How Some Credit Unions Continue to Harm Seniors

Many seniors do their banking with a credit union. They like the personal attention a credit union provides, and they might like that they are a “member” of the credit union. Sometimes the fees are less at a credit union. For the most part, credit unions do a good job. However, there is one area in which credit unions often fail their senior customers.

Federal law protects Social Security from collections, but before 2013, Social Security was sometimes garnished after it was deposited in a bank or credit union account. No one told seniors this money was protected or how to get it released. Because of this, lawmakers implemented rules to automatically protect Social Security and certain other federal funds deposited into a bank account. The law instructs banks and credit unions that when they receive a garnishment notice, they must first identify the source of funds in an account. If the account receives federal deposits (like Social Security), the banks and credit unions must protect an amount equaling twice the monthly federal benefit – no matter the source of other funds in the account.

So, if a senior received $1000 in Social Security electronically deposited each month, $2000 was protected from garnishment even if other funds were in the account. A senior whose account contained more than twice the monthly sum could still file a challenge to garnishment with the court to release any excess Social Security or other exempt monies. But twice the monthly Social Security sum was automatically protected by the bank.

This rule shifted the burden to protect Social Security onto banks and credit unions. It has been an enormous help to seniors with financial problems who now can rely on their bank to protect twice their monthly Social Security deposit. Banks don’t have difficulty understanding and following these rules.

However, credit unions are a different story. After nearly eight years, too many credit unions are incorrectly honoring garnishments of accounts containing Social Security.

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For example, here is a recent notice the collection manager of a large credit union in Georgia sent to an elderly widow:

“Enclosed please find a copy of a garnishment…Unfortunately, we are required to hold any funds in your account up to $1745.90…. At this time there is $973.02 in your account of which only $272.04 appears not to be Social Security Funds. Any deposits going into this accounts (sic) for the next 5 days, that is not Social Security funds will also be subject to the hold up to $1745.90.”

This senior had $1500 in Social Security deposited into her account each month, so $3000 should have been automatically protected by her credit union under this federal rule. The credit union sent a confusing, incorrect letter telling her that the $272.04 that wasn’t from Social Security was subject to garnishment.

This Georgia senior contacted HELPS. We explained to her how her Social Security was protected and available for her needs. We wrote her credit union and advised them of the law. We included a copy of the instructions sent back in 2013 to credit unions from the National Credit Union Administration describing the rule. Belatedly, they corrected their error and didn’t honor the garnishment. But this is something that should not have happened in the first place.

While most credit unions get it right, HELPS is regularly contacted by seniors whose credit union doesn’t follow this rule. Seniors at risk for garnishment generally receive lower incomes. They are vulnerable and trust their credit union to follow the law. If the banks can get this right, all credit unions should too.

Eric Olsen, Executive Director HELPS Nonprofit Law Firm. HELPS assists seniors with debt.We protect seniors from unwanted debt collector contact. We also educate seniors about their financial rights, including how their Social Security and other retirement income are protected from collectors and available for their needs. We help many seniors who bank with a credit union, so we have seen firsthand the difficulties seniors face when their credit unions don’t follow the law. Learn more about HELPS at www.helpsishere.org or call HELPS toll-free at 855-435-7787.
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