Creditors Use Loophole To Seize Benefits

Bill Collectors Have Found Way To Collect Social Security, Veterans' Payments

(AP)  Bill collectors are exploiting a legal loophole to seize Social Security and veterans' benefits even though federal law is supposed to protect the payments from creditors.

Lawmakers from both parties who have been pressing the Treasury Department for years to close the loophole with new regulations are growing impatient. The Obama administration is now promising action but has offered no timetable for developing the new rules.

Federal law has long protected Social Security and veterans benefits from most creditors, with a few exceptions for child support, alimony, unpaid federal taxes and debts to other federal agencies. But creditors have been seizing the payments anyway by getting court orders to freeze and garnish bank accounts that receive the benefits through direct deposit.

Activists say the issue has festered for years, but has intensified as more recipients get their benefits deposited directly into bank accounts.

Many people who receive Social Security or veterans benefits can't afford to have their bank accounts frozen for even a short period of time, said Margot Saunders of the National Consumer Law Center. It's hard to hire a lawyer to get your money back when all your resources are frozen, she said.

"They take all your money, and they take it illegally," Saunders said. "But when you live on $700 or $800 a month and have all that money garnished, there's very little recourse."

Over a 12-month period in 2006-2007, an estimated $178 million was garnished from bank accounts that included a mixture of Social Security benefits and other deposits, according to the Social Security Administration's inspector general.

"Some banks are doing the right thing to protect their customers by denying creditors' requests to freeze and garnish accounts with Social Security funds, but too many banks are not," Sen. Herb Kohl, D-Wisc., chairman of the Senate Special Committee on Aging, said this week.

"We need our banking regulatory agencies to recognize this widespread problem and start enforcing the law," he said.

Kohl and other lawmakers have introduced a bill that would stop further promotion of the direct deposit programs for Social Security and veterans' benefits until the Treasury Department issues rules to protect the benefits from creditors. More than 80 percent of the 51 million Social Security recipients get their payments through direct deposit.

Assistant Treasury Secretary Michael Barr was asked by lawmakers to commit to new regulations last month, before he was confirmed by the Senate.

"I am fully committed to ensuring that federal anti-garnishment statutes are given full force and effect," Barr said in a written response to questions from Kohl. But he said he also wanted to do it "without imposing burdens or shifting liabilities to financial institutions."

A Treasury official said this week the department has already reached policy agreements with the agencies that issue protected benefits. The next step is to write formal rules, said the official, who spoke on condition of anonymity because she was not authorized to publicly discuss the rulemaking process.

In a related issue, the California Supreme Court ruled Monday that Bank of America could recoup overdrafts and insufficient funds fees from accounts that include Social Security payments. The court said it based its ruling on state law.

The American Bankers Association said in a letter submitted for the inspector general's report that banks are often confronted with court orders to freeze or garnish accounts that include deposits from multiple sources - including money that is not protected from creditors.

Under the current system, the only "fair" response is for banks to freeze or hold the disputed amount to "provide the parties with time to work things out," the trade association said.

"Banks would welcome clear rules," the letter said.

[ev_ares]

The one factor that is disappointing to me is that we now have a democratic congress along with a democratic president. This is supposedly the party of the people, the party that puts us first over corporations. As most can see, there is not any more happening or any faster than the other party. Anymore, it is all about money and both parties get money from the banks and corporations and that is where the help is directed, not to us as we saw with the stimulus money and then the banks turned around and screwed the American people after getting our money to bail them out of their greed and corruption.

I keep hope things will change. I still have faith and hope in President Obama that he will come around. We all know he had a lot to deal with when he came into office he inherited from the Bush Administration.

[toldyouso29]

I'm constantly hounded for the person who had my old cell phone number before I had it. I've told these companies multiple times that I am the only person at that number and I never met him, and they *still* keep calling. If they don't even understand they have a wrong number, can anyone expect them to understand anything else?
Posted by emh1701 at 4:44 AM : Jun 4, 2009


You can call your cell phone company and ask for a new number--explain what is happening, they usually will not charge for this. YOu can also ask for a number that has not been recycled for up to 24 months..finally, you can have your cell phone number placed on the Do not call registry--when any caller calls you unsolicited, tell them they have reached a do not call number and hang up--if your phone has the feature, block their calls.

[toldyouso29]

" If you are on a fixed income or otherwise can't afford on your own to run up what you regard as "essential" debt, better contact a private charity or relative or friend for help.
Posted by ghwab1949 at 7:57 AM : Jun 3, 2009


We learn best by example. If huge corporations, banking and mortgage institutions, automakers, airlines and others can just throw away their debts, start over and get massive amounts in bailout money--why not each American? The "law" is equal is it not? If you can stomach all of these institutions getting hand outs and jettisoning debt and employees with no repercussions, why do you censor avg citizens? Are you a diletante? or a traitor?

Free money for all!!! Freedom of debt for all!!!! If the big guys no longer have their old debts and can get multimillion dollar bonuses from Tax payer bailouts--then fork over each consumer's share--the big companies lost billions and squandered and will never repay a lot of that debt--what is good for the goose is also good for the gander.

F 'em all. Pay no taxes, pay no debts back....you can't allow a free ride for so many (the elite) then expect the little guy to tow the line--after all, maybe Chrysler, GM, Lehman Brothers, Wells Fargo, Banc of America and others should have looked into borrowing from friends and charities to recoup their losses too--huh? LMAO

[toldyouso29]

The lesson here is --if you owe a lot of money, remove all of your money from the bank, have any checks mailed directly to you or a PO box and spend it all now--before the creditors find it and take it. If you work, pick up your check at work from HR in person (if possible) and if the creditors start to whine--tell them their money is being repaid through the federal trillion dollar bailout--just fill out the paperwork and leave you alone. LOL

[emh1701]

I'm constantly hounded for the person who had my old cell phone number before I had it. I've told these companies multiple times that I am the only person at that number and I never met him, and they *still* keep calling. If they don't even understand they have a wrong number, can anyone expect them to understand anything else?

[jasperlily]

Trouble is, so many corrupt collection companies out there do all they can to collect on sham debts. They tried it with me and I contacted the state's Atty General's office which took care of it. But if these corrupt "collection companies" can push through a bogus claim in court and get people's social security or veterans' benefits, they need to be fined huge amounts plus shoved in jail for a long, long time. But they need to be stopped, now, before they can devastate an innocent person.

[whitemale08]

In the month of Octoboer 2008, I posted a WARNING to everyone here that you (American citizen) was about to lose EVERYTHING!

I meant everything because I knew that the banksters were broke and that not even the United States taxpayer had enough money to bailout over 1.4 quadrillion in worthless derivatives and credit-default swaps.

Nobody listened, instead they laughed at me and said I was 'crazy' and that their personal situation was just fine.

Well I would like to hear from those same people today and tell me if you still think the same way.

Folks, if you haven't listened to me or Lyndon Larouche up till now, NOW is the time.

We're passed time to put the Federal Reserve System into RECEIVERSHIP and BANKRUPTCY RE-ORGANIZATION.

Soon our imploding economy will turn into an irreversible catastrophe if we do not take the advice of Lyndon Larouche and get these fascistst Hitler-clowns surrounding the President OUT!

larouchepac.com

Wall Street has failed.
Globalization has failed.
Anglo-Dutch Financial and Monetary System of Private-Central-Banks has failed.

Do we want to go down to hell with these dumb idiots?

[growlll]

Shrub? I thought it was Klintoon that started the free trade idea and most favored trade status with China that started all of this. Trade deficets,out sourcing to China and such. Oh that idea does not fit the usual "its all the other partys fault" idea that is common here on CBS.

[holalanemeir]

I have been hounded by an outfit called Portfol** Recov*ry Servic*s-they are trying to make me pay for someone else's 1993 credit card bill. They continually say that I am covering for this other person, yet when I ask them if they know who they are speaking with, they can't even give my name or the address to which they are calling. I keep telling them they are a sorry excuse for a collector if they can't even google their old accounts names. When I remind them of the Fair Debt and Collections practices Act...they immediately hang up. Just remember lots of these collectors have mostly outdated info. In many instances, phone numbers are "recycled" as people move, get married or drop land lines altogether.

[tomanyt]

ghwab1949 ... Circumstances happen. Not everyone is trying to ditch their obligations of debt. But sometimes things can happen to prevent you from paying back that debt.

[ghwab1949]

I haven't seen any excuse yet posted here for not paying debts when they become due or trying to work out some payment schedule. All I read is sympathy for those who owe and forced welfare for those who might find other welfare-type government payments like Social Security "off limits." If you are on a fixed income or otherwise can't afford on your own to run up what you regard as "essential" debt, better contact a private charity or relative or friend for help.

[grabandgo]

It gives you a warm feeling that our government is out to protect us.

[bobbyduck1]

If this legal stealing goes on why not change the currency and end the madness?
Posted by gohan31 at 10:44 PM : Jun 2, 2009 ***************** The dollar is no more, anyway. bamy sold us to the Chinese. Nice job, Your Lordship. Or was that Messiah. I forgot.
Posted by YouCantBSirius at 4:11 AM : Jun 3, 2009

That was your buddy the shrub who sold us to China. Now the real President has to figure out how to clean up the mess all the GOP crooks and idiots made.

Sheesh, outsourcing and deficit spending using China as the bank for 8 years and you blathering neowacks try to spin it around and make it President Obama's fault. Get real.

[mycommentspg]

You should pay your bills if you are able, but this access to social security is just another example of a do nothing congress while they count their own money! (mycommentspage.blogspot.com)

[retiredgustav]

For thoses that says pay your bills and you won't have a problem, sometimes the creditor screws up and tries to get money they are not entitle to. Many people on fixed income do not have the resources to fight theses b*a*s*t*a*r*d*s.

[novamba]

Why, if this is an ongoing problem, was this not targeted in our recent "monumental" credit law? many of these people receiving SS or VA benefits are struggling to pay off debts left by late spouses. These creditors are not targeting your run of the mill college student with a credit card. Obscene.

[jtmichalec]

The people with comments like "pay your bills and you don't have to worry" were obviously not in New Orleans during Katrina, or in the Midwest last year during the big floods, or have not lost their jobs due to the economic downturn.

[walt1944]

We'll see if your point holds up when your employer suddenly decides your job is discontinued and all you have is unmployment, veteran's pay, or social security to live on in a bad economy with no jobs out there and unemployment reaching for 10%.

It gets pretty hard to pay that electric bill or buy a loaf of bread then!!!

[ronlouver]

Would the simple solution to this problem be to open a seperate account with only access by owner, and designated a benefit account.

[Dgunner]

As a person who gets a pension and disability check. I have this to ask. If the creditors were aware of the persons income bracket and rolled the dice with borrower? The borrower should be given a opportunity to set up a repayment plan in the eventof default.To freeze thier entire assets is not going to do anything but shift the monetary loss to other agencies such as food stamps medicaid and loss of medicare and then the burden finds its way to the emergency room doors of hospitals and clinics and finally to the working tax payer.