u.s. MAY REVISE PAYMENT OF SOCIAL SECURITY CHECKS

Concerned that "payday" and other high interest storefront lenders are improperly capturing Social Security payments from elderly and disabled beneficiaries, the Social Security Administration has announced it would likely change how it delivers some benefits.

More than 80% of Social Security recipients receive their benefits by direct deposit thanks largely to federal rules making it mandatory unless recipients opt out.

The government says direct deposit is cheaper than printing millions of paper checks each month, but also safer for recipients because checks can be stolen or destroyed.

While the direct deposit program has been a success, a growing number of high interest lenders in recent years have used the direct-deposit program to help them capture loan payments and fees from Social Security benefits.

Social Security recipients with direct deposit can effectively use their anticipated Social Security benefits as collateral for short-term high interest loans taken out from high -interest lenders and check cashers.

Some lenders require borrowers to have their checks deposited directly into banks that partner with the lenders as a condition of obtaining a loan.

Some lenders "attempt to exercise too much control" over payments sent to Social Security recipients that are then automatically transferred to the lender.

Some high-interest lenders arrange bank accounts, typically in other states, that provide no checks or ATM cards to the borrowers.

That means borrowers can access their monthly Social Security benefits only by visiting the lender to pick up what remains after loan payments, including interest and fees are deducted.

The Social Security Administration's request for comment centers on "master/sub accounts;“ which allow institutions to receive Social Security benefits for many individuals and allocate them to "sub accounts" in each recipient's name.

The agency initially established the master/sub-account arrangements so it could send Social Security benefits directly to investment accounts, nursing homes and religious orders with vows of poverty. According to the notice, such arrangements are supposed to be "freely revocable" by the benefit recipient.

However, the agency said it is "troubled" by loan-agreement provisions "designed to prevent the beneficiaries from terminating direct-deposit arrangements or preauthorized transfers, and thus dissuade beneficiaries from taking actions they may have the lawful right to take.”

The agency said it is seeking information from beneficiaries, lenders, advocates, and other members of the public so it can revise the payment procedures "to help beneficiaries avoid some of the unfortunate outcomes that may result when they enter into agreements with some payday lenders:'“