14.5.4.10 Bank Setoff and Bank Fees

The rule prohibits banks from debiting fees for processing the garnishment against the protected amount.⁵⁴⁰ In addition, the bank may collect such a fee only on the day the account is reviewed, so the bank cannot collect a fee at all if an account contains only the protected amount on that day.⁵⁴¹ Except for these provisions, the rule is intentionally silent about bank setoff rights, including the key question of whether a bank can use setoff against exempt funds as a means of collecting a debt owed to the bank.⁵⁴² However, the prohibition against banks taking fees from the protected amount supports the idea that banks do not have unfettered access to exempt amounts.⁵⁴³

State law may also restrict the fees that a depository institution can charge for a bank account attachment. For example, a New York law prohibits a banking institution from charging a fee if it is served with a garnishment notice but the debtor’s bank account is protected by law, or if it places a restraint on the account in violation of certain New York laws.⁵⁴⁴ Although federal rules preempt certain state laws that regulate non-interest charges and fees charged by national banks and federal savings associations,⁵⁴⁵ they leave state laws that pertain to the right to collect debts largely unaffected.⁵⁴⁶ As a result, courts may find that banks must abide by state limits on these fees. In any event, to the extent that state restrictions parallel the Treasury rule, there should be no preemption, because federal banking law preempts state laws only if they conflict with federal law.⁵⁴⁷

Limits on the banker’s right of setoff—and whether setoff can be used to reach exempt funds on deposit—are discussed briefly in § 14.3.3.4.2, supra, and in detail in NCLC’s Consumer Banking and Payments Law.⁵⁴⁸