The reports just keep coming that consumers are still having difficulty paying their debts.

One of the latest is from the Consumer Credit Delinquency Bulletin of the American Bankers Association. The bulletin found the percentage of home equity lines of credit that were more than 30 days past due rose 14 basis points to 1.10 percent during the first quarter (seasonally adjusted). This was the highest recorded rate for this category since 1997. Bank card delinquencies rose 13 basis points to 4.51 percent. Auto and personal loan delinquencies also increased.

As many people struggle to pay for necessities, they skip making debt payments. Many creditors in turn are seeking relief by taking borrowers to court. But in some cases the actions of the financial institutions in carrying out court orders are of questionable legality, according to a new report out by the Social Security Administration’s Office of the Inspector General.

The inspector general found that some financial institutions are apparently violating federal law by garnisheeing accounts that receive electronic deposits of Old Age, Survivors and Disability Insurance, and/or Supplemental Security Income payments. These funds are supposed to be protected from creditors except under certain conditions.

During a 12-month period beginning September 2006, the 12 largest banks took $1 million from accounts that held only government benefits. Another $29 million was taken from accounts that held money from government benefits that was also commingled with cash from other sources, according to the report. The inspector general also found in some cases that banks were charging legal processing fees, overdraft charges or insufficient fund charges that occurred as the result of a garnishment.

Although the sample size in this investigation was relatively small, the inspector general’s report concluded that if all financial institutions followed the pattern of those investigated, as much as $177.7 million in garnishments could be attributable to beneficiaries receiving direct deposit of Social Security benefits.

Nessa Feddis, vice president and senior counsel for the American Bankers Association, said the financial institutions aren’t acting heartlessly by taking or freezing funds from people receiving government benefits. Instead, she said, the banks are just obeying court orders. Feddis said in many cases if the banks don’t comply, they could be punished with heavy fines.

The problem is that you have a set of state and federal laws that are conflicting, Feddis said.

“The banks are caught between a rock and hard place,” she said. “They have a court order that says they have to take this money.”

A financial institution can take protected government benefits only under the following five conditions, according to the Social Security Administration:

¢ To collect child support and/or alimony obligations.

¢ To collect unpaid federal taxes as the result of an IRS levy.

¢ If the government beneficiaries elect to have a percentage of their benefits withheld and paid to the IRS to satisfy their federal income tax liability for the current year.

¢ To pay a federal agency a non-tax debt the beneficiary owes to that agency.

¢ To collect overdue federal tax debts by levying up to 15 percent of each monthly payment until the debt is paid.

The Social Security Administration recommends that if your benefits have been taken from your bank account or a creditor tries to garnishee your Social Security check, inform those involved that unless one of the five conditions apply, your benefits cannot be garnisheed. And, if needed, seek legal assistance.