May 20, 2009

Shutting Down A Scam

From Emergency Message EM 09039, issued on May 15:
The Federal Deposit Insurance Corporation (FDIC) has advised SSA of an order against the Bank of Agriculture and Commerce in Stockton, CA to “cease and desist” their alleged unsafe and unsound bank practices involving Social Security and Supplemental Security Income (SSI) benefit payments.

The FDIC’s investigation uncovered that the Bank of Agriculture and Commerce maintained a relationship with a third party, Petz Enterprises, Inc. (PEI), to solicit SSA/SSI beneficiaries for direct deposit of their payments and to deposit the benefits into a master account in the name of PEI. PEI, in turn, contracted out with check cashers, payday lenders, and retail merchants to enroll beneficiaries in their direct deposit program and disburse payments to the beneficiaries using questionable practices.

The investigation discovered instances where these check cashers; payday lenders and small retail merchants withheld the whole amount or a significant amount of the beneficiary’s benefit payment (e.g., transaction fees, cashing fees, short-term loans, and financing secured by upcoming benefit payments, repayment of loans, etc.) These practices left some beneficiaries in need of further short-term loans in order to meet their basic living expenses. ...

In response to the order to cease and desist, the Bank, FDIC, and SSA are working closely to inform the affected individuals of the need to make alternative payment arrangements by August 1, 2009 for receipt of future benefit payments.

When will Social Security shut down Allsup's similar arrangement?


Anonymous said...

Master and sub accounts are specifically allowed in the deposit regulations that are used for proper title of a bank account for a SSA deposit. It was the improper relationship between PEI and the bank that the FDIC investigated. Its not the deposits to the accounts that were the error its the ability to withdraw at these PEI check cashing branches that abuse processing fees that FDIC has issue with.

Clausewitz said...
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