[Federal Register Volume 73, Number 77 (Monday, April 21, 2008)]
[Notices]
[Pages 21403-21405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-8576]
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SOCIAL SECURITY ADMINISTRATION
[Docket No. SSA 2008-0023]
Use of Master and Sub Accounts and Other Account Arrangements for
the Payment of Benefits
AGENCY: Social Security Administration (SSA).
ACTION: Notice of request for comments.
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SUMMARY: We are issuing this notice to obtain public input regarding an
anticipated change to an Agency payment procedure that permits benefit
payments to be deposited into a third-party's ``master'' account when
the third party maintains separate ``sub'' accounts for individual
beneficiaries. We anticipate changing our current procedure in light of
concerns about how high-interest lenders are using this master/sub
account procedure. We are also seeking comments on the practice that
some beneficiaries follow of preauthorizing their banks to transfer
their benefits to lenders immediately after the benefits are deposited
into their accounts.
DATES: To be sure that your comments are considered, we must receive
them by June 20, 2008.
ADDRESSES: You may submit comments by any one of four methods--
Internet, facsimile, regular mail, or hand-delivery. Commenters should
not submit the same comments multiple times or by more than one method.
Regardless of which of the following methods you choose, please state
that your comments refer to Docket No. SSA-2008-0023 to ensure that we
can associate your comments with the correct regulation:
1. Federal eRulemaking portal at http://www.regulations.gov. (This
is the most expedient method for submitting your comments, and we
strongly urge you to use it.) In the Comment or Submission section of
the webpage, type ``SSA-2008-0023'', select ``Go,'' and then click
``Send a Comment or Submission.'' The Federal eRulemaking portal issues
you a tracking number when you submit a comment.
2. Telefax to (410) 966-2830.
3. Letter to the Commissioner of Social Security, P.O. Box 17703,
Baltimore, Maryland 21235-7703.
4. Deliver your comments to the Office of Regulations, Social
Security Administration, 922 Altmeyer Building, 6401 Security
Boulevard, Baltimore, Maryland 21235-6401, between 8 a.m. and 4:30 p.m.
on regular business days.
All comments are posted on the Federal eRulemaking portal, although
they may not appear for several days after receipt of the comment. You
may also inspect the comments on regular business days by making
arrangements with the contact person shown in this preamble.
Caution: All comments we receive from members of the public are
available for public viewing in their entirety on the Federal
eRulemaking portal at http://www.regulations.gov. Therefore, you should
be careful to include in your comments only information that you wish
to make publicly available on the Internet. We strongly urge you not to
include any personal information, such as your Social Security number
or medical information, in your comments.
FOR FURTHER INFORMATION CONTACT: Ashley Harder, Office of the General
Counsel, Social Security Administration, 6401 Security Boulevard,
Baltimore, MD 21235-6401, (410) 966-9483, for information about this
notice. For information on eligibility or filing for benefits, call our
national toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or
visit our Internet site, Social Security Online, at http://www.socialsecurity.gov.
SUPPLEMENTARY INFORMATION:
Electronic Version
The electronic file of this document is available on the date of
publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html.
Authorities
Section 205(i) of the Social Security Act (the Act) directs the
Commissioner of Social Security to certify to the Department of
Treasury, the name and address of the beneficiary or his representative
payee, the amount of the benefit payments, and the time at which such
payments should be made. The Department of Treasury's Financial
Management Service then makes payments in accordance with our
certification. Section 207 of the Act prohibits transfer or assignment
of the right of any person to any future benefit payments under the Act
and protects
[[Page 21404]]
the benefits from levy, attachment, garnishment, or other legal
process.
In addition to the foregoing requirements, the Department of
Treasury's regulations governing the Federal Government's use of the
direct deposit system generally require that Federal benefit payments
may be deposited only into accounts at a financial institution in the
name of the recipient. 31 CFR 208.6, 210.5.
Background
For many years we have permitted individuals to have their benefits
paid by direct deposit into a master account, under which the master
account holder maintains separate sub accounts for each individual
beneficiary. We began to accept master/sub account arrangements in
order to make direct deposits to beneficiaries' investment accounts. We
expanded this payment process to nursing homes as a convenience to
their residents, and later to religious orders whose members rely upon
these arrangements to honor their vows of poverty. We allowed the use
of the master/sub account arrangement as long as individual sub
accounts were carefully maintained, beneficiaries had complete access
to the funds in their accounts, and the arrangements were freely
revocable by the beneficiaries. Our intent in accepting these
arrangements was to allow individuals to make choices that are
appropriate and convenient for their situations.
In 1997, the Department of Treasury considered this payment process
when it proposed rules to address account requirements for Federal
payments made by electronic funds transfer. The proposed rules set
forth a general rule requiring all Federal payments to be deposited
into an account in the name of the recipient at a financial institution
and proposed two exceptions for situations that involve an authorized
payment agency, such as a representative payee, or an investment
account established through a registered securities broker or dealer.
62 FR 48714, Sep. 16, 1997. There was some expectation that the
exceptions would be revised to cover the existing master/sub accounts.
However, rather than expanding the exceptions, Treasury decided that
the payment-certifying agencies should address such additional
situations by determining who is authorized to receive payment on
behalf of a beneficiary. 63 FR 51490, 51500, Sep. 25, 1998.
The issue of master/sub accounts has recently come to our attention
again in the context of ``payday lenders'' who solicit social security
beneficiaries to take out high-interest loans. Based on the loan
agreement between the beneficiary and the loan company, we may
authorize the deposit of benefits directly into the loan company's
master account. The loan company then deducts the loan principal, fees,
and interest before depositing the remaining benefits into the
beneficiary's sub account. We are also aware of check-cashing services
that set up a master account at a financial institution, with sub
accounts in beneficiaries' names. When a beneficiary wants to withdraw
his benefits from the sub account, the check-cashing service prints a
check payable to the beneficiary who can cash the check at the check-
cashing service for an additional fee.
In addition, some beneficiaries preauthorize their banks to
transfer funds from their accounts to their lender. Some lenders who
utilize these arrangements attempt to exercise too much control over
the beneficiaries' payments. They may require the use of specified
banks and provide in the loan agreement that the beneficiary cannot
discontinue this arrangement until the loan is repaid.
Request for Comments
We anticipate changing our current procedure in light of our
concerns about how the high-interest lenders are using this master/sub
account arrangement. We invite your comments about the current uses of
master/sub accounts and the resulting effect on beneficiaries. We are
also interested in hearing about beneficiaries who have been
disadvantaged by authorizing the lender or bank to transfer their
benefit payments to the lender as soon as benefits are deposited.
We recognize that merely eliminating our current master/sub account
procedure may not solve all problems associated with payday lender
activity. We are particularly concerned about high-interest payday
lenders directing beneficiaries to set up accounts in their own name
and authorizing the bank to transfer benefits to the loan company to
pay back the loan and any associated interest and fees. Moreover, we
are troubled by provisions in beneficiaries' loan agreements that are
designed to prevent the beneficiaries from terminating direct deposit
arrangements or pre-authorized transfers, and thus dissuade
beneficiaries from taking actions that they may have the lawful right
to take.
We expect that by obtaining information about these arrangements
from beneficiaries, lenders, advocates, and other members of the
public, we can revise our payment procedures to help beneficiaries
avoid some of the unfortunate outcomes that may result when they enter
into agreements with some payday lenders. We also would like to offer
other payment alternatives that meet our statutory and regulatory
obligations.
Please provide us with any comments and suggestions you have about
these practices. The following questions raise issues that you may wish
to consider. Feel free to raise other questions, thoughts, or comments.
Have master/sub account arrangements disadvantaged any of
our beneficiaries, and if so, in what way?
To what extent will the elimination of the procedure
allowing benefits to be deposited into master/sub accounts create
significant costs and burdens on beneficiaries or organizations that
currently utilize this account arrangement?
Are there alternative payment procedures that we could
offer to ensure that beneficiaries receive their benefits and have
control over them?
The Act allows us to select representative payees to
receive benefits on behalf of beneficiaries when we determine the
interest of the beneficiary will be served. Generally, a payee is
appointed if we determine that the beneficiary is not able to manage or
direct management of benefit payments. Would nursing homes and
religious orders that handle monies for both incapable beneficiaries,
who need a representative payee, and capable beneficiaries be able to
receive and manage benefit payments without the use of master/sub
accounts?
Without master/sub account arrangements, would creditors
instead require beneficiaries to preauthorize the transfer of their
benefits to the creditor when they are deposited into the beneficiary's
account?
Do beneficiaries have sufficient control over their
benefits when they have elected to automatically transfer their
benefits into the accounts of creditors after the benefits are
deposited into the beneficiary's own account?
How can we address the situation where the lender will not
allow the beneficiary to terminate a direct deposit arrangement or a
pre-authorized transfer of benefits?
How We Will Use Your Comments
We will not respond directly to comments you send us because of
this notice. After we consider your comments in response to this
notice, we will decide how to proceed with an anticipated change in the
procedure we use for the payment of benefits.
[[Page 21405]]
Dated: April 16, 2008.
Michael J. Astrue,
Commissioner of Social Security.
[FR Doc. E8-8576 Filed 4-18-08; 8:45 am]
BILLING CODE 4191-02-P