Congressional Hearing On Predatory Lending Practices

The House Social Security Subcommittee is holding a hearing today on "Protecting Social Security Beneficiaries from Predatory Lending and Other Harmful Financial Institution Practices." The written statements of the witnesses are now available online. This excerpt from the testimony of Margot Saunders of the National Consumer Law Center may tell us what is in the works:

We understand that as the result of extensive discussions and negotiations between Treasury and the Social Security Administration, the other federal payment agencies, and the federal banking agencies,that a compromise regulation will be proposed in the near future. Our understanding of this compromise is that it will incorporate at least the following features:

Upon receiving an order to freeze a bank account pursuant to a garnishment or attachment, a bank will –

1. Review the electronic deposits made into the account in the previous 30 to 45 days (called the “look-back period”), to determine whether any are accompanied with the electronic designation for federally exempt funds.
2. If there are any exempt funds deposited into the account, then the total amount of exempt funds deposited within the look-back period will be multiplied by a factor (either 2 or 2.5, or some other number to be determined – this is called the “multiplier”).
3. The multiplied sum of exempt funds will be considered the protected amount – this amount of money will always be kept safe from freezing or attachment or garnishment, regardless of the flow of money into and out of the account.
4. Funds in the account which are in excess of the multiplied sum will be frozen and held pursuant to state law for disposition.
5. The recipient will be free to seek to protect all exempt funds over the protected amount using the standard state court procedure.
6. No garnishment fees assessed by the bank can be taken from the protected amount.