Consumer Law

Important New Treasury Rule Protects Social Security, Other Federal Benefits in Bank Accounts

By Jon Sheldon

by Jon Sheldon

An extremely important federal rule issued today (76 Fed. Reg. 9939) strengthens protections for Social Security and other federal benefits deposited in consumers' bank accounts. The ?interim final? rule, which will take effect on May 1 but is still open for public comment, will limit creditors? ability to freeze and take funds from accounts that contain Social Security, Supplemental Security Income (SSI), VA and other federal benefits.

Federal law makes these funds immune from seizure by creditors. But in practice creditors frequently obtain court garnishment orders and banks then freeze bank accounts containing protected funds. A beneficiary may be unable to access urgently needed funds for weeks or months. Often, the paperwork and procedures needed to end an illegal freeze prove too daunting for a recipient, so that a bank turns over supposedly ?untouchable? funds to a creditor. The new rule requires all banks to determine whether an account contains protected funds. If so, the bank is required to protect two months of benefit payments from garnishment or even from a temporary freeze.

Comments on the new rule may be filed by May 24, 2011, by going to www.regulations.gov and entering ?3206-AM17? in the keyword field. The NCLC contact on this rule is Margot Saunders, (202) 452 6252 x 104; (304) 553 1123 (cell phone); msaunders@nclc.org.

Full post as published by CL&P Blog on February 23, 2011 (boomark / email).