Topic: Requests for Financial Information
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We received a citation to discover assets for a former business customer whose account was closed before we received the citation. Do we need to send a copy of the citation to the former customer?
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Yes, we believe you should send a copy of the citation to discover assets to your former customer. The Illinois Banking Act provides that a bank “shall disclose financial records” under a lawful citation to discover assets only after the bank mails a copy of the citation “to the person establishing the relationship with the…
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Are Illinois banks required to act on out-of-state tax levies? We received a notice of levy from another state’s Department of Revenue and are not sure what we should do. We do not have branches in the other state. Does it depend on how the levy is served and whether it is served on a federally chartered or state bank?
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Whether you are required to honor the out-of-state levy depends on whether your bank is subject to that state’s jurisdiction, which is a fact-intensive inquiry best suited for bank counsel. We believe that the other state’s Department of Revenue would first need to file a judgment order obtained in its state against your customer with…
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Is there any Illinois law that would prevent banks from deducting overdraft fees from child tax credit payments? We are aware that child tax credit payments generally are subject to garnishment.
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We are not aware of any Illinois law that would prevent your bank from deducting an overdraft fee from a child tax credit payment — provided your account agreement allows for the setoff of overdraft fees. The IRS has published guidance confirming that advance child tax credit payments are not exempt from garnishment by non-federal…
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Are there any provisions in the CARES Act that would limit a creditor’s ability to garnish Paycheck Protection Program (PPP) loan funds? We received a third-party citation to discover assets for a customer who recently received a PPP loan, and we froze the funds pending the upcoming turnover hearing. Was this appropriate?
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We do not believe there are any provisions in the CARES Act or subsequent American Rescue Plan Act of 2021 that would prevent a creditor from garnishing PPP loan proceeds. Consequently, we believe it was appropriate to freeze your customer’s account on receiving a third-party citation to discover assets — provided you froze no more…
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How must subpoenas be served on financial institutions? Should we accept a subpoena only if it is served via certified mail, and how should we respond if a subpoena is sent via fax or email? Also, for civil matters such as a divorce proceeding, are we required to wait a certain number of days before sending documents to the requesting party? Must we give our customer time to quash the subpoena, if necessary?
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In Illinois, a subpoena may be served by personal service or by certified or registered mail. Consequently, we do not believe you are required to respond to a subpoena served via fax or email. The Illinois Banking Act requires banks to mail a copy of a subpoena to a customer before responding, “unless the bank…
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Over two years ago, we received a non-wage garnishment summons and sent a response stating the amount of funds we were holding for the customer named in the summons. To date, we have not been asked to turn over the funds. Is there a maximum amount of time we must hold these funds before returning them to the customer’s account? We have contacted the court and the creditor’s counsel regarding the status of the garnishment proceeding but have not received a response.
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We believe you must continue to hold the funds until further order of the court — with the caveat that you may eventually have to remit them to the State Treasurer if they become abandoned. The lien created by a garnishment summons does not expire after a set length of time, unlike the lien created…
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We received a garnishment order for one of our business customers. Does the COVID-19-related moratorium on garnishment proceedings in Illinois apply only to consumers and not to businesses?
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Yes, the current prohibition against the service of garnishment summonses in Illinois applies only to consumer debtors and consumer garnishees. Under Executive Order 2020-25, as amended and extended by Executive Order 2020-55, the service of a garnishment summons, wage deduction summons, or a citation to discover assets on a consumer debtor or consumer garnishee is…
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Would a citation to discover assets or a garnishment summons served on a natural person debtor for a non-consumer debt (such as a commercial loan for which the natural person debtor served as a guarantor) be subject to the Illinois Supreme Court’s COVID-19 order on post-judgment proceedings served after March 8, 2020? It is perplexing that the order does not apply to judgments that are not exclusively against a natural person, since many commercial judgments involve both a business and its personal guarantors.
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Yes, we believe that the Illinois Supreme Court’s COVID-19 order would apply to natural persons who owe a non-consumer debt, unless their property is held in a business account. The substantive provisions of the Illinois Supreme Court order state that it applies to certain garnishment and citation proceedings “arising out of a judgment that is…
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Was the Executive Order restricting garnishments and other collection activity extended beyond May 29?
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Yes, on May 29, the Illinois Governor signed Executive Order 2020-39, re-issuing and extending Executive Order 2020-25 (restricting garnishments and certain other collection activities) through June 27, 2020. For resources related to our guidance, please see: Illinois Executive Order 2020-39 (May 29, 2020) (“Executive Order 2020-25 is re-issued in its entirety and extended through June 27, 2020.”) Illinois…
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Under the Illinois Supreme Court’s COVID-19 order on post-judgment proceedings served after March 8, 2020, if a customer has available funds in their account above what is being restricted due to a garnishment or citation, would they still be entitled to the $4K exemption for the funds being held? For example, what if a debtor had an account balance of $6K and a citation comes in for $1K. Would the customer still get to claim the personal property exemption in the $1K being held under the citation? Or what if the customer had an account balance of $8K and $4K was being held under a citation?
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No, we do not believe that the Illinois Supreme Court’s order would entitle a customer to claim a personal property exemption of more than $4,000 in account funds. As stated in the Illinois Supreme Court’s order, Illinois law provides consumer judgment debtors with a personal property exemption “not to exceed $4,000 in value,” and the…