Important Levy and Restraints Guidance Issued

April 11, 2017 at 9:00 am Leave a comment

Since the Governor and Legislature agreed to gradually raise New York’s minimum wage starting in January of this year, inquiring minds have wanted to know how financial institutions should comply with the Exempt Income Protection Act (EIPA) which shields a minimum amount of money in a member’s account from being restrained or levied to pay off a debt based on a multiple of the minimum wage.

The good news is that, the newest member of the Association’s compliance staff, Sarah Hodgens, gave me a heads-up that the state has issued guidance to financial institutions in how to comply with the law. The bad news is that the guidance creates more work for employee’s responsible for complying with those ubiquitous levy and restraint notices.

The problem is that when the EIPA was drafted the state had a uniform minimum wage so every account holder could be dealt with using the same thresholds. Now that the state has regionally based minimum wages (which also vary for NYC depending on an employer’s size) complying with the law has gotten even trickier.

New York mandates that an amount equal to the greater of 240 times the state or federal minimum hourly wage (whichever is greater) is exempt from levy and restraints. N.Y. C.P.L.R. 5222 (McKinney). There are certain narrow exceptions, and the exemption ceiling is even higher if federal funds are direct deposited but none of this matters for the purposes of today’s blog.

The guidance explains that when a financial institution receives one of these notices it should use “reasonable due diligence” in trying to obtain the most current information regarding the employment address of the account holder and, if applicable, the most current information regarding the size of an account holder’s employer located in New York City. It should use this information to calculate the size of the account exemption. If your credit union can’t get this information it may use the highest minimum wage in the state to determine the size of the exemption which means as of right now, at least $2,640 is exempt. Remember this threshold amount goes up every December until 2021, when it reaches $15.

The good news is that your credit union now has a clear roadmap with which to comply with levy and restraints, which is vitally important given that this is probably the most common operational issue your credit union deals with, from a compliance stand point. The bad news is that the guidance raises more questions such as what precisely is “reasonable due diligence” when it comes to establishing a member’s address? Can a credit union be found in contempt of a levy or restraint order for failing to exercise it? Finally, how are you supposed to know how many people are employed by your delinquent member’s NYC employer?

Entry filed under: General.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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