Social Security Loophole Allows Creditors to Steal Economic Recovery Checks, Disability Payments
Posted on:6/10/2009
Written By: Chris Robideaux
| A bipartisan group of legislators is putting pressure on the Treasury Department to close a loophole that has allowed banks to seize Social Security and disability benefits from customers' accounts despite federal rules intended to protect these benefits from creditors. |
A bipartisan group of legislators is putting pressure on the Treasury Department to close a loophole that has allowed banks to seize Social Security and disability benefits from customers' accounts despite federal rules intended to protect these benefits from creditors. The loophole also has enabled some banks to seize from customers their recent $250 Economic Recovery Payments, payments to disabled veterans, and supplemental benefits to impoverished individuals from the Social Security Administration.
Federal law says creditors can't take Social Security, disability, veterans' and children's survivor benefits to pay a debt. But the federal law doesn't say how money deposited directly into bank accounts is to be protected -- a gap that has given banks the ability to seize such funds.