Gordon Bill to Protect Social Security and Veterans Benefits

July 30, 2009, WASHINGTON, D.C. – Congressman Bart Gordon has introduced legislation aimed at protecting the bank accounts of Americans receiving Social Security, Supplemental Security Income (SSI) and Veterans benefits.  Federal law prevents these benefit payments, which are the sole source of income for many seniors and veterans, from being seized by creditors to pay past-due debt.  However, a loophole has enabled creditors to obtain these funds when directly deposited into a beneficiary’s bank account.  

“The Treasury Department is spending $50 million a year encouraging seniors, veterans and the disabled, who rely on government assistance, to sign up for direct deposit payments,” explained Gordon.  “At the same time, financial institutions are being forced by creditors to freeze the bank accounts of beneficiaries, preventing them from accessing their money."

Since 2007, the U.S. Treasury Department has been drafting regulations to close this loophole and prohibit the freezing of accounts that contain these direct deposit benefit payments.  However, the rules have yet to be formalized – a process that could take a year or longer.  Gordon’s legislation, the Illegal Garnishment Prevention Act (H.R. 3366), would prohibit the Treasury Department from using funds to promote the use of direct deposit among Social Security, SSI and Veterans beneficiaries until the Department implements regulations protecting their bank accounts.

“According to a recent report, from 2006-2007, more than $170 million was seized from bank accounts that included Social Security benefits and other deposits,” said Gordon.  “When these bank accounts are frozen, millions are left with nothing to pay their day-to-day living expenses.  The Treasury Department shouldn’t be promoting direct deposit payments until financial institutions and creditors are prohibited from seizing benefit payments.”

A companion-version of Gordon’s bill has been introduced in the U.S. Senate by Senator Herb Kohl.  Gordon is committed to working with his House and Senate colleagues to see that regulations protecting the funds of Social Security, SSI and Veterans beneficiaries are implemented as soon as possible.