Stimulus Checks Are Coming Next Week. Could Private Debt Collectors Grab Them?https://www.forbes.com/sites/sarahhansen/2020/04/10/stimulus-checks-are-coming-next-week-could-private-debt-collectors-grab-them/#4a77a1681f57Quote
Topline: Next week, millions of Americans will begin receiving direct deposits from the federal government as part of the $2 trillion coronavirus rescue package signed by President Trump last month, but in some cases, private debt collectors may still be able to access that money. Here’s what you need to know.
Right now, there is no provision in the CARES Act that prohibits private debt collectors from garnishing stimulus money that is sitting in a personal bank account (some states, like Massachusetts and Texas, have issued their own emergency regulations that prevent debt collectors from issuing new garnishment orders, but most states don’t have those protections).
This means that once a direct payment hits, it’s possible for a private debt collector to serve a garnishment order (if, of course, a consumer is behind on debt payments and subject to an outstanding court judgment) in order to seize that cash.
The Treasury Department already has rules that protect social security payments from this type of garnishment; some lawmakers want the agency to extend these rules to cover direct stimulus payments.
“If people are worried about debt collectors, they should take the money out right away,” says Lauren Saunders, Associate Director at the National Consumer Law Center. The NCLC advises those consumers who are at risk of garnishment to keep a close eye on their accounts and move the money out as soon as it arrives by withdrawing it as cash, transferring it electronically, or using it to pay for groceries or other essentials.
The federal government, on the other hand, will not be able to take money you owe for defaulted federal student loans or back taxes out of a stimulus check. It will be able to take the money for back child support. (The CARES Act also blocks the IRS from taking money from your tax refund for defaulted student loans.)
Crucial quote: Senators Sherrod Brown (D-Ohio) and Josh Hawley (R-Mo.) are urging the Treasury Department to step in and exercise its ability to prevent private debt collectors from seizing CARES Act direct payments (with the exception of child support payments). “If Treasury fails to take action, the CARES Act direct payments are at risk of being seized by debt collectors. That is not what Congress intended,” they wrote in a letter. “We came together to pass the CARES Act to help American families pay for food, medicine, and other basic necessities during this crisis...we ask that you immediately exercise your authority to protect these payments from private debt collectors.”
Key background: The historic CARES Act includes sweeping provisions to shore up funding for hospitals and expand unemployment benefits. It allocates $349 billion in loans for struggling small businesses and $500 billion in loans and grants for companies in distressed industries, and provides direct payments of $1,200 to most Americans. The rollout of portions of the bill has been rapid and, at times, chaotic, and the virus’ toll on the economy has already been staggering. Over the last three weeks alone, for instance, some 16 million Americans have applied for temporary unemployment benefits.