July 27, 2005 CCPA2005-1NA
This in response to your
letters of May 20 and October 21, 2004, addressed to Kristine Iverson,
Assistant Secretary for Congressional and Intergovernmental Affairs, on behalf
of your constituent, Name* of Name*. The Employee Benefits Security Administration of
the U.S. Department of Labor referred to the Wage and Hour Division Name*
complaint that the Name* Circuit Court violated the Consumer Credit
Protection Act ("CCPA"), 15 U.S.C. 1671 et seq., by ordering, as
part of Name* divorce settlement, that all of his "commission
income" be garnished.
Name* indicates in his correspondence that the "100%
garnishment" of his "commission income" was carried out by a court-appointed
receiver of his property and assets. In this regard, Name* submitted
with his correspondence a copy of an April 10, 2000,
letter from the receiver, Name*, to Name*. In the letter, Name* directs
the firm, pursuant to the Circuit Court's Order Appointing Receiver, to
transfer to him "all funds being held" by the firm and "any future monies that
would be otherwise disbursed to [Name*]." Name*
asserts that this action
violated the garnishment restrictions of the CCPA .
Title III of the CCPA (copy
enclosed), limits the amount of an employee's disposable earnings that may be
garnished and protects an employee from being fired if pay is garnished for
only one debt. The Wage and Hour Division administers Title III. This
Division has no other authority with regard to garnishments. Questions over
issues other than the amount being garnished or termination should be referred
to the court or agency initiating the withholding action.
Section 303 of the statute,
15 U.S.C. 1673(a), provides, subject to certain exceptions not pertinent here,
that the maximum part of an individual's aggregate disposable earnings for any
workweek that is subject to garnishment may not exceed 25 percent of his
disposable earnings for the week or the amount by which his disposable earnings
for that week exceed thirty times the current minimum wage established by the
Fair Labor Standards Act, 29 U.S.C. 201 et seq., whichever is
Section 302 provides the
pertinent statutory definitions. Section 302(a) defines the term "earnings" as
"compensation paid or payable for personal services, whether denominated as
wages, salary, commission, bonus, or otherwise, and includes periodic payments
pursuant to a pension or retirement program." 15 U.S.C. 1672. Section 302(b)
defines "disposable earnings" as "that part of the earnings of any individual
remaining after the deduction from those earnings of any amounts required by
law to be withheld." 15 U.S.C. 1672(b). Section 302(c) defines "garnishment"
as "any legal or equitable procedure through which the earnings of any individual
are required to be withheld for payment of any debt." 15 U.S.C. 1672(c).
Courts have further
explained the statutory terms. In Kokoszka v. Belford, 417 U.S. 642
(1974), the U.S. Supreme Court held that the terms "earnings" and
"disposable earnings" are generally limited to periodic payments of
compensation. The Court emphasized that Congress' goal in the CCPA was to
"regulate garnishment in its usual sense as a levy on periodic payments of
compensation needed to support the wage earner and his family on a
week-to-week, month-to-month basis." Id. at 651.
Thus, the Court affirmed the appellate court's determination that a tax refund
was not "earnings" or "disposable earnings" under the CCPA.
Also, in Usery v. First
National Bank of Arizona, 586 F.2d 107 (9th Cir. 1978), then
Judge Kennedy, writing for the U.S. Court of Appeals for the Ninth Circuit,
held that the CCPA's garnishment restrictions do not apply to banks and other
financial institutions that are in possession of a debtor's monies, even though
the sums may be traceable to earnings. The Act's restrictions are limited to
garnishments served on the debtor's employers or those who stand in the
position of employers by virtue of paying or owing compensation for services to
the debtor. The CCPA does not apply to an employee's bank accounts comprised
of earnings already received by the employee. See, e.g., Long
Island Trust Co. v. U.S. Postal Service, 647 F.2d 336, 342 (2d Cir. 1981)
(CCPA has no application to assets other than earnings before they are paid out
by the employer). See also, Guidry v. Sheet Metal Workers
International Association, 10 F.3d 700, 715 (10th Cir. 1993)
(assuming, without deciding, that the protections of the CCPA do not extend to
earnings that have been received).
Consequently, while the
statutory definition of "earnings" expressly includes compensation denoted as
"commission," absent information that Name* "commission
income" was held by Name* as his employer (or as one who stands in the place
of an employer) and was compensation for personal services payable on a
periodic basis, such monies are not protected by the garnishment limitations of
Name* may contact our Name* district office,
located at Name*, telephone ****, fax. **** to discuss his situation
in greater detail.
Rosemary E. Sumner
Office of Enforcement Policy
* Note: The actual name(s) was removed to preserve
privacy in accordance with 5 U.S.C. 552 (b)(7).