The Social Security Administration’s Inspector General concludes in
a recent report that many banks are violating federal law by garnishing
accounts that receive electronic deposits of Social Security benefits.
The practice could imperil millions of low-income seniors and people
with disabilities who rely on Social Security.

When people owe money to credit card companies and other types
of lenders, the creditors often use garnishment as a way of gaining
partial payment of the debt. In order to garnish a debtor’s account, a
creditor must go to court and obtain an order compelling the debtor’s
bank to relinquish a set portion of the account, often on a monthly
basis in accordance with the debtor’s deposits. However, federal law prohibits
garnishment of accounts receiving direct deposit of Social Security
benefits, except in very specific situations, such to collect child
support or unpaid federal taxes.

Unfortunately for many indebted seniors and people with
disabilities, many state courts and most banks are unaware of the
federal law regarding garnishment. Therefore, courts routinely issue,
and banks carry out, garnishments of accounts they have no business
depleting. These accounts often hold the only source of income of a
senior or person with a disability..

After they were alerted to the situation, Sens. Herb Kohl
(D-WI), Max Baucus (D-MT) and Claire McCaskill (D-MO) requested that
the Social Security Administration’s Inspector General investigate. In
a recently released report, the Inspector General found that in a
12-month period, the 12 largest U.S. banks withheld more than $1
million from accounts holding government benefits and no other funds.
The banks also withheld an additional $29 million from accounts holding
benefits mixed with money from other sources.