NCLEJ Appeal Aims to Protect Social Security from Seizure by Debt Collectors
NCLEJ, along with co-counsel New Economy Project (NEP) and Ahmad Keshavarz, filed a brief in the Second Circuit Court of Appeals in a case of first impression that addresses the need to protect Social Security benefits from unlawful restraint and seizure by debt collectors in New York. This case arose when a debt collection law firm restrained Franklin Arias’s bank account, which contained only Social Security retirement benefits. Social Security is exempt from collection under federal and state law.
When Mr. Arias provided proof to the law firm that his account contained only exempt funds, the law firm should have released the restraint. Instead, Mr. Arias alleged, the law firm doubled down on its unlawful conduct, filing court papers containing false and misleading statements in order to prolong the restraint and pressure Mr. Arias into giving up his exemption claims. Mr. Arias, represented by NEP and Keshavarz, filed suit under the Fair Debt Collection Practices Act (FDCPA).
In a surprising turn of events, the federal district court dismissed Mr. Arias’s claims in an opinion that substantially undermines New York’s landmark Exempt Income Protection Act (EIPA) – a state law passed in 2008 that protects exempt income from restraint and seizure by creditors. EIPA provides critical protection to thousands of low-income New Yorkers who live check to check, subsisting on government benefits or low-wage jobs, and need every penny for rent, food, transportation, and health care. NCLEJ joined as counsel on the appeal, arguing that the FDCPA prohibits debt collectors from knowingly restraining exempt funds.
The Consumer Financial Protection Bureau – the federal consumer watchdog agency – filed a friend of the court brief on Mr. Arias’s behalf, as did a coalition of ten legal services organizations from across New York State.