31 CFR Part 212: Protecting Federal Benefits in Bank Accounts

Under 31 CFR Part 212, banks, credit unions, and savings associations must automatically shield directly deposited federal benefits from garnishment. When a creditor serves a garnishment order on an account holding Social Security, SSI, VA, Railroad Retirement, or federal civil service retirement payments, the financial institution has to identify those deposits, calculate a “protected amount,” and keep that money available to you. You do not have to file paperwork, go to court, or claim an exemption for the protection to kick in.¹

Which Benefits Qualify

The rule covers payments from four federal sources:

Social Security Administration — retirement, disability, and Supplemental Security Income (SSI).
Department of Veterans Affairs — all VA benefit payments.
Railroad Retirement Board — railroad retirement and Railroad Unemployment Insurance.
Office of Personnel Management — Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) payments.

Each of these payments carries a specific electronic code inside the ACH transaction record when it hits your account. That code is what tells the bank’s systems the money is protected federal benefits rather than wages, a private pension, or some other deposit.²

Direct Deposit Is the Trigger

The automatic protection depends entirely on the electronic marker. If you deposit a federal benefit paper check into your account, the bank has no way to identify those funds as protected, and a garnishment order can freeze them the same as any other money. Enrolling in direct deposit is the only way to get the automatic protection under Part 212.¹

How the Bank Calculates What Is Protected

When a garnishment order arrives, the bank must perform an “account review” no later than two business days after it has both the order and enough information to identify the account holder.³ During that review, the bank looks through the transaction history for deposits carrying the federal benefit codes.

The Two-Month Lookback

The bank doesn’t examine the whole account history. It looks at a window of roughly two months. That window starts the day before the account review and reaches back to the same date two months earlier. If that earlier month has no corresponding date, the window ends on the last day of that month.²

So if the bank runs the review on May 20, the lookback runs from March 19 through May 19. Every qualifying federal benefit deposit inside that window counts toward the protected amount.⁴

The Smaller-of-Two Formula

The protected amount is whichever is smaller: the total of federal benefit deposits during the lookback period, or the current balance in the account at the time of the review.²

Say two monthly Social Security deposits of $1,250 posted during the lookback, for a total of $2,500. If the balance at review is $1,000, the whole $1,000 is protected and the bank cannot touch any of it. If the balance is $5,000, only $2,500 is protected, and the other $2,500 can be frozen or paid to the creditor.⁴

The whole calculation is automatic. Part 212 states that the account holder is not required to assert any garnishment exemption before accessing the protected amount.⁵

Joint Accounts

If someone else is on the account with you, the bank counts every federal benefit deposit during the lookback window, including deposits made to the co-owner. The review happens “without consideration for any other attributes of the account,” which also means the bank ignores commingled non-benefit funds and the nature of the underlying debt.¹

Using the Money and Bank Fees

Once the protected amount is set, the bank must give you “full and customary access” to those funds right away. It cannot freeze the protected balance in response to the garnishment order.⁵ Debit card, checks, cash withdrawals — all continue as normal against that protected balance.

The bank also cannot charge a garnishment processing fee against any part of the protected amount. If the account holds only protected funds, no garnishment fee can be charged at all. The one narrow exception is if non-benefit funds are deposited into the account within five business days after the review, and even then the fee cannot exceed those non-benefit deposits.¹

The account review is a one-time event tied to that specific garnishment order. After the review date, the bank cannot keep pulling from new deposits under the same order, and it cannot freeze anything deposited after the review.¹

The Notice You Should Receive

If the bank freezes or removes any funds beyond the protected amount, it must send you a written notice within three business days of completing the account review.⁶ If everything in your account was protected and nothing was frozen, no notice is required.

When notice is required, it has to include:

The date the order was served, the amount of the order, and the name of the creditor.
Your total balance, the protected amount, the amount frozen or removed, and any garnishment fee charged.
A statement that you can access the protected amount normally without doing anything else, and a list of the federal benefit types that receive protection.
If any funds were frozen, instructions on how to file a garnishment exemption claim with the court and how to contact the creditor or seek legal help.

Part 212 provides a model notice in Appendix A that banks can use to satisfy the requirement.⁷

When These Protections Do Not Apply

The automatic protection has a real limit. If the garnishment order arrives with a document called the “Notice of Right to Garnish Federal Benefits” attached, the bank skips the account review and processes the garnishment under its standard procedures. Two types of collectors can attach that notice:

State child support enforcement agencies collecting overdue child support, including liens that arise by operation of law.
The United States government collecting debts it is owed, including debts under the Federal Debt Collection Procedures Act and the Mandatory Victims Restitution Act.¹

When that notice is present, the lookback period, protected amount, and everything else in Part 212 drop out. Child support arrears and certain federal debts can reach money that would otherwise be shielded.

One other thing worth understanding: Part 212 does not itself make federal benefits exempt from garnishment. The exemptions come from other statutes that already existed. What Part 212 does is force banks to identify and honor those exemptions automatically, instead of leaving you to fight for them after your account is already frozen.

If Your Bank Gets It Wrong

Compliance is enforced by federal banking regulators — the OCC, FDIC, Federal Reserve, and NCUA, depending on the type of institution.¹ If your bank froze funds that should have been protected, failed to run the account review, or charged a garnishment fee against protected money, you can file a complaint with the agency that supervises your bank or credit union.

Part 212 does not give you a private right to sue the bank for a violation. Your route runs through the federal banking regulators or the Consumer Financial Protection Bureau, not through a personal lawsuit under this rule. If money was wrongly frozen and you need to move faster than a regulator, the notice from the bank should tell you how to file a garnishment exemption claim in the court that issued the order.