A consumer advocacy organization is calling on the Treasury Department to code the stimulus payments that will be sent to individuals in a certain way in order to make sure the money is “not grabbed by debt collectors.”
The National Consumer Law Center issued a release yesterday saying that the stimulus checks should be coded as federal benefits which would protect the money as if it were a Social Security check. If not coded as a federal benefit, the money, when deposited into a bank, may be subject to garnishment or asset seizure notices that have been filed previously by debt collectors, the NCLC noted in its release.
“People nationwide have suffered a dramatic loss of income and desperately need the stimulus payments that Congress just authorized for food, rent, utilities and health care,” said Lauren Saunders, associate director of the National Consumer Law Center. “But if Treasury does not take immediate steps to protect the stimulus payments, debt collectors could grab the money out of the bank accounts of the families who most need the funds for their basic survival.”
As it was written, the The Coronavirus Aid, Relief, and Economic Security, or CARES, Act does protect the stimulus checks from being used to pay debts owed to a state government or the federal government, but it does not address bank garnishments, according to the NCLC.
According to the NCLC, should the Treasury Department opt to designate the stimulus checks as federal benefits, it will:
- Ensure 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.
- Allow banks to use the systems already in place that will automatically protect the payments so there is no need to develop additional procedures.
- Ensure that banks will not have to deal with irate customers when desperately needed funds disappear.
- Prevent state governments and courts from having to issue emergency orders to protect these payments, or handle disputes about them, putting banks in the middle.
- Allow individuals to 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.
- Ensure far fewer requests from individuals for paper checks to deliver stimulus payments.