The nationwide rise in inflation has caused many individuals and families to seek ways to stretch their dollars and protect their finances. With costs soaring, individuals depending on Social Security are worried about their benefits and the risk of being sent to a debt collection agency.
Financial Literacy Month is celebrated annually in April to help consumers understand their personal finances and protect themselves. Managing benefits can seem overwhelming or confusing for individuals relying on Social Security benefits. But knowing what protections are available can mitigate any existing uneasiness. Even though Financial Literacy Month is over, it remains an important topic all year round and one that everyone, particularly Social Security beneficiaries, should be well-versed on.
The Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) is a government agency that assists consumers in understanding finances and protecting them from unfair practices. Founded in 2011, the CFPB enforces laws regarding unfair, deceptive, or abusive acts within financial institutions as well as enforcing laws to protect consumers from discrimination within consumer finance. The CFPB helps reduce exploitative fees charged by banks and financial companies and investigates consumer reports of unfair practices.
The CFPB aims to stop illegal and excessive harassment through debt collection agencies. The Fair Debt Collection Practices Act (FDCPA) is the primary federal law governing debt collection practices. Goals of the CFPB include:
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- Prohibiting collection companies from using abusive, unfair, or deceptive practices to collect debts.
- Preventing and investigating claims of agencies pretending to be law-enforcement officials, government agencies, or court officials.
- Preventing and investigating forms of harassment, including abusive or threatening phone calls, use of obscene or profane language, threats of violence or harm, misidentification or refusing to identify themselves, and publishing lists of those refusing to pay debts.
Debt collection protection
Debt collection can be serious and result in court cases siding against the consumer. In these cases, wages can be garnished and bank accounts frozen until the money is reimbursed. This can be especially concerning for Social Security beneficiaries relying on monthly benefits.
A rule established by the U.S. Department of Treasury provides protects certain federal benefits from garnishment. Two months’ worth of benefits that are direct deposited into a bank account or loaded onto a prepaid card account receive automatic protection under this rule. Benefits that fall under these protections include:
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- Social Security;
- Supplemental Security Income (SSI);
- Veterans, Civil Services Retirement;
- Federal Employee Retirement System; and
- Federal Railroad retirement, unemployment, and sickness.
However, there are exceptions to the garnishment and bank freeze rule. Social Security benefits, including Social Security Disability Insurance (SSDI), can be garnished to pay government debts such as back taxes, federal student loans, and child and spousal support debts. Means-tested benefits such as Supplemental Security Income are protected from government garnishments, including back taxes and child support. In addition, benefits received via paycheck are not automatically protected and may require a court order to ensure they are protected.
Protecting yourself
The CFPB provides consumers with the means to report problems with financial products or services, especially if there is a concern for discrimination or harassment through those services. Reporting can be done online at the CFPB’s website anytime or over the phone if additional assistance is required. Resources are also available for consumers in a wide variety of subjects, including personal finance education.
Being aware and financially literate is nothing something that should only occur each year during Financial Literacy Month. It is important to prepare yourself with resources to help protect yourself should something happen and you suddenly lose income or face debt collection. For more information, we encourage you to take advantage of the resources provided by the CFPB and reach out to your local Social Security office for specific information on your individual benefits.
Nothing herein is considered legal advice. Nothing in this post is intended as advice or a suggestion to elect or not elect to claim benefits of any kind, including Social Security benefits, nor is it intended as financial advice in any way. The decision to claim benefits is a personal one that is contingent upon each individual’s unique circumstances.
