Bureau (CFPB) entered into a consent order against a large national bank regarding the bank's garnishment-related practices.
  • The consent order places the burden on banks to determine whether a state restricts out-of-state garnishments, as well as to apply state-specific garnishment exemptions.
  • Therefore, banks need to develop a robust compliance plan, which may include a 50-state survey that informs the bank's policies and procedures regarding processing of out-of-state garnishments.

When a consumer fails to pay a debt, the creditor may engage in proceedings to collect, which may result in a court issuing a garnishment notice directing a bank to freeze and turn over funds in the consumer's deposit account to satisfy the debt.

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