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Empire Justice Comments on the Exempt Income Protection Act

September 11, 2008


Terryl Brown Clemons
Counsel to the Governor
Executive Chamber
Albany, New York 12224

Re: S.6203-B Volker / A.8527-A Weinstein—an Act to Amend the Civil Practice Law and Rules in Relation to Restraint, Execution, Income Execution and Levy Procedures.

This Act, referred to as the “Exempt Income Protection Act,” will provide critical protections for New York’s lowest income citizens. The Act reflects the needs of the banking community and provides clear guidance regarding the restraint of bank accounts. Empire Justice Center strongly supports this bill and urges Governor Paterson to sign the bill into law without hesitation.

The purpose of the bill is to close a loophole in New York’s debt collection law, which currently allows banks to restrain accounts containing income that is exempt from collection, including social security, disability benefits, public assistance, pensions, college tuition trusts, and veterans benefits. This legislation mandates that exempt income directly deposited into accounts and easily identifiable by banks will be automatically protected from restraint.

While it is illegal for debt collectors to seize income statutorily classified as exempt under federal and sate law, current New York law does not provide safeguards preventing banks from freezing bank accounts even when the funds contained within are known to be exempt from collection. Releasing the funds in a restrained account is an arduous and often complex process for many low-income account holders, and it can take weeks or even months to unfreeze an account. During that time, the inability to access basic funds puts low-income families in peril of hunger, illness, loss of utilities and eviction. Even after the account has been released, low-income, elderly and disabled account holders find that they have lost hundreds of dollars to bank fees, overdraft fees, and bounced check fees incurred as a direct result of the inappropriate restraint.

This law will provide a bright line rule for banks and will allow them to reject requests to freeze the first $2,500 in their customer’s account when the account contains directly deposited exempt income. Additionally, the law will make it easier for account holders whose funds have been unlawfully frozen to get restraints lifted from their accounts. The bill has no impact on the rights of debt collectors to seize a debtor’s funds when they are permitted to do so by law. This legislation is an example of the positive results that can be achieved when the advocacy and business communities come together to solve a problem. The bill strikes a balance, satisfying both consumer related concerns of advocates and business concerns of members of the banking industry. Empire Justice believes that this balanced approach will meet the needs of both the creditor and debtor and we strongly encourage Governor Paterson to sign this bill.

For more information, please contact:

Kirsten E. Keefe

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 

(518) 462-6831
(518) 935-2852