A Short History of Attorney's Fees and Social Security

In a prior blog, I spoke to the history of social security. Here the issue is the history of the attorney fee process as the social security law developed.
As to administrative proceedings, the 1935 Social Security Act made no provision for attorney’s fees. 49 Stat. 620 (1935). It was four years later that Congress amended the Act to permit the Social Security to prescribe maximum fees attorneys could charge for representation of claimants before the agency. Social Security Act Amendments of 1939, 53 Stat. 1360.

"Sec. 206.

The Board may prescribe rules and regulations governing the recognition of agents or other persons, other than attorneys as hereinafter provided, representing claimants before the

Board, and may require of such agents or other persons, before being recognized as representatives of claimants that they shall show that they are of good character and in good repute, possessed of the necessary qualifications to enable them to render such claimants valuable service, and otherwise competent to advise and assist such claimants in the presentation of their cases.

An attorney in good standing who is admitted to practice before the highest court of the

State, Territory, District, or insular possession of his residence or before the Supreme Court of the United States or the inferior Federal courts, shall be entitled to represent claimants before the Board upon filing with the Board a certificate of his right to so practice from the presiding judge or clerk of any such court.

The Board may, after due notice and opportunity for hearing, suspend or prohibit from further practice before it any such person, agent, or attorney who refuses to comply with the Board's rules and regulations or who violates any provision of this section for which a penalty is prescribed.

The Board may, by rule and regulation, prescribe the maximum fees which may be charged for services performed in connection with any claim before the Board under this title, and any agreement in violation of such rules and regulations shall be void.

Any person who shall, with intent to defraud, in any manner willfully and knowingly deceive, mislead, or threaten any claimant or prospective claimant or beneficiary under this title by

word, circular, letter or advertisement, or who shall knowingly charge or collect directly or indirectly any fee in excess of the maximum fee, or make any agreement directly or indirectly to charge or collect any fee in excess of the maximum fee, prescribed by the Board shall be

deemed guilty of a misdemeanor and, upon conviction thereof, shall for each offense be punished by a fine not exceeding $500 or by imprisonment not exceeding one year, or both.”

Discussions in Congress concerning the possible adoption of the 1939 amendments, indicated that Congress thought that there would very little need for counsel in agency proceedings. H.R. Rep. No.728, 76th Cong., 1st Session, pp. 44—45 (1939); S. Rep. No. 734, 76th Cong., 1st Session, p.53 (1939).

"While it is not contemplated that the services of an agent or attorney will be necessary in presenting the vast majority of claims, the experience of other agencies would indicate that where such services are performed the fees charged therefor should be subject to regulation by the Board, and it is so provided." H.R. Rep. 728, supra, at 44-45; S. Rep. 734, 76th Cong.,

1st Sess. 53 (1939).  
Although Congress authorized regulation of attorneys practicing before the social security,it  did not lift the bar on assignment of benefits, I,e, it did not authorize the withholding of fees. Section 406 as added to Title II in 1939 simply authorized the Board to regulate the practice of claimants' representatives and provided that "(t)he Board may, by rule and regulation, prescribe the maximum fees which may be charged for services performed in connection with any claim before (it)" (Section 201, 53 Stat. 1372;  42 U.S.C.
(1940 ed.) 406).

Under the 1939 amendments, the Board established a maximum fee of $10, permitting a higher fee only by petition to the agency. 20 CFR § 403.713(d) (1949).
Presently over 80% of claimant's requesting disability benefits from Social Security are represented and attorney's fee can be withheld and assigned to the attorney in a successful case. Fees are now assessed on a contingent basis and the amount of fee paid (by withholding from claimant's total award) is usually 25% of any back due benefits to a maximum of $6,000.00 (it is the lesser amount paid to the attorney). With a small fee paid to social security, the attorney's fees can be withheld and directly paid to the attorney.