Creditors unlawfully prey on seniors' Social Security benefits

Although it's illegal for creditors to garnish Social Security benefits, more and more seniors today are being guilted by debt collectors to tap their fixed assets for often old or written-off credit card, store and other accounts, senior advocates say.

Meanwhile banks, in response to court ordered judgments, continue to freeze accounts containing exempted funds — a hardship some believe will be exacerbated with the looming mandate of paperless Social Security benefits.

"Creditors and debt collectors are more aggressive today than ever,” said Richard Goralewicz, an attorney with the senior division of Legal Aid Services of Oklahoma Inc. "And a lot of older people, whose generation feels it's important to pay their bills, unnecessarily will forgo prescriptions and groceries or let their rent lapse to make payments.”

Goralewicz cautions seniors never to pay a debt before basic needs because of debt collection calls or threats to sue.

"Federal and state law provide certain safety nets so those who become unable to pay their debts, don't unduly suffer,” he said.

In Oklahoma, a creditor with a court order to collect cannot touch most pensions or take consumers' homes unless they don't pay their mortgages, Goralewicz said. The protections, he said, date to statehood when the homestead, one gun, 20 chickens, a milked cow and other property were exempted.

"The idea was to leave a minimum subsistence so a family could survive and stay off the state welfare rolls,” he said.

Laws not followed

Still, many seniors are unaware of the exemptions, Goralewicz said, and the burden is on them to raise the issue. Consequently, banks, when presented with creditors' garnishment orders, automatically may freeze accounts bearing Social Security benefits, and by the time seniors file exemptions at the county courthouse and their cases are heard, it can be five to 10 days before they have access to essential funds.

According to a 2008 study by the U.S. Inspector General, illegal garnishments occur at about 70 percent of banks nationwide and account for an estimated $178 million each year.

Larry Jones, public affairs specialist with the Social Security Administration in Oklahoma City, has seen it happen in his own family. His mother-in-law's account was frozen by creditors of her daughter, who was a co-signer on the account.

Among Social Security beneficiaries, two-thirds count on their monthly benefit, which nationwide averages a little over $1,000 a month, for more than half of their income, Jones said. One-third — including Jones' mother-in-law — look to it for 90 percent or more.

Beginning soon, beneficiaries will be required to accept payments only by direct deposit, a mandate some believe will worsen unlawful garnishments. New enrollees must switch to electronic deposits March 1 and existing recipients, two years later.

It costs the administration 97 cents to send checks, compared with 7 cents for electronic deposits. The savings will amount to more than $100 million a year, Jones said.

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