Senators Say Banks Illegally Garnishing Funds of Senior Citizens, Veterans

[unhappycamper]

Note to mods: please snip, if necessary.


Financial institutions are illegally garnishing accounts on behalf of creditors in order to recover debt owed to them by recipients
of VA benefits, SSI and Social Security.

Senators Say Banks Illegally Garnishing Funds of Senior Citizens, Veterans
Top senators ask Social Security to investigate growing abuse



Two Senate committee chairs and a member of the Senate’s Special Committee on Aging has asked the Inspector General of the Social Security Administration to investigate the increasing violation of laws pertaining to collecting debt from senior citizens, veterans and the disabled.

Financial institutions are garnishing accounts on behalf of creditors in order to recover debt owed to them, and are assessing fees on bank accounts into which Social Security, Supplemental Security Income (SSI), and Veterans benefits are electronically deposited. Federal law prohibits anyone from garnishing these benefits, but financial institutions are increasingly using this practice, the senator’s say..

For twenty percent of seniors over 65 years old, Social Security is their only source of income and for two thirds it is the major source of income.

Senators Max Baucus (D-MT), chairman of the finance committee, Herb Kohl (D-WI), chairman of the committee on aging, and Claire McCaskill (D-MO), a member of the aging committee, sent a letter requesting the investigation.

"In recent months several newspapers have published articles describing how financial institutions have been freezing and assessing fees on accounts in which Social Security and Veterans' benefits are electronically deposited," the letter read. "Sadly, the majority of the individuals to whom this is occurring are those who can least afford it."

Despite clear protections in federal law against attachment and garnishment of Social Security, SSI and Veterans' Benefits, banks continue to freeze these safety net funds on behalf of creditors and sometimes for their own purposes. In most cases theses funds are taken not only by the creditor but also by the bank who levies fees for "processing" the garnishment.

Additionally, as a one two-punch to America's seniors, veterans, and disabled citizens, overdraft charges from insufficient funds that resulted from garnished benefits are also being withdrawn. Some banks also dip into these protected funds to pay for other debts owed to the bank, such as a car loan.

Baucus, Kohl, and McCaskill requested that the Social Security Administration's Inspector General report to them the degree to which large and small banks are engaged in these practices and the extent to which the resulting fees are eating up the safety net funds upon which seniors, Veterans and the disabled rely.

"Millions of seniors rely on their Social Security benefits as their only source of income for basic needs like housing and food. When financial institutions and creditors illegally garnish these benefit checks, they are putting the lives of our most vulnerable segment of the population at risk. We need to know how wide-spread this practice has become and find a way to make it stop," Kohl said.



A copy of the letter to the Social Security Administration’s Inspector General is below.

August 6, 2007

The Honorable Patrick P. O’Carroll, Jr.
Inspector General
Office of the Inspector General
Social Security Administration

Dear Mr. O’Carroll:

In recent months several newspapers have published articles describing how financial institutions have been freezing and assessing fees on accounts in which Social Security and Veterans’ benefits are electronically deposited. Although Federal law, in our view, clearly precludes creditors from garnishing these benefits to fulfill debts, financial institutions continue to allow this to happen. In our view, another violation of Federal Law that is troubling is the practice by banks of directly withdrawing funds from beneficiary accounts to cover a variety of bank services such as: ATM transactions, insufficient funds, low account balances, account maintenance, etc.

Sadly, the majority of the individuals to whom this is occurring are those who can least afford it. As we in Congress consider how to address this issue, it would be helpful to know whether the twelve largest banks and a select number of small and medium size banks are allowing the garnishment of Social Security and Supplemental Security Income (SSI) benefits. We would also like to know what types of fees these financial institutions are charging beneficiaries in relation to these garnishments. Finally, we would like to know what these financial institutions are doing to protect exempted Social Security funds.

To assess the magnitude of these issues, we would appreciate it if your office would query the twelve largest financial institutions and a select number of small and medium sized banks in the United States servicing SSA beneficiaries on the number of their account holders receiving these benefits through direct deposit in the last twelve months, and provide us with the following additional information:

How many of these accounts have been garnished at creditors’ requests.

Please provide the number of accounts upon which fees in relation to such garnishment were imposed, the number of times these fees were imposed on, and the total dollar amount of fees charged to these accounts as a result of the garnishment. Please include all types of fees charged by the institution in relation to such garnishment, including administrative fees, fees to garnish and/or release the funds, and NSF fees.

Should you have further questions, please contact Jeff Cruz of Senator Kohl’s staff at [phone], Alan Cohen of Senator Baucus’s staff at 202-224-4515 or Melissa Garza of Senator McCaskill’s staff at 202-224-6154. We look forward to working with you on this and other important issues that affect our nation.

Sincerely, (Signed by Kohl, Baucus, McCaskill)

A few months ago, we had a story about this. At that time I wrote the following advice for veterans. Here it is again, with a few additions...


This story should serve as a warning to anyone who gets any government check through the direct deposit program.

A few years ago the VA sent out letters saying they were "changing" to the direct deposit system. The letter made it sound like vets HAD to get their comp via direct deposit. This was very misleading.

Veterans' advocates complained about this practice and the VA backed-off and included an instruction to allow vets to keep getting their comp checks in the mail if they wished.

If you have any credit problems and feel that a debt collector might "come after" you, then you should get your VA comp via check in the mail, cash it and pay your bills in cash or with money orders.

If your government check is direct-deposited to a bank account and you have "creditor problems," your money is at risk, as the stories below explain.

[mrcheerful]

1. Works great until your mail is late or stolen, which is why many went to DD.

Alaate SSI or SS check could land you with an eviction notice from the land lord as well as having you power shut off for non payment because you were late paying your last winters bill. Then theres theft, ever see how much red tape and waiting to get a stolen check replaced? I had 2 state SSI checks returned after I moved to another city,$43 doesn't sound like a great loss until its your $43 missing, I never got the checks replaced because the case worker at welfare "forgot" to issue new checks. Never mind the fact that the same worker also "forgot" to put the county name of where I moved to which was why the checks were sent to my old address and sent back to the state.

Btw, for those not in the state of michigan, the state no longer sends the $14 to the feds for their share of SSI payments, instead you get a welfare check every 3 months and the state welfare office handles the paper work. Another bright ideal from the party of morons and nit wits to "save" the state money. (R)

[flashl]

2. Leading the sheep to slaughter

Creditors illegally garnishing bank accounts of Seniors and Veterans are probably duplicating the callous and successful IRS collection practices that been unchallenged for years. I always had suspicions about pressuring government payments into automatic bank deposits. In the long run, the only real beneficiary of this practice was the banks.

[TahitiNut]

3. Preying on the weakest ... those least able to defend themselves and least able to buy a lawyer.

It's the hallmark of our increasingly sociopathic economic system ... creeping "Social Darwinism." It has nothing to do with the possibly enormous "service" these people have done ... age catches up with almost everyone. Veterans, of course, are part of a "throwaway culture" ... we don't maintain or repair anything, even human beings.

[jody]

4. If "Federal law prohibits anyone from garnishing these benefits", why isn't the Attorney General

prosecuting banks that break the law?