Credit Card Companies Snatch Social Security Payments

Holes are appearing every day in our so-called safety net, as state and local governments, in particular, are forced to cut back on public programs. But even amidst all the budget cutting, most elders and disabled people probably feel that their monthly Social Security checks are something they can count on. Having escaped attempts at privatization under Bush, Social Security might appear secure, at least in the short term.

Maybe not. As New America Media* reports, debt collectors for credit card companies and other creditors are  now going after Social Security payments, which are supposed to be exempt from garnishment in such situations. Their tactics include freezing the bank accounts into which a beneficiary’s Social Security checks are direct-deposited. When this happens, often without warning, old and disabled people find themselverobber_011 suddenly without the resources to buy food and medicine, which can trigger a desperate medical crisis.

That’s right. The meager amounts deposited into our accounts by the Social Security Administration, which many older people now must rely on more than ever before because of layoffs, the real estate crash, and the 401k collapse, are being illegally siezed, often by the very same companies that brought on the crisis in the first place–the big banks and other financial institutions that issue loans and credit cards. After taking in billions in public stimulus funds, they are wringing out every last dime by going after these public pensions, which are supposed to be protected. When you read stories about how Wall Street is relaxing with the comeback of high pay and big bonuses, think about this:

Margot Saunders of the National Consumer Law Center estimates that “tens of thousands of people every month,” who are elderly or disabled, are being forced into dire financial circumstances. Bank account freezes and illegal garnishments of exempt funds, including veterans’ benefits, are shredding safety nets. In her 2008 testimony before a House Ways and Means Subcommittee on Social Security, Saunders included a long list of stories…..

According to SSA, its payments provide baseline financial solvency for 13 million Americans, who would otherwise be in poverty. However, a 2008 report by SSA’s inspector general, estimated that direct-deposit beneficiaries across the United States have incurred $177.7 million in total garnishments. The report did not attempt to estimate the near incalculable damage of bank account freezes.

Bank account freezes are designed to prevent account holders from withdrawing funds before creditors can collect on legal claims. Debt collectors, though, often file claims on exempt accounts.

“The freeze creates a hostage-like situation where the creditor can wait out the debtor by demanding payment,” said attorney Johnson Tyler, director of the Social Security/Consumer Rights Unit at South Brooklyn Legal Services.

Tyler explained that often consumers don’t know SSA funds are exempt and agree to make payments to have the freeze lifted, so they can access their accounts. He suggested the problem might be worse in communities where limited proficiency in English is common.

The story includes the account of one 60-year-old disabled man, recovering from open heart surgery and dependent upon his monthly Social Security, who went to fill his prescriptions one day, only to find that his Washington Mutual bank account had been frozen because he owed money on an old credit card bill. (Think about it: You know that without the medicine you’ll probably die. What would you do? Would you beg on the streets? Or maybe go for some poetic justice, and rob a bank?)

While these illegal efforts to steal exempt funds (which also include SSI, veteran’s benefits, and unemployment insurance) have been going on for some time, they are bound to be increasing with the recession: While more and more people find themselves hard pressed to pay their bills, a couple of trillion in taxpayer funds doesn’t seem to have bought any mercy from the bailed-out banks.

*This story reflects the new “Ethnic Elders” and “Elders News Roundup” initiatives being run by Paul Kleyman at New American Media, a unique news organization that both aggregates material from the nation’s thousands of ethnic media outlets, and produces original content.  In its own words, NAM is “dedicated to bringing the voices of the marginalized–ethnic minorities, immigrants, young people, elderly–into the national discourse.”

17 responses to “Credit Card Companies Snatch Social Security Payments

  1. Thanks for helping to amp this story–I had NO idea. It’s horrendous. What happened to the party of “state’s rights,” anyway? *snark* It’s very unfortunate that Obama is carrying on what Bush wrought. Fortunately, it’s my impression that O is a savvy political being who LISTENS, and waits until he hears an undeniable rumbling…make your opinion known!

  2. if u find yourself in such a position, go to your bank or another bank and inquire about an electronic transfer account. that’s where the treasury department direct deposits your check directly into this account. it is in many ways just like a savings account, with a few restrictions. the good thing is that according to my understanding the only institution that can garnish, freeze on in any way mess with this type of account in the federal government, for such cases as back income taxes.

  3. THIS WILL NOT STAND!!!!!!!!

  4. The children of the people having their bank account frozen (that prevent them from accessing social security payments) are paying taxes to bail out the people that are freezing the accounts! I must have died and woke up in Russia. Can it get any worse?

  5. kenneth // April 29, 2009 at 4:01 pm

    I believe these are the accounts being garnished illegally….read the article again.

  6. kenneth // April 29, 2009 at 4:01 pm

    From the article…..freezing the bank accounts into which a beneficiary’s Social Security checks are direct-deposited.

  7. This should demonstrate to everyone that nothing is sacred or protected. My grandmother told me as a child that if something’s not in your hands, you don’t own it..


  8. Is ANYone surprised!!!?????

  9. When will the people STAND UP and DO what needs to be done?

  10. Pingback: Money & Markets - Week of 5.04.09 at The Catherine Austin Fitts Blog

  11. No one should be surprised at this. The banks own the government, and they need to create incentives for debt collection agencies to buy up the bad debts that banks create.

    So the banks lobby the federal and state governments to make it easier to collect on debts. They also make it so that all levels of government are dependent on bank borrower to finance their operations.

    The government regulators won’t bother going after this type of practice because it would hurt the banking industry to decrease the power of the state that collectors can tap into to pursue bad debts.

    People are being thrown in jail for not paying unsecured debts, having their bank accounts that receive SS payments deposited into, and having assets stolen just so the government can keep in the good graces of the banks.

  12. I have had problems with a credit card company when they raised my interest rate to 30% even though I was never late never missed a payment and usually paid more then my minimum. I wrote them a letter telling them to reduce the interest rate or I would no longer make payments to them…they refused, so I did not make another payment. They sent me to collections that then called me and wrote me, they even began sending me text messages posing as a relative of mine and some of these messages were coming in at 4 am! I called them and informed them that what they were doing was illegal and ask if the credit card company had informed them that I am on SSD, they told me that they did not know this. I warned them to stop contacting me via any means and thus far I have not heard from them again and it has been several months. It is my opinion that most collection companies will not pursue with collections once they understand that a person is knowledgeable about the law as it pertains to SS SSD benefits…so please become informed.

    Here is the law as it applies to SS and SSD monies. People need to become better informed as to their rights under the law so that they can effectively respond to the credit card companies and collection agencies.
    Section 207 of the Social Security Act (42 U.S.C. 407) protects Social Security benefits from assignment, levy, or garnishment. However, the law provides five exceptions:
    Section 459 of the Act (42 U.S.C. 659) allows Social Security benefits to be garnished to enforce child support and/or alimony obligations;
    Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows benefits to be levied to collect unpaid Federal taxes;
    Section 3402 (P) of the Internal Revenue Code allows beneficiaries to elect to have a percentage of their benefits withheld and paid to the Internal Revenue Service to satisfy their Federal income tax liability for the current year;
    The Debt Collection Act of 1996 (Public Law 104-134) allows benefits to be withheld and paid to another Federal agency to pay a non-tax debt the beneficiary owes to that agency: and
    The Tax Payer Relief Act of 1997 (Public Law 105-34) authorizes the Internal Revenue Service to collect overdue federal tax debts of beneficiaries by levying up to 15 percent of each monthly payment until the debt is paid.
    The Social Security Administration’s responsibility for protecting benefits against legal process and assignment usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under section 207 of the Act as long as they are identifiable as Social Security benefits using normal banking practices. For example, only social security benefits are deposited into a particular bank account.
    If a creditor tries to garnish your social security check, inform them that unless one of the five exceptions apply, your benefits cannot be garnished. You also may want to provide this same information to your financial institution and seek legal assistance if you believe it is needed.
    NOTE: Supplemental Security Income payments cannot be levied orgarnished.

  13. FYI…there is a direct deposit that the federal government has established about a year ago. This is from

    If you don’t have a bank account and you wait anxiously every month for the mail carrier to deliver your check from Social Security, Direct Express® is for you. If you already have an account with a financial institution, ask us about Direct Deposit. Direct Deposit is the easy, convenient way for your benefits to go automatically into your account.

    A debit card is sent to the person and can be used anywhere a credit/debit card can be used including ATM’S. You can pay bills online with a $00.50 per payment fee. I called this company and ask them about the ability of others to freeze the account and I was told the federal government for tax purposes was the only ones that could freeze the account.

    I hope this information helps others. If it does please tell others.

  14. Rochelle Bernstein

    I have MS and om receiving SS income. I was oldf by a third party collector that Obama is changing Section 207 of the Social Security Act (42 U.S.C. 407) and that unsecured debts owned by an agency will now become attachable. Is there any validity to this? If so, how to protect?

  15. would like to know about ,direct depost for my ssi. check.

  16. I’m saddened to hear people weren’t aware of this I’m on SSDI and I knew about this before I became disabled and was also told about this when I had my introduction meeting at the local SSI office. You most learn your rights and stand up to creditors I’m not saying you should use your SSDI as a reason to not pay your bills but if you fall on worse times don’t let them try putting you over a barrel. I spoke with my bank when I got my SSDI and they said since they now know I’m receiving SSDI they won’t honor an account freeze request unless it’s from the federal government.

  17. For all You SSA & SSDI Recipents> Not Go Direct Deposit Instead, Have Your Checks Come Directly To A P.O. Box Or Have the Checks Delivered To your Place Of residents.. Go To Any Check Cashing Store Pay a Small Fee Grab Your Money & Stuff Your Mattress Best Bet….The Key Is? Don’t Let The Banks See What You Got…Understand? Use Money Orders To Pay Your Bills There Free In Most Check Cashing Places…I hope I was Of Some Help! Good Luck! : )

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s