WASHINGTON, D.C. - On Friday, leaders of the Committee on Ways and Means sent a letter to Treasury Secretary Tim Geithner expressing support for a proposed regulation to protect Social Security beneficiaries from unlawful debt collection practices such as garnishment and levy.
Ways and Means Democrats have repeatedly called for a rule to end these practices, which violate Social Security Act statutes explicitly protecting benefits from debt collection in order to ensure that beneficiaries have a basic income. Members have been particularly concerned with the role banks have played in this problem by freezing beneficiaries’ bank accounts containing protected benefits in response to court orders obtained by debt collectors.
In the letter, Ways and Means Committee Chairman Sander M. Levin (D-MI), Social Security Subcommittee Chairman Earl Pomeroy (D-ND), Income Security and Family Support Subcommittee Chairman Jim McDermott (D-WA) and Oversight Subcommittee Chairman John Lewis (D-GA) state that, “The practice of freezing accounts containing these funds undermines the federal statutes, denies beneficiaries a basic income, and can often result in irreversible financial hardship due to fees and penalties assessed by the banks themselves to administer the freezes and in response to consequent overdrawn accounts."
While the Chairmen note that the proposed rule “will help further protect beneficiaries and ensure greater compliance with the federal statutes exempting benefit funds from debt collection," they also call for critical improvements, including the following:
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The rule should explicitly protect all exempt Federal funds from fees or penalties arising from garnishment proceedings. The proposed rule appears to permit banks to collect garnishment fees from exempt amounts that are not in the protected amount.
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The rule should extend the lookback period to longer than 60 days to ensure that a full two months of benefit payments are protected, as the rule intends.
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The rule should extend the “safe harbor" protection to financial institutions that release or refuse to freeze such clearly exempt funds to encourage banks to release to the beneficiary any clearly exempt funds that are above the amount protected by this rule.
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The rule should explicitly state that a determination by a bank that an amount is protected from freezing is also a final determination of exemption from garnishment, etc., and cannot be challenged by creditor as collectible. This explicit statement of the finality of this determination will protect beneficiaries and avoid needless legal proceedings against banks.
* The rule should explicitly state that a beneficiary’s access to the protected funds should not be hindered or otherwise restricted in any way. The proposed rule should provide sufficient clarity for how banks should respond to garnishment or freezing orders.
