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#84870 - 06/03/03 06:35 PM Use of Social Security Funds

We have a customer whose income is derived from the government: social security and disability. He also has a loan and has authorized bank to debit deposit account for loan payment. Is this legal?

We have an officer who believes that the bank cannot offset deposit account if funds are government funds. Officer also believes that owner of fund cannot authorize automatic payment from government funds.

Any help is appreciated.

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Operations Compliance
#84871 - 06/03/03 07:43 PM Re: Use of Social Security Funds

The Social Security Act, at 42 U.S.C. § 407(a), provides in part:
“The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment or other legal process, or to the operation of any bankruptcy or insolvency law.”

I would presume that if the authority is received from the borrower, it should not be a problem but once a default is established there may be no recourse.

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#84872 - 06/03/03 07:46 PM Re: Use of Social Security Funds
Alien Offline
Platinum Poster
Joined: Dec 2002
Posts: 862
Check out Lopez vs Washington Mutual Bank case
If you have enough, would you know?

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#84873 - 06/03/03 07:53 PM Re: Use of Social Security Funds
rlcarey Offline
10K Club
Joined: Jul 2001
Posts: 79,368
Galveston, TX
Don't confuse the offsetting of funds with an express agreement to pay funds by the customer.
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#84874 - 06/03/03 08:40 PM Re: Use of Social Security Funds
Princess Romeo Offline

Power Poster
Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
I think it helps if you consider why the law was put there in the first place.

I believe the desire was to protect the elderly and infirmed from having their government benefits stipped away by a process over which they have little control.

I don't believe the desire was to enact the following scenario:

I'm sorry Mrs. Smith. While I realize you're 83 years old, have very poor eyesight, and suffer from arthritis, I'm going to have to instist that you write us a check every month. You are not allowed to authorize automatic payments.
Regulations are a poor substitute for ethics.
Just sayin'

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#84875 - 06/03/03 08:58 PM Re: Use of Social Security Funds

My thoughts exactly!

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#84876 - 06/04/03 12:28 PM Re: Use of Social Security Funds
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Ditto rlcarey. The prohibition against the bank's offsetting these funds is not intended to limit the customer's decisions as to how they are to be used.
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

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