- “I received a child support levy…”
- Tax Refund Checks
- The ADA and the WWW
- Prepaid Accounts Rule Amended and Delayed
- Payday Lending Rule Likely to be Rescinded or Trimmed
“I received a child support levy…”
By Pauli D. Loeffler
First things first
The Oklahoma Child Support Services (“OCSS”) is a division of the Oklahoma Department of Human Services. I worked for the division for three years when it was called the Oklahoma Child Support Enforcement Division (“OSED”). I assume the change was an attempt to improve its image by taking a kinder, gentler name.
OCSS is tasked with establishing paternity and child support for persons receiving Temporary Assistance to Needy Families (“TANF”), Medicaid, and Child Care Subsidy. OCSS also provides services for the collection of child support for non-public assistance clients upon application. A nominal annual fee is collected from non-public assistance client’s child support for this service. An Overview of Oklahoma Child Support Services can be accessed here.
TANF, Medicaid, and Child Care Subsidy are federal programs and are under the United States Department of Health and Human Services (“DHHS”). These programs are administered by the states through state agencies which must abide by guidelines and directives of DHHS. The OCSS and its counterparts in other states are primarily funded by the federal government. In Oklahoma, the majority of collections come from non-public assistance cases.
The Financial Institution Deposit Match (“FIDM”) program from which child support levies are generated is required by DHHS. Deposit records nationwide are matched by social security number and name of persons who owe child support administered by a state child support program against accounts held by banks, credit unions, money-market mutual funds and brokerage accounts.
Where are the Oklahoma child support levy statutes? The statutes can be found in Title 56 of the Oklahoma Statutes, §§ 240.22 – 240.22G, which may be accessed here by scrolling down to those sections. The statutes were enacted in 1997 by the Oklahoma legislature. Back in 2001 when I began working at OSED, caseworkers were assigned cases by the last name of the custodial parent (“CP”). They were given a printout of the FIDM lists for noncustodial parents (“NCP’” also known as “obligors”) who owed child support, and entered information to generate child support levies. Nowadays, the vast majority of child support levies issued by OCSS and other states are automatically generated by the system, and caseworkers receive copies for the child support files. However, caseworkers still may generate a child support levy manually or request an override of the automated system if an obligor is paying back child support as agreed under an order of the Administrative Court.
Who issued the child support levy? The vast majority of child support levies in Oklahoma are issued by the Oklahoma Child Support Service, but OCSS can contract with Oklahoma district attorney offices, nonprofit agencies, and federally recognized tribes (see the link to An Overview, above), all of which will have jurisdiction over any bank with a branch in Oklahoma.
On the other hand, an agency of a state other than Oklahoma will not have jurisdiction over your bank to enforce the levy as long as your bank does not have a branch in the state that issued it. For instance, the Texas Attorney General is in charge of that state’s child support program, so unless your bank has a branch in Texas, the bank is not subject to the jurisdiction of Texas agencies. This is true even if your customer happens to reside in Texas. You should NOT enforce the levy. Why? Neither the Texas Attorney General nor the Texas courts (judicial or administrative) have the power to enforce the levy, neither by contempt nor by fine or money judgment. Because the bank is not legally required to enforce the child support levy, if it does so, the bank will be liable to the customer for returning items unpaid since the funds should not have been frozen for the levy.
So, how should the bank handle the situation when there is no jurisdiction? I suggest you use the No Jurisdiction Letter Template (found here) to respond. This template may also be used for out of state garnishments, tax levies and subpoenas. Having worked for OCSS, I know that state child support agencies have procedures for handling interstate child support collections and can have OCSS issue the levy or take other appropriate actions for them.
What is subject to a child support levy?
The levy attaches to all deposit accounts OWNED by the Obligor/customer whether or not the account number is included on the levy. The levy attaches to all of the following accounts:
- Sole ownership
- Joint ownership
- Sole proprietorship
- Grantor trust
- CDs (you may deduct any early withdrawal penalty before remitting)
- Retirement and Annuities
Note that In the event the bank has a loan secured by a CD, and the amount of the CD exceeds the balance owed on the loan, the excess is subject to the levy. Unlike a garnishment, the bank has no right of offset for a loan payment that is due or a loan that is in default.
The levy does NOT attach to:
- A safe deposit box owned by the customer
- An account owned by an LLC (even if the LLC uses the SSN of the customer as sole member)
- An account owned by a corporation (even if the customer is the sole shareholder)
- A partnership account
- An IOLTA account
- A line of credit, loan, or escrows established pursuant to a loan
- Any account where the obligor/customer is the custodian (UTMA), guardian, conservator, representative payee, or personal representative for an estate
- Any account where the obligor/customer is only an authorized signer or attorney-in-fact/agent and is not the owner of the account.
OCSS levies contain the “Notice of Right to Garnish Federal Benefits” in the middle on the first page, so social security, VA benefits, etc. are subject to the levy. None of the numerous exemptions in the Oklahoma Claim for Exemption & Request for Hearing that you have to send the customer with the garnishment packet will apply either.
As indicated above the levy does NOT attach to accounts where the obligor is an authorized signer on the account rather than the owner (corporations, LLCs, partnerships, unincorporated associations, etc.), nor where the obligor stands in a fiduciary capacity such as guardian, rep payee, federal fiduciary, etc. The levy DOES attach to a revocable trust in the same manner a garnishment does.
If accounts set out in the paragraph immediately above are listed on the levy, the bank has miscoded them (and they have been included on the FIDM lists). The bank needs to fix the coding immediately to avoid future levies on these accounts. The bank should also note the encoding error on the report submitted the 21st day after receipt of the levy.
The levy is mailed to the bank three days before the obligor’s notice is mailed to him/her. For this reason, the bank is not required to mail or notify the obligor regarding the levy unlike a garnishment or an IRS levy. In fact, the bank may ONLY advise the obligor of the levy once it has frozen the account. Just as with a garnishment or IRS levy, the bank has no obligation to notify joint owners on accounts of the obligor nor does the obligor have the duty of doing so.
Upon receipt of the child support levy, immediately freeze the account and “hot card” any ATM/debit cards. Memo posted debits cannot be paid.
Continuing levies: Unlike non-wage garnishments and IRS levies, which are “snap shots” and only attach to funds in the account at time of service, a child support levy continues to attach to the account for 60 days, unless the full amount stated in the levy is captured or the levy is fully or partially released. In other words, it captures ALL subsequent deposits for 60 days from date of receipt. If an account has a negative balance when the levy is received, any deposits made after receipt of the levy are subject to the levy and cannot be used to bring the account to a zero balance.
Remitting the funds: Twenty-one days after receiving the levy, the bank must remit the funds, up to the amount of the lien (unless the levy is released), provided there is $50.00 or more to remit after the bank deducts a $20 fee per levied account (one fee per account per levy). If there is less than $50, the bank submits the Levy Response Form provided in the levy packet but does not remit any funds. Sixty days after receiving the levy, the bank must remit funds if there is $50.00 or more (after deducting its $20 per account fee). If the amount in all accounts subject to the after deducting the fee is less than $50.00 on the 60th day, the bank reports but does not remit. At that point, the levy expires and drops off the accounts.
Multiple levies: It is not unusual for the bank to receive two levies or more for the same obligor since the obligor may owe child support to more than one custodial parent. I remember one NCP/obligor who owed child support to EIGHT of his “baby mommas”! In this case, the bank may charge $20 per levy per account. Fortunately, the bank is not responsible for determining which levy has priority. The bank will simply remit the funds showing the FGN numbers (shown on the levies) and let OCSS divvy them up.
Check cashing: If the obligor or joint account holder has an “on-us” check, the bank may cash the check. Just because there is a child support levy in place does not require that an “on us” check be deposited into the account of the obligor. On the other hand, the bank should not cash a check drawn on another financial institution. The bank will not have the right of charge-back even if provided in the account agreement; nor can the bank offset against the account until the child support levy is paid in full, expires, or is released. The bank may inform the obligor or joint owner of this when the check is presented. This is important when the obligor or joint account owner on the levied account also has a loan with the bank and wishes to pay the loan with the not “on-us” check, because you won’t be able to charge it back to the levied account if the check is returned unpaid.
The obligor’s copy of the levy contains information on how the obligor or joint owner can then contact OCSS for a desk review by the child support specialist (caseworker) and child support attorney assigned to the case. This may result in the bank receiving the full or partial release of the levy, but this rarely happens. If the result of the desk review is unfavorable, the obligor/customer or joint owner can request a hearing before an administrative law judge which must occur in a very short period of time. Often the obligor or the joint account owner has direct deposits going into the account. Generally, OCSS will assert that the obligor has access to and receives benefit from all funds in the account even when the joint owner is receiving direct deposits of salary into the account, and the joint owner will have to disprove this. The joint owner has the option of removing herself from the account and opening a new one in which case any direct deposits received on the levied account after removal payable to the joint owner should be returned. The joint owner could also close the account, and the bank should note that the joint owner closed it. If the joint owner does open a new account at the bank after removal from or closing the levied account, I would advise the bank to advise him/her that the obligor will not be added as a signer on the account and any direct deposits payable to the obligor credited to the new account will be returned. The bank may permit the obligor to remove himself from levied accounts, and any direct deposits to the account payable to the obligor should be returned after removal. Allowing the obligor to close an account whether solely owned or joint should not be permitted.
Finally, a few words about release/partial release of a levy: Never accept a verbal release/partial release of levy! All releases/partial releases must be in writing signed by an attorney from child support! Faxed releases/partial releases are acceptable; oral promises (“I’ll put it in today’s mail!”) are not.
Tax refund checks
By Pauli D. Loeffler
Below is an actual situation that occurred. Don’t let this happen at your bank!
Q. We charge noncustomers a 1.5% fee to cash their income tax checks. To get around the fee, account holders will sign for the noncustomer. We had a customer that signed for her daughter and son-in-law last year then deposited the check into her account.
Now the daughter and son-in-law are going through a divorce. The son-in-law is saying he did not sign the check. He wants us to give him half of the money. We have no way of knowing if he signed the check or not, or, now that they are divorcing, he is just saying he didn’t. My assumption is that he did sign. Why wait a year, and then when divorcing, dispute it?
Who is responsible? Is the mother who signed with them on the check not responsible? She has since closed her account with us. Would he not just press charges against her? He also said that he has contacted the IRS in the matter.
A. All third-party checks which are deposited into the account of a customer need to be indorsed by the check payee(s) in the presence of the teller after they present satisfactory identification, to avoid this situation. You state the bank has no way of knowing whether the son-in-law signed the check or not. A requirement that the check payee(s) indorse the check at the teller window might have prevented this potential loss This is a U.S. Treasury check and is subject to reclamation for a year plus 180 days.
The son does not have to press charges against the mother or sue her.
We have also recently been made aware of tax refund advance checks issued by EPS, which is a tax service similar to H&R Block, Jackson Hewitt, etc. and a division of MetaBank. These checks bear a legend on the front of the check “CASHIERS PLEASE VERIFY CHECK” with a phone number to call. When the bank calls the number, the automated system requests entry of the SSN of the customer. I don’t like that, but I do understand why it is there. It is a means for the paying bank (MetaBank) to detect multiple presentations, altered items, and counterfeit checks. The question I cannot answer is whether the check will be returned if the bank does not call and provide the SSN before the check is presented for payment. In order to avoid any privacy issue, I recommend obtaining the customer’s consent to provide his/her SSN before accepting the check for deposit. In lieu of consent, do not accept the check for deposit and send it for collection.
The ADA and the WWW
By Andy Zavoina
I recall compliance school in the early ’90s when the Americans with Disabilities Act (ADA) was setting our banking world on fire with the new requirements it was imposing on the buildings we worked in and served our customers in. Then, for compliance professionals it seemed to be much ado about nothing because the rules didn’t apply in most cases unless you were building new or remodeling and it became an issue for architects and whoever managed the facilities. That seemed good enough to me at the time. There was another point of ADA emphasis in 2012, when new requirements were imposed on ATMs. In that case, many machines were required to be retrofitted or replaced. Again, while “compliance” was a term associated with the discussion, it really didn’t impact regulatory compliance, as the operations area and IT worked with the ATM vendors to get ATMs compliant with the rules. It impacted the bank, but not regulatory compliance.
In 2000, websites were not as common as they are today, but they were rapidly becoming a new cost-effective way for banks to deliver products and services to existing customers and to attract new business. A bank’s website became a virtual branch. As dependency grew on these virtual branches, there were special account offers or interest rates only available there, along with internet banking and account management. Everyone needed to be on the World Wide Web, so they could take advantage of the opportunity to “get the word out.” And this is where web presence and the ADA meet. Many websites had the latest bells and whistles to display video, audio and had external requirements and add-ons to take advantage of the technology. But many users felt left behind, as many websites lacked assistive technologies for the hearing or vision impaired.
This is also when a major case was settled between Bank of America and the California Council of the Blind. This was the first agreement in which a bank agreed to make its website more accessible. Additionally, Bank of America agreed to increase its audible ATMs in more states. It turned out to be the first of three agreements with organizations representing blind customers.
Website accessibility is not a concern unique to banks, but to any entity providing products and services to the public. In 2002, Southwest Airlines had a website accessibility case end with a ruling in their favor. U.S. District Judge Patricia Seitz said the Americans with Disabilities Act applies only to physical spaces, such as restaurants and movie theaters, and not to the Internet. “To expand the ADA to cover ‘virtual’ spaces would be to create new rights without well-defined standards,” Seitz wrote in her opinion dismissing the case. “The plain and unambiguous language of the statute and relevant regulations does not include Internet Web sites.” That did not stop all the lawsuits or the reputation risk for any business opting to exclude the disabled from its virtual offices. Many courts have since interpreted the ADA’s definition of “public accommodation” to include offerings over the Internet. More on this in a minute.
In some cases when there is a suit, the results are that the website, mobile app, product or service will be modified so that it is more accessible, and that can be costly. The reputation risk itself can take a toll if the bank or company being sued resists and appears to be politically incorrect. Then there are cases where the hard costs are real. In 2008, Target paid $6 million to settle a class-action suit brought by the National Federation of the Blind. Additionally, it paid almost $4 million more in attorney’s fees and other costs for the plaintiffs.
In 2017, there were 7,663 ADA lawsuits under Title III filed in federal courts. This is a 16 percent increase over 2016 and a 182 percent increase since 2013. The lawsuits have increased each of the last four years and are largely due to website accessibility issues.
Clear rules applying the ADA to virtual spaces on the internet do not exist. Title III of the ADA requires banks and others providing public accommodations to provide auxiliary aids to improve communications so long as there is not an undue burden or fundamental alteration required to the products and services offered. This is where the much ado about nothing started in my building and facilities example above. But technology is more bits and bytes than concrete and ramps. Technology is evolving and being rebuilt continually. Note: “rebuilt.” That means it is easier to add in the auxiliary aids in technology than in a brick-and-mortar structure.
During the Obama era, the Department of Justice, which is greatly involved in the litigation of this federal law, took a broad approach that spurred on some ADA cases and certainly may have fanned the fire. In 2010, the DOJ began developing the guidelines for web accessibility. This would have brought clarity to the rules all businesses should follow to comply with Title III.
In 2015 and 2016, law firms were sending letters to businesses, including banks, on behalf of disabled persons who claimed access to certain websites was denied to them. They could not access the goods or services generally offered to those without disabilities. The letters essentially claimed there were barriers to fully access the site and required compliance with the ADA and in particular the DOJ-endorsed guidelines in the World Wide Web Consortium’s (W3C) Web Content Accessibility Guidelines (WCAG 2.0 AA) accessibility guidelines. The letters also demanded an out-of-court settlement, injunctive relief and attorney’s fees and costs (often ranging from $15,000 to $50,000 for “consulting fees”). Most recipients of the letters would quickly settle without any lawsuit ever being filed. Others would allow the lawsuit to be filed and then make a business decision to settle the lawsuit and avoid unnecessary costs and reputation risk.
But the DOJ rules were never adopted. As the Trump administration has taken over, things are changing. In July 2017, the DOJ website accessibility rules were shifted down to the “inactive list” on the Department’s regulatory agenda, which greatly reduced the priority and potentially the DOJ’s involvement in actual cases. On December 26, 2017, the rulemaking was officially withdrawn. The DOJ is assessing whether these rules are necessary and appropriate.
This brings us to the current status of the ADA and the world wide web. I say, “current status” because this is an evolving situation. Although the DOJ is largely stepping back, it may be doing so to determine the extent of any problems and to determine if it even needs to be involved or if the issues will be self-correcting. The excessive lawsuits from a few years ago have largely disappeared because the Supreme Court ruled that a plaintiff must suffer a concrete injury to bring claims in federal court. The injury can’t be “abstract”—it must “actually exist.” While the DOJ will be less active on the ADA front, this does not mean a bank with a website has less risk than it did a year ago. It’s simply not over.
While there is no official ADA compliant standard, the W3C guidelines are the best available. And while there are standards for browsers, there are none for smartphones apps, which could impact internet banking apps. Because of the ADA wording that includes “public accommodation,” some courts have held that the close association between a brick-and-mortar business and its website makes the ADA applicable. This is why retailers are often targets for litigation, but are banks far behind? The W3C Web Content Accessibility Guidelines established standards of accessibility for websites and these guidelines were accepted by the DOJ and should not now be dismissed just because the DOJ is stepping back. The W3C guidelines should be implemented over time and in a cost-effective manner in websites, apps and other electronic means of communicating with customers.
The purpose and intent of the ADA is admirable; it’s the immediate cost that seems prohibitive. It is extremely cost prohibitive to take a bank’s website offline to remediate it, and relaunch it. Perhaps instead of waiting until there is a new law, or lawsuit, and facing all that cost at once, banks should be phasing in website and mobile app ADA compliant standards now. While the DOJ may be less involved, that does not mean a consumer who feels harmed, or an attorney who seeks justice for that client and sees a deep pocket to pay the cost of litigation, will hesitate to threaten a lawsuit.
Prepaid Accounts rule amended and delayed
By John S. Burnett
Issuers get another year for implementation
The CFPB said it would make some final tweaks in its Prepaid Accounts rule “soon after the new year,” and they delivered. The Bureau released a final rule on January 24 amending the 2016 Prepaid Account Rule to adjust requirements for resolving errors on unregistered accounts and provide greater flexibility for credit cards linked to digital wallets.
Perhaps most importantly, the amendments postpone the effective date of the Prepaid Account Rule not six months, as we had predicted, but a full year, to April 1, 2019.
The amendments also included some clarifications and minor adjustments, and a few grammatical corrections (we identified some errors the Bureau missed and let them know, in the hope they can correct them before the rule is published in the Federal Register).
Under the Prepaid Accounts rule accounts can be acquired anonymously (and become like cash or a check payable to cash), but they aren’t eligible for FDIC coverage unless the consumer registers them by providing the consumer’s name, address, SSN (U.S. persons) and date of birth and the issuer verifies that information in a CIP-like procedure. Under the 2016 version of the Prepaid Accounts rule, financial institution issuers of prepaid accounts would be subject to the limits on consumer liability and error resolution requirements of Regulation E sections 1005.6 and 1005.11, with modifications to the timing requirements.
The January 2018 amendments change that. Now the regulation will not make issuers comply with the provisions of sections 1005.6 and 1005.11 at all, unless the transactions occur after a prepaid account is registered and the consumer’s identity is verified.
Payday lending rule likely to be rescinded or trimmed
By John S. Burnett
In a last-minute statement issued the day that one provision of the CFPB’s Payday Lending Rule became effective, the Bureau announced on January 16, its intent to engage in a rulemaking process “so that it may reconsider” the rule.
Virtually all of the provisions of the rule affecting lenders carry an effective date of August 19, 2019, but one section – which provides for Registered Information Systems – became effective on January 16, 2018. That was the first day that any entity could apply to become a Registered Information System – a form of specialized credit reporting agency to be used by lenders subject to the rule. There is a deadline (April 16, 2018) for applications for preliminary approval, but the Bureau will waive it on request.
The Payday Lending Rule includes some broad exceptions for banks making small loans as accommodations, but it has been controversial since it was first proposed. The Bureau’s acting director, Mick Mulvaney, has even suggested the Bureau should shift its focus away from payday lending in an internal memo to Bureau staff, where he said that only 2 percent of complaints handled by the Bureau related to payday lending.
There appears to be a strong chance that the Bureau will either relax the requirements of the rule or rescind it altogether.