House hears bill to restrict reimbursement of writ of garnishment attorneys' fees

Credit unions may incur legal fees when they are presented with a writ of garnishment. To avoid the “unauthorized practice of law,” a credit union must hire an attorney to answer a writ of garnishment. Current law permits the credit union to recoup the cost of attorneys’ fees from the judgment debtor’s account prior to releasing the funds to the garnishor. HB 4122 by Rep. Jarvis Johnson (D-Houston) would prohibit financial institutions from receiving reimbursement of the legal fees in most circumstances.

Regulatory and Compliance Counsel Suzanne Yashewski, representing the Texas Credit Union Association, testified in opposition to the bill. Yashewski told the committee that the bill would negatively affect credit unions and their members by requiring them to bear the cost of legal fees, despite not being a party to the lawsuit. Financial institutions are forced to assist the debt collection efforts of the third-party creditor, and in doing so are forced to accrue legal fees simply because the debtor happens to have an account at the credit union. 

If the judgment debtor’s account contains insufficient funds, current practice is for the credit union lawyer to call the garnishor’s attorney to let them know so that the case can be dropped without accruing attorneys’ fees, saving all parties time and money. The author of the bill expressed his intent to cease this practice and require all financial institutions to file an official answer every time, while at the same time prohibiting financial institutions from recouping legal fees associated with filing the required answer.

HB 4122 received a hearing in the Texas House Judiciary and Civil Jurisprudence Committee on April 15 and was left pending.

Contact Jeff Huffman at 469-385-6488 or jhuffman@txcua.coop for more information.