There are laws. And when banks break them, this law firm will defend you.

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Seniors need to know that their Social Security can’t be garnished or taken from them, even after it is deposited into their bank account.

Before 2011, a senior had to file a “challenge to garnishment” with a court when their bank account was garnished to get their Social Security and other retirement money released or returned.

The delay in getting their money created untold hardships for seniors who needed their money for food, medicine, rent, and other basics. Sadly, many seniors did nothing because they didn’t know better.

Federal banking regulations were changed

So in 2011, new regulations mandated that banks and credit unions examine a garnished account within 72 hours to determine if federal funds – including Social Security – were electronically deposited.

If so, the bank was instructed to automatically protect from garnishment twice the monthly amount of electronically deposited Social Security and federal benefits.

These new regulations protected twice the monthly amount, no matter the source of funds that were in the account at the time of a garnishment.

So, for example, if a senior received $1,200 in Social Security each month, then $2,400 was protected, period. No matter the actual source of funds in the account at the time. It amounted to simple addition- twice the federal benefit automatically protected. Seniors don’t need to do anything.

What’s happening nine years later?

I am the Executive Director of HELPS, a national nonprofit law firm that protects seniors nationwide from unwanted collector contact and helps them maintain their financial independence.

There was a learning curve for banks and credit unions after this rule was implemented in 2011. With a few ongoing exceptions, this federal regulation has been a huge success.

The National Credit Union Administration (NCUA) is an independent federal agency that governs credit unions. A senior recently filed a complaint with the NCUA over the actions of his credit union.

The total balance in his checking account when garnished was well under twice the amount of his monthly Social Security electronically deposited. Yet his credit union took money deposited into his checking account that wasn’t from Social Security to pay a garnishment.

They also charged a garnishment fee prohibited by the 2011 rule. Multiple pleas to his credit union about their error were ignored. The NCUA exonerated the credit union from making a mistake simply stating, “Your protected amount over this period was limited to the funds you receive from Social Security.”

The NCUA, the federal agency that oversees America’s credit unions, apparently doesn’t understand what many consider the most important part of the federal rule that protects bank accounts into which Social Security is deposited.

Specifically, the part specifying that the source of other funds in an account are to be disregarded in determining what money in the account is protected. The NCUA didn’t mention 31 CFR 212.5 (d) which states:

“The financial institution shall perform an account review without consideration for any other attributes of the account or the garnishment order, including but not limited to: (1) The presence of other funds, from whatever source, that may be commingled in the account with funds from a benefit payment.

Banks too, foul-up, just not as often

HELPS was contacted by an 87-year-old senior whose Bank of America checking account was recently garnished. He receives around $1600 in Social Security each month.

Bank of America placed a hold on the entire balance in his bank account of $1700. A review required by the rule to determine if Social Security was deposited into his account was never conducted.

The Bank of America simply informed him his account was garnished. All phone calls to Bank of America representatives were answered by persons unaware of the rule and unwilling to help.

HELPS is assisting this senior to file a “challenge to garnishment,” which will eventually release his money. But meanwhile, his rent and other bills are due. This difficulty was exactly what this federal regulation was designed to prevent.

Seniors shouldn’t worry

Banks and credit unions, by and large, now have departments that understand and follow this rule correctly. If there is a mistake by a bank or credit union, it can be corrected.

I tell seniors don’t call your bank manager because they have no idea about this rule. Bank managers shouldn’t feel bad. I would guess that 99,9% of attorneys don’t understand this rule.

Seniors, especially the poor and lower-income, are among the most vulnerable in our society. Violations of this federal rule by those who should know better shouldn’t happen.

Several times a year a small credit union gets this federal regulation wrong and honors a garnishment of an account into which Social Security is deposited.

We’ll reach out to the credit union’s legal counsel, and hopefully, their attorney will get them on the right track.

But I am very worried that after nine years the federal agency that governs credit unions, the NCUA, and a bank like the Bank of America still get this basic banking rule dead wrong.

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About the Author

Eric Olsen

Eric Olsen

Eric Olsen is an attorney with more than forty years of consumer law-related experience. Born and raised in the Pacific Northwest, Eric graduated from the University of Oregon Law School. He founded the area's largest consumer bankruptcy firm and has filed 40,000 bankruptcies. Eric counseled with many lower-income senior citizens during this time. Because their income and assets were protected from collectors, he told them bankruptcy was not necessary. But harassing debt collection calls and intimidating demand letters made their lives miserable. Eric was very familiar with the federal Fair Debt Collection Practices Act. He knew debt collectors could not directly communicate with a person represented by an attorney. There was no national organization representing the specific needs of the 40 million lower-income American seniors. So Eric left the law firm he founded in 2015 and started Help Eliminate Legal Problems for Seniors, HELPS. HELPS is a charitable 501 (c) nonprofit law firm that represents seniors and disabled persons ongoing in all 50 states to prevent unwanted collector contact.

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