social security debit card

[junker]

i recently read that social security is going to be offering prepaid debit cards in lieu of paper checks for those that dont have a bank acct, will these be safe from garnishment or freezing acct from judgements? they will be issued by a bank. but since its not a bank acct can someone with a judgement try to attach it, even though social security is exempt from what i understand.

[WhatMoney]

http://www.fms.treas.gov/directexpresscard/index.html

and

http://www.directexpress.org/partner...tners_faqs.cfm

And directly from the Direct Express Terms Of Use we find this:

6. Legal process. We may comply with any subpoena, levy or other legal process which we believe in good faith is valid. Unless the law prohibits us, we may notify you of such process by telephone, electronically or in writing. If we are not fully reimbursed for our record search, photocopying and handling costs by the party that served the process, we may charge those costs to your Card Account. We may honor legal process that is served in any manner at any of our offices, including locations other than where the funds or records sought are held, even if the law requires personal delivery at a different location.

https://www.usdirectexpress.com/edcf...docs/terms.pdf

The critical phrase here is "We may comply with any subpoena, levy or other legal process which we believe in good faith is valid". Is the levy of exempt funds valid? It's up to the bank. However practically the levy would need to be redomesticated at an office of the Comerica Bank, wherever they may be (Texas, Michigan, Florida, Illinois, Calif, Arizona), before it could be legally served. And then the bank "should" reject it unless the levy was from a government agency. You could also call Customer Service: 1-888-741-1115, and ask them. Ha ha, sorry the chances of any CS line knowing about legal affairs is slim to none. They will tell you to ask your attorney.

Anyway it would be a good test case for some idiot collection attorney to try and levy an account like this - the judge would have a field day.

.

[magyar123]

Comerica - the outfit that these debit cards are processed through, would have the records indicating that it is only SS funds going into that account, and could tell collection agencies to stick their attempts to levy up where the sun don't shine.

[AngelinaCat]

You could also call Customer Service: 1-888-741-1115, and ask them. Ha ha, sorry the chances of any CS line knowing about legal affairs is slim to none. They will tell you to ask your attorney.

.

And the majority of cutomer services are housed in call centers in third world countries, where English is a secoond language. And the agency they are supposedly giving service for are clients that pay them on the volume of call the take, not quality of service. Clark Howard refers to them as "Customer NO-Service."

[treehugger1]

I've posted on "debit cards" before. There are literally dozens, maybe hundreds, of prepaid debit cards out on the market today; WalMart, Western union, most banks, other private companies, etc. I think even VISA itself has some prepaid lines. A colleague of mine was just explaining something called Visa ReadyLink. Somehow, you can get debit cards that can be loaded by going to pharmacies, grocery stores, etc and wiping the card, and for fees of $2 - $5, you can load several thousand dollars onto the card. (I'm going to google this later and see how the system works.) While most of them are FDIC insured, the majority do not constitute a "bank" account as defined under various federal and state laws. They even have disclaimers stating they are not bank accounts. How can they be FDIC insured? I don't know, but...

Somehow the direct deposit (government agency, employer, individual, etc) has to go through a routing number and account number before the money is assigned to your card. As such, there are banks who "underwrite" the transfer, thus the FDIC backing, I presume. Now, once the money is assigned to your card number (a matter of hours, perhaps) does the money officially reside in YOUR "bank account." I would venture a guess that it does not. If not, it would be incredibly hard for anyone to ever seize the funds.

I have no reliable sources as to how the prepaid debit card system works, but I'll hazzard a guess! There is ONE routing number and ONE account. The single account has thousands of prepaid card numbers assigned to it. When you access your funds, you access through your card number, but the funds are removed from the general larger account that perhaps belongs to "thousands of folks." This would make it potentially lucrative for the "bank" holding the funds (collecting small percentages on interest and short-term investments every 24 hours or so,) and the modern techno systems can easily keep track of how much money is available to each card on the account. In terms of YOU having a bank account, well its probably true that you do not technically have a bank account. But, the money being on deposit at a FDIC insured banking institution is indeed secure.

Any other thoughts as to how these major prepaid debit card systems work?

Hey, I'm just guessing. The pre-paid debit card industry appears to be growing very quickly, as folks begin to see them as the modern version of "cash only."

Here is the new question related to the debit-card accounts. Suppose you owe child support, alimony, etc. You are called into court for an interogatory and asked for your bank accounts. Does your pre-paid debit card constitute a bank account under the law? While having cash available on the card might constitute an "asset," it is clearly stated on the pre-paid debit card agreement that this is not a bank account. I don't know how the SS system will work, but I will guess that there is a disclaimer that your account is not a bank account. If not, how could money be seized?

[treehugger1]

Here is a link describing the VISA ReadyLink

http://usa.visa.com/personal/cards/prepaid/readylink_card_faq.html?it=l2|/personal/cards/prepaid/readylink_card.html|FAQ

VISA is not a "bank," so somehow, somewhere, money put on these cards (swipe and load, direct deposit, etc) has to pass through a banking institution. Or, perhaps it does not need to. Hopefully, someon with banking/finance experience can add comments. Indeed, since you are not given a bank account with the new SS system, how could there be an account to seize? I sure don't know, but maybe others do.

[WhatMoney]

I don't know the details either treelover (sic), but all a levy needs is your name and possibly your SSN.

Let's say you were asked to provide all your accounts, and you had a PayPal account with a debit card. You would need to supply your name and e-mail for that account. From that info on the levy, what is to prevent PayPal from freezing your funds when served with the levy? PayPal freezes funds all the time for purchases and disputes. All they need is your e-mail address to do so.

I have a feeling that these debit card accounts are not that hard to freeze, IF the collector knows about them. And if you give the judgment holder your debit card number and name on an interrogation, what is going to stop them from finding and serving the Bank handling the debit account?

I've yet to hear of anyones debit card or PP account being frozen from a levy on the internet grapevine. But I'm sure the collectors are thinking about it.

[BigJohn]

If you pay a bill with a debit card, I assume the creditor knows about the debit card.

Where I live, a company that managed a large number of people's Social Security accounts, disappeared right after the people's money was deposited into his account. I figure he got about 2/3 million to one million dollars.

[treehugger1]

Whatmoney, Treehugger here ( I was a logger for 18 years and worked for some of the largest gypo companies in Oregon until the "writing was on the wall," LOL.) In terms of debit-card accounts, Oregon does not recoginze these non-bank accounts as bank accounts. In fact, Oregon is a state that will not allow WalMart to offer their pre-paid debit card accounts to its citizens.

I do wonder what constitutes cash, passbook accounts, etc. when it comes to prepaid debit accounts. For instance, suppose you were served with an interrogation asking for current assets and you had zero balances on 6 - 10 prepaid debit cards. Since you signed a "contract" that you understood that such accounts did not constitute a bank account, they are for practical purposes "cash" accounts. Under contract, I would assume one would not state these as bank accounts.

While I know little about PayPal, I have heard that PayPal shares far too much info with others to ever think of having an account with them. But, there are other hundreds of options that might be better for protecting exempt funds. There are plenty of banks that offer prepaid VISA cards that hold $2500 to $5000. Their expiration dates can be 2 - 5 years. Their is little info related to SSN or other personal info when acquiring these. While these are assets under interrogation, it takes little time to drive the balances to zero, and if all you have are exempt funds, then any interrogatory is a mute point.

As you've mentioned before, in our state a bank levy is a one time shot, unless the garnishor is willing to continue to pay for writs. I can't imagine a creditor/CA will continue to garnish accounts with nothing in them. What's the point?

[WhatMoney]

PayPal does not require your SSN to open an account with a debit/MC card. They do need an open checking account to verify, and to ACH transfer money in and out. The only paper trail to PP is through your checking account. My mother has a PP account open in her name, her address in another city, and her e-mail address, linked to only a checking account in her name. I do happen to have a debit card for her account, in a name, as a second user. Would I consider this account my reportable asset? No way!

I think the requirement to serve the levy in the county where the assets are actually located is the real barrier to going after the debit/cash cards. If your debit card is with a bank or processor in another state, then to execute a judgment the collector first has to domesticate the judgment in the state where your assets are located. For example with PP that is Nebraska or California. Then, after fees, paperwork, and mailing expenses to get the judgment domesticated in the new state, the collector needs to hire an attorney in the new state to obtain a garnishment order for levy of the account in the county of the institution the funds are located.

Then they need to hire the Sheriff to serve it to the headquarters of the new bank. And if it is an indirect account with no personal account number, they can only hope it will be honored. I think it is the extra mechanics of levying out of state funds that is making this a rare event, so far.

[GoingDown]

It is rather unlikely that a debt collector will even bother trying to levy a Social Security debit card because it would cost them money to hire an attorney and a sheriff to process the levy, and in the end, they know that they would just have to give the money back plus pay the debtor's court costs when they file an exemption claim to get their money back. Social Security is exempt from consumer judgment creditors, so they would have to be really stupid and willing to lose money in the form of attorney's fees, court costs, sheriff's fees, and perhaps punitive damages paid to the debtor for violating the federal and state laws which clearly say that Social Security is exempt from ordinary consumer judgment creditors-- such as credit card companies, etc.

So, stop worrying about stuff like that.

They don't want to lose money.