NCLC: How to ensure that COVID-19 stimulus checks aren’t grabbed by debt collectors

Read U.S. Treasury Must Protect Stimulus Payments From Garnishment by Debt Collectors from the National Consumer Law Center. Here's an excerpt:

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides for payments to individuals up to $1,200 so that people can pay for food, rent, utilities, medicine, and other basic necessities.  The CARES Act protects stimulus checks from being reduced to pay certain debts owed to federal and state governments but does not specifically address garnishment or bank offsets for other debts. Instead, it gives Treasury the authority to issue rules and guidance to carry out the purposes of the stimulus payments.

Coding the payments as federal benefits will serve these important purposes:

    • The payments will be available for food, medicine, utilities, and rent as Congress intended and will not be seized by debt collectors, depriving recipients of the ability to pay for essentials.
    • Banks already have systems in place that will automatically protect the payments so there is no need to develop additional procedures.
    • Banks will not have to deal with irate customers when desperately needed funds disappear.
    • State governments and courts will not have to issue emergency orders to protect these payments, or handle disputes about them, putting banks in the middle.
    • People can provide direct deposit information to the Treasury Department without fear of losing their funds so they can receive their payments quickly and safely. Otherwise, consumer advocates, legal services offices, credit counselors, and others will be forced to counsel struggling families to avoid direct deposit and wait for a paper check.
    • The Treasury Department will have far fewer requests for paper checks to deliver stimulus payments.

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