Treasury seeks to protect federal benefits: report

(BestGrowthStock) – The Treasury department will release new rules on Wednesday that would prevent banks from seizing a borrower’s social security to recover unpaid debt, the Wall Street Journal said.

The proposed new rules, to be published in the Federal Register, will require banks to check if the borrower has received any direct deposits of federal benefits within the past 60 days, the Journal said.

In case the borrower had received a federal benefit then the new rule would require the banks to establish a protected amount equal to the sum of the benefits deposited, the paper said.

For example, if a person had two federal benefit deposits of $1000 each, then the banks must establish a protected amount of $2000, even if the person had spent the benefits, the Journal said.

Any amount above the protected amount would be handled according to the garnishment rules of each state, the newspaper said.

Garnishment is a debt collection practice that involves a bank seizing the assets of a borrower in case the debt remains unpaid.

The U.S. Treasury could not be immediately reached for comment by Reuters outside regular U.S. business hours.

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(Reporting by Sakthi Prasad in Bangalore )

Treasury seeks to protect federal benefits: report