Complaint Review: U.S. BANK

The Office of the Comptroller of the Currency (OCC) sided with Bank of Americas ability to honor overdraft fees in the event of insufficient funds. They claimed that banks can do this without infringing upon 12 United States Code section 24, par. Seventh, or 12 Code of Federal Regulations part 7.4002 or 7.4007 (2009). (Letter, at p. 1). Overdraft fees are considered account maintenance, rather than creating a debt that the bank later collects.

Looks like someone gave an order to invent a reason to reverse this decision.

                                READ THAT LAST PART AGAIN!!

        Overdraft fees are considered account maintenance

rather than creating a debt that the bank later collects

Does being a recieptient mean we are also expected to be incompetent?

The fact is that the process of over drafting a bank account undeniable entails creating a debt that the bank later collects

The bank has simply labeled overdraft fees account maintenance to distract from the truth that it is actually creating a debt that it later collects because creating a debt that it later collected would be illegal under section 207.

__________________________________________________________________________________________________________________________________________________________      

Now read through this information and see if you agree that this application of

section 207 should probably be reconsidered in some higher Court

  Testimony before the

Subcommittee on Social Security

Committee on Ways and Means

                                               U.S. House of Representatives

                                        Protecting Social Security Benefits

From Predatory Lending and

Other Harmful Financial Institution Practices

National ConsumerLawCenter and

The Consumer Federation of America

Consumers Union

National Association of Consumer Advocates

National Legal Aid & Defender Association

National SeniorCitizensLawCenter

U. S. Public Interest Group

Consumer Federation of America2

Consumers Union3

National Association of Consumer Advocates4

National Legal Aid and Defender Association5

National Senior Citizens Law Center6

U.S. Public Interest Research Group.7

Community Justice Project of Harrisburg, Pennsylvania

Coordinated Advice & Referral Program for Legal Services of Cook County, Illinois

EmpireJusticeCenter of Albany, New York

Jacksonville Area Legal Aid of Jacksonville, Florida

Legal Aid Society of Minneapolis, Minnesota

Legal Aid Society of RoanokeValley of Roanoke, Virginia

LegalAdvocacyCenter of Central Florida, Inc of Sanford, Florida

Legal Assistance Foundation of Chicago

Legal Services of New Jersey of Edison, New Jersey

MFY Legal Services of New York, New York

MississippiCenter for Justice of Jackson, Mississippi

MountainState Justice of Charleston, West Virginia

Neighborhood Economic Development Advocacy Project (NEDAP) of New York, New York

NorthCarolina JusticeCenter of Raleigh, North Carolina

St. John'sUniversitySchool of Law Elder Law Clinic of Queens, New York

VirginiaPovertyLawCenter of Richmond, Virginia

Washoe Legal Services of Reno, Nevada

Thats a lot of legal people, so lets see what this has to say.

The Problem Recipients Starve as Debt Collectors Claim Exempt Funds

Dont worry; there is apparently no danger of recipients starving as long as the exempt funds that debt collectors claim are internal. WTF??

Is there possibly a bit of a problem with the banks integrity when it comes to understanding the intention of a law that would prohibit them from raping 38 billion dollars a year from the very poorest of people.

The Law Exempt Benefits Must Be Protected.

The law could not be clearer. To preserve federal benefits for their intended recipients, Congress

provided that the benefits cannot be seized to pay debts, as such seizures would result in the loss of

subsistence funds. Each of the statutes governing the distribution of these funds specifically articulates that these funds are to be free from attachment or garnishment or other legal process.

Here again it says attachment or garnishment or other legal process.

And here again, It simply does not say, except for those that are internal

The Social Security Act specifically says:

The right of any person to any future payment under this subchapter shall

not be transferable or assignable, at law or in equity, and none of the

moneys paid or payable or rights existing under this subchapter shall be

subject to execution, levy, attachment, garnishment, or other legal

process, or to the operation of any bankruptcy or insolvency law.10

(Emphasis added.)

What words could be used to make these protections any clearer? The words in these statutes apply as against all parties creditors, judgment creditors, debt collectors, and banks.

Note the words And banks

 This nations courts have consistently said that exemptions are to be liberally construed in favor of the debtor.11

This point alone should really be enough to stifle the argument. 

The United States Supreme Court has repeatedly reiterated that Social Security,12 and Veterans Benefits13 are protected from attachment and garnishment. The protections in these federal statutes explicitly apply to benefits that are paid and payable, thus making the benefits exempt both before and after payment to the beneficiary,14 regardless of whether the creditor is a state or a private entity.15

The Policy Exempt Benefits Must Be Protected.

Social Security benefits, SSI benefits, Veterans benefits, Railroad Retirement benefits, were all

intended by Congress to be used exclusively for the benefit of recipients to ensure a minimum subsistence income to workers, the elderly, and the disabled.

Now this is important. Note the phrase intended by Congress.

To preserve these benefits for recipients, Congress provided that the benefits cannot be seized to pay pre-existing debts, as such seizures would result in the loss of subsistence funds. Each of the statutes governing the distribution of these funds specifically articulates that these funds are to be free from attachment or garnishment or other legal process. The courts processing the competing interests of the creditors, debtors and banks have repeatedly articulated the underlying reasons for these protections: (1) to provide the debtor with enough money to survive; (2) to protect the debtors dignity; (3) to afford a means of financial rehabilitation; (4) to protect the family unit from impoverishment; and (5) to spread the burden of a debtors support from society to his creditors.2

Do you believe the court of appeals decision to reverse the Miller ruling was unjustified?

It is time we petition our senators and congressmen.

This really all comes down to just one basic question.

Are the laws governing the banks or are the banks governing the laws?

Here are a few more points of argument from another case.

MICHAEL DALY HAWKINS, Circuit Judge.

4

We must decide whether the statutory protections afforded Social Security and Supplemental Security Income ("SSI") beneficiaries are offended by a bank's practice of using directly deposited Social Security and SSI benefits to cover overdrafts and overdraft fees.

Read that again carefully, it is important to clearly understand what is being said.

In short it says; we must decide if the banks practice offends the statutory protections.

The point to be realized is that we are trying to decide if the bank is offending the law not if the law is offending the bank.

15

In light of these precedents, plaintiffs contend that Washington Mutual's overdraft practices constitute a seizure of protected benefits by "other legal process." By paying the plaintiffs' checks when there were insufficient funds in the accounts, they argue, the bank essentially extended a loan to the plaintiffs and became a creditor. Washington Mutual then used a self-help equitable remedy to recoup the plaintiffs' debt to the bank. However, even if Washington Mutual's actions in applying the deposit to the account deficit can be construed as some type of legal or equitable action, we agree with the district court that no violation of Section 407(a) occurred in this case because there is simply no indication that the plaintiffs did not voluntarily agree to apply their SSI benefits in such a fashion See Crawford, 56 F.3d at 1167 (distinguishing Fetterusso, 898 F.2d at 328, because in Fetterusso there was no basis for concluding the patients did not voluntarily agree to use SSI benefits to pay care and treatment costs).

We are talking about direct deposit accounts, a practice which Congress has clearly advocated for SSI recipients. See 31 U.S.C. 3332, the recipients never have the money in their hands before the bank takes it therefore there is no point in which they can object. There is simply no affirmative and unequivocal consent.

16

In this case, the plaintiffs voluntarily opened an account with the bank and executed an account holder agreement which outlined the terms and conditions of the bank's overdraft policies. They also established a direct deposit for their benefits (an agreement to which Washington Mutual was not a party). The plaintiffs remained free at all times to close their account or change their direct deposit instructions. Because they did not do so, Washington Mutual argues, each deposit to the account after an overdraft should be treated as a voluntary payment of a debt incurred. We agree.

To say recipients are voluntarily paying overdrafts with each consecutive directly deposited check is a distortion of the truth. It would take anywhere from 2 weeks to a month to stop the direct deposit process so it simply would not be an effective way to prohibit the banks from garnishing the incoming funds.

This is like suggesting that people are getting their electricity shut off in the middle of the winter because they voluntarily chose not to pay their bill when the truth is that they simply do not or did not have enough money. These points completely deny the reality of poverty that exists with recipients.

One can always opt to live without a direct deposit bank account in the same sense that they can elect to live without electricity but doing so is really not so feasible in todays society especially for those who can already be recognized as disadvantaged by age, accident or illness.

17

The plaintiffs, however, argue that a more explicit consent is required under Crawford. In Crawford, we noted that California failed to obtain a "meaningful consent" from patients before deducting the cost of care from their Social Security benefits. 56 F.3d at 1165. We went on to affirm the district court's order that required the state to notify patients that the benefits "are exempt from legal process and cannot be used to pay the plaintiff's cost of care without the patient's knowing, affirmative and unequivocal consent." Id. at 1167.

18

We do not believe Crawford controls the free market banking arrangement present in this case. Several unique concerns were present in Crawford, in that the plaintiffs were involuntarily committed and not free to terminate their dealings with the state, incompetent to handle their personal affairs, statutorily obligated to reimburse the state for the cost of their care and required by state law to deposit all of their funds into the hospital trust accounts. Id. at 1164. In sharp contrast, the plaintiffs here voluntarily opened their accounts and made arrangements to have their SSI benefits deposited to such accounts. Unlike the mental patients who statutorily incurred debt to the state for their care, the plaintiffs here were not forced to incur overdrafts. Two of the named plaintiffs indicated that they understood the bank's overdraft policies and fully expected that their next deposit of SSI benefits would cover those costs. The plaintiffs also remained free to close their accounts or change their direct deposit instructions, and were therefore able to remove their benefits from the bank's reach if they so desired.

Here again it should be realized that generally speaking recipients overdraft for the very same reason they get their power turned off. To imply that such actions are voluntary because some one is aware again seems a distortion of truth. I would suspect that most people who are broke have some sense of that reality. What do we imagine statistics would show as the primary reason if we polled those with overdrawn accounts and or those with utilities that had been shut off? For those on subsistence funds it is continually a month to month challenge just to survive independently. We may very well know if we overdraft our accounts we have to pay a fine out of our next check but that does not mean we dont still have to figure out how to eat or stay warm today

Unfortunately overdraft policies are not much different from one bank to another and we can expect most recipients are not so likely afforded the luxury of excessive mobility and so will probably stay with what ever bank is the closest or handiest. Again for those surviving on subsistence funds the bank is there only for the purpose of convenient check cashing and funds availability not loans or credit. The only credit people this poor are offered is in the predatory extension of small overdrafts that result in the outlandishly disproportionate fees that are then garnished from the next direct deposit. Likely a more perfect example of the need or a reason for section 207 does not exist.

19

Moreover, the court in Crawford noted that the state had been deducting the cost of care from patients' accounts regardless of whether they had authorized the deduction, believing that under state law, the patients lacked the ability to refuse. Id. at 1165-66. It then affirmed the district court's order which enjoined the hospital from making further withdrawals without notifying the patient that the benefits are exempt from legal process and obtaining the patient's "knowing, affirmative and unequivocal" consent. Id. at 1167. It did not, however, hold that this standard is required in all circumstances when dealing with SSI recipients. Indeed, as Washington Mutual points out, numerous creditors, such as landlords, grocers, etc., are paid daily with Social Security benefits without giving explicit notice to the recipient that such benefits are exempt from legal process or requiring explicit consent by the recipient. For example, we cannot imagine that it would be acceptable for the SSI recipient to write his landlord a paper check each month on an account that contains SSI benefits, but unacceptable for him to establish an automatic deduction from his account for the same expense without receiving express notice that the benefits are exempt from legal process. Such a requirement would ignore the reality of modern banking, which is increasingly paperless.

Are the laws governing the banks or are the banks governing the laws?

so, too, we believe that precluding automatic payments of overdrafts from directly deposited SSI benefits on these facts would impose an unnecessary hurdle on direct deposits, a practice which Congress has clearly advocated for SSI recipients. See 31 U.S.C. 3332. In our view, it is sufficient and "meaningful" consent for the recipient to have executed the account agreement which notified him of the bank's standard practice of using deposits to cure overdrafts and then to have provided the bank with a deposit to apply in such fashion.

In a sense what they are saying because the banks are doing it and the recipients are going along with it it must be legal.

If a person had been shoplifting at the same store for years before the store caught them and then filed charges could it then be argued that there was simply no indication that the store did not voluntarily agree to allow the activity. It is likely that only a small percentage of SS recipients are even aware that these laws exist.

To say that there is no indication that the plaintiffs did not voluntarily agree to apply their benefits in such a fashion denies the very existence of this and other class action cases.

Last but not least these arguments should really end right back at the very point where they started. Remember that the point of this case was to decide whether the statutory protections are offended by the banks practice. The reality is that the banks arguments are based on their alleged agreements with the recipient. Now then should any such agreement actually even exist by way of anything from a signed contract to the lack of a protest by the recipients it is all really completely irrelevant. The agreement that the bank continually refers to is the one between the bank and the customer. What we are evaluating is between the banks practice and the current law.

        The banks want to keep everyone distracted from their own avoidance and/or ignorance of the law by keeping the focus on the actions of the recipients. The recipients, however, are not the one on trial, the bank is. The bottom line is that the recipient had or has no legal authority to exclude the banks practices from the existing laws.

        Would it be legal for the banks to break the arms of recipients for making an error just because they somehow got them to agree to those terms? Such a contract would clearly be illegal. So why would it, or should it, be legal for banks to profit by taking money from the ill, elderly or disabled just because they have made an error.

Over