Banks Cannot Garnish Social Security Payments

The Social Security Administration recently released a report on an investigation into the practice of banks garnishing Social Security and disability payments for third party creditors, a practice that is illegal. It was discovered that approximately $171.4 million was garnished from accounts receiving direct deposits of SS benefits and other direct deposits and an additional $6.3 million was garnished from accounts that contained only Social Security payments. In addition to the garnishments, they found that in some cases the banks would freeze accounts and charge penalty fees after the freezes. Those fees totaled just over $1 million between September 2006 and September 2007!

Unfortunately, consumers can do little except wait for relief from lawmakers. Some states already have laws in place that protect SS recipient accounts. In New York, the governor is expected to sign a bill that would protect the first $2,500 of a depositor’s money from being frozen if they are getting SS direct deposits, a law that is similar to those in place in California and Connecticut.

Banks Continue to Prey on Social Security Recipients [Yahoo! Finance]