Title III of the Consumer Credit Protection Act is the federal law that protects employees from being fired if the employer receives a single wage garnishment against him. Title III also limits the amount employers can withhold from employees’ pay each pay period to satisfy a wage garnishment. To ensure compliance, the employer should withhold the garnishment appropriately.
A creditor must go to court and obtain a judgment to garnish a debtor’s wages. The state taxation agency, the IRS and the Federal Student Aid can garnish without a court order, but prior to garnishing, they should send the debtor a bill demanding payment and a notice of intent to garnish. The IRS and the state may use the term “levy” when referring to a garnishment. The issuing institution sends both the employer and the employee a copy of the garnishment notice.
The employer should examine the garnishment notice immediately upon receipt to determine when the withholding must begin. In most cases, the issuing agency requires withholding to start on the employee’s next regularly scheduled pay date. Some court-ordered judgments require the employer to complete an “answer” form, reporting the amount of pay that will be garnished and submitted per pay period. Instructions on how to deduct and submit payments are generally included on the garnishment notice.
Title III limits the amount of pay that can be garnished within a single pay period to 25 percent of disposable income. The employee’s disposable income is her pay after payroll taxes, such as federal income tax, Social Security tax, Medicare tax, and state income tax (if applicable), and voluntary pre-tax deductions have been withheld. The employer can withhold more than one garnishment at a time, provided the total does not exceed 25 percent of disposable pay. For federal student loans, the employer can garnish up to 15 percent of disposable pay. When the IRS sends the employer a wage levy notice, it includes Publication 1494, which the employer uses to figure the amount of pay exempt from the levy.
Support Order Limits
The employer can withhold up to 50 percent of disposable income for alimony or child support withholding orders, if the employee is supporting a spouse or child not included in the support order. If the employee does not have this obligation, the employer can withhold up to 60 percent. It can also withhold an additional five percent for support orders that exceed 12 weeks in arrears.
Penalties for violating Title III include criminal prosecution and a monetary fine of up to $1,000. The employer should not stop a wage garnishment prematurely unless the issuing agency tells it to. If the employee does not agree with the garnishment or wants to pursue payment options, she should file an appeal with the issuing agency within the time frame listed on garnishment notice.
- U.S. Department of Labor: Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title 3 (CCPA)
- IRS: Levy
- Federal Student Aid: Administrative Wage Garnishment
- U.S. Department of Labor: Wage Garnishment
- IRS: Publication 1494
- Department of Labor. "Garnishment." Accessed Feb. 13, 2020.
- Michigan Legal Help. "An Overview of Garnishment." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Consumer Credit Protection Act of 1968 -15 U.S. Code § 1673.Restriction on Garnishment." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Consumer Credit Protection Act of 1968 - 15 U.S. Code § 1672.Definitions." Accessed Feb. 13, 2020.
- Department of Labor. "Fact Sheet 30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III," Page 2. Accessed Feb. 13, 2020.
- United States Department of Labor. "Minimum Wage." Accessed Feb. 13, 2020.
- Department of Labor. "Fact Sheet 30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III," Page 3. Accessed Feb. 13, 2020.
- California Courts. "If You Do Not Pay Your Judgment." Accessed Feb. 13, 2020.
- Office of the U.S. Courts. "Discharge in Bankruptcy – Bankruptcy Basics." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "United States Bankruptcy Code - 11 U.S. Code § 523.Exceptions to Discharge." Accessed Feb. 13, 2020.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.