Changes to Social Security death list will affect banks

The Social Security Administration is expanding its master death list in ways that are likely to have a considerable impact on banks and lenders.

The SSA has added 6,300 people who had temporary legal status in the U.S. to a list that previously contained only the identities of Americans who had died, according to a White House official.

And in a previously unreported development, that same list of dead people has grown drastically in recent weeks for reasons that are currently unclear, though the spike is not necessarily connected to the policy of adding certain immigrants to the list.

The two developments suggest the SSA is changing the nature of the data that banks, credit agencies and other financial companies have historically relied upon to know when their customers have died. Financial institutions use this data to know when they need to close accounts, recover debts from estates or in some cases waive the debts.

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In the long term, repurposing the list of dead people to instead be a list of people ineligible to receive Social Security benefits could eliminate a vital, authoritative data source financial institutions use to manage accounts.

In the short term, adding the 6,300 live immigrants to the list recently used as a list of dead people could also lead to these people facing foreclosures and having their accounts closed. It could also make it more difficult for people on the list to obtain a job, get a driver's license or receive government benefits.

The White House official said the Department of Homeland Security had identified the 6,300 immigrants as people who are on the terrorist watch list or have FBI criminal records and that, effective April 8, Customs and Border Patrol terminated the temporary legal status of these immigrants.

When asked about the policy change, Liz Huston, a spokesperson for the White House, told American Banker that President Donald Trump "promised mass deportations, and by removing the monetary incentive for illegal aliens to come and stay, we will encourage them to self-deport. He is delivering on his promise he made to the American people."

What happens when living people get reported as dead?

The fate of immigrants added to the SSA's list could mirror that of Americans whom the Social Security Administration accidentally declares as dead. Namely, they could face foreclosures, account closures, inability to obtain credit and numerous other financial consequences.

False reports of death occur in "less than one-third of 1%" of the 3 million reports the SSA receives each year, according to a statement the administration provided to trade publication ThinkAdvisor last month. In other words, thousands of people — less than 9,000 — are falsely reported dead by SSA each year.

Cases where a person has been falsely declared dead by the SSA can lead to financial turmoil. A report this month from Baltimore-based channel WMAR-2 News detailed how one local woman, Joyce Evans, had her house foreclosed upon, her bank accounts closed and her Medicare benefits stopped, according to her attorney Jim Francis. Evans and Francis are currently suing the SSA.

In these cases of erroneous death reports, the affected person can obtain an erroneous death case notice from the Social Security Administration that the person can then show to banks, insurers, creditors and others. It does not appear the SSA will be issuing such notices to the 6,300 immigrants it has put on its now-repurposed death master list.

Deaths reported in SSA data have spiked 300-fold

The Social Security Administration provides the Department of Commerce's National Technical Information Service, or NTIS, with a public file of death information, which excludes state death records because of legal limitations on the death data the SSA receives from states.

NTIS then sells that file, known as the public Death Master File or Limited Access DMF, to other agencies and private organizations such as banks and credit companies. As of April 2, roughly 230 companies and government agencies — including multiple banks, each of the three credit bureaus and multiple state departments of transportation — have access to this list, according to the NTIS.

These entities also get weekly and monthly updates to the list, which are files that include information about all the new deaths since the previous update was issued.

NTIS issued a weekly update on March 14 that contained nearly 100 times the number of records compared to the previous week, and the number of records has increased since. In the previous 13 weeks leading up to the March 14 spike, the average number of weekly death records was roughly 11,000. In the three most recent updates, roughly 3 million deaths were recorded.

Similarly, while the five monthly updates issued from November to March had an average of 29,000 records, the update issued on April 1 had 10 million.

SSA, NTIS and the Department of Commerce did not immediately respond to a request for comment on the sudden spike in death records.