Groups Call for Stimulus Funds to be Protected From Garnishment; Legislative Proposal Forthcoming

Now that another round of stimulus payments is on the horizon for people across America, it is time for another round of articles aimed at making sure that the big, bad debt collectors don’t come in and take that money away from people who really need it. To that end, we have legislation that is going to be proposed in Congress that protect the stimulus payments from being seized by private debt collectors and a letter from 19 different consumer advocacies and banking trade groups seeking to have those funds protected from garnishment.

When the first round of economic stimulus payments were distributed last year, Congress failed to instruct the Treasury Department to categorize the payments the same way that Social Security payments are categorized, which meant that the stimulus payments were subject to garnishment orders or seizures that had been filed with financial institutions. A lot of people wrote about how those funds needed to be protected and a lot of states enacted measures aimed at doing so.

This time around, the process under which the latest economic relief package was passed in Congress precluded a protection from being included in the law. That is why Sen. Ron Wyden [D-Ore.], the chairman of the Senate Finance Committee, has come out and said he will be introducing a bill aimed at protecting the funds from being garnished or seized.

“I will be introducing standalone legislation to ensure families receive their much-needed relief payments,” Sen. Wyden said in a statement.

In case Congress needed more arguments about why these funds should be protected, the trade groups and advocacies, including the American Bankers Association and the National Consumer Law Center, also made sure to voice their support for some form of protection. Garnishment orders are issued by a court and financial institutions are bound to comply with them, they noted, despite the fact that “even many debt collectors believe the economic impact payments should be exempt.”

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