A credit union exercised its right to offset money owed in a defaulted loan, but there was a problem: the funds seized represented Social Security disability benefits.
From The Credit Union Times:
[...] a former accounting clerk for the $18.6 million Wallingford Municipal Federal Credit Union, has been awarded more than $200,000 after a state judge ruled that the Wallingford, Conn., cooperative committed "statutory theft" in seizing the woman’s $13,801 Social Security disability benefit and using it to repay a loan she and her husband defaulted on. Read more
After a three-year court battle, Connecticut Superior Court Judge Robin L. Wilson in a 72-page ruling released Aug. 8 said the credit union's move against Odell's benefits were illegal because Social Security is exempt from debt collection.
"In the present case this court granted the plaintiff's (Odell) summary judgment as to the statutory theft count and this court awards damages as to that count," Wilson wrote in her ruling. The judge also wrote in her opinion that the credit union seizure of Odell's Social Security funds is against the public policy of both the federal and Connecticut government for protecting exempt funds.