On Friday, September 26th, Governor David Patterson approved the Exempt Income Protection Act, which will protect thousands of low-income New Yorkers from abusive debt-collection practices.
Social Security, disability benefits, Veterans Benefits, pensions,
child support, workers compensation, and unemployment insurance are
exempt from collection by creditors and debt collectors. However, a
loophole in the law has allowed banks to freeze accounts containing
this exempt income, often with devastating consequences to individuals
and families who depend on the funds for housing, food, and other basic
living expenses. Those who have their accounts frozen carry the burden
of proving that the funds should be exempt, a complicated task that can
take weeks or even months. Meanwhile, late fees, overdraft fees, and
bounced check fees pile up, making a bad situation even worse.
The
newly-signed Exempt Income Protection Act closes the loophole,
preventing banks from freezing the first $2,500 in a bank account when
their bank accounts contain directly deposited exempt funds, which the
banks can identify from the electronic transfer information.
Working
poor who do not receive Social Security or other exempt funds will also
have up to $1,716 of their earned income (8 weeks worth of minimum wage
earnings) protected by the Act. Currently, the law exempts 90% of
earnings deposited into an account in the last 60 days.
"The debt
collectors for years were able to squeeze exempt income out of poor and
disabled persons," said South Brooklyn Legal Services' SSI and
Disability Rights Director Johnson Tyler. "This legislation stops
that.”
The measure's passage is being hailed as a victory for New
York's most vulnerable communities. It will go into effect on January 1, 2009.
South Brooklyn Legal Services’ Director of SSI and Disability
Rights Johnson Tyler recently appeared on New York’s Channel 9 (WWOR)
in a segment highlighting the problems that can occur when banks fail
to prevent lenders from freezing accounts containing exempt funds. View
the video at Channel 9’s website; scroll down to “Debt Collector.”
Legal Services NYC —the largest
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neighborhood offices in every borough of New
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