Use of Master and Sub Accounts and Other Account Arrangements for the Payment of Benefits, 21403-21405 [E8-8576]

Agencies

• Social Security Administration

[Federal Register Volume 73, Number 77 (Monday, April 21, 2008)]
[Notices]
[Pages 21403-21405]
From the Federal Register Online via the Government Printing 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 https://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 https://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 https://
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 https://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