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SENATORS SAY BANKS ILLEGALLY GARNISHING FUNDS
OF
VETERANS, DISABLED AND SENIORS -- 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.
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.
Previous story on this issue is here...
http://www.vawatchdog.org/07/nf07/
nfMAY07/nf050707-4.htm
Today's story
here...
http://www.seniorjournal.
com/NEWS/SocialSecurity/2007/7-08
-10-SenatorsSayBanks.htm
Story below:
-------------------------
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 (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)
-------------------------
Larry Scott --
