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Social Security News
Senators Say Banks Illegally Garnishing Funds of
Senior Citizens, Veterans
Top senators ask Social Security to investigate
growing abuse
 Aug. 10, 2007 – 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withdrawn.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 (202) 224-5364, 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)
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