Debt collectors could take a bite out of the $1,400 coronavirus stimulus checks that will land in Americans’ bank accounts as soon as this weekend.
The $1.9 trillion stimulus bill authorizing the so-called economic impact payments doesn’t include a crucial provision protecting them from garnishment, banking groups say.
That means private debt collectors armed with a court order could take some or all of the pandemic relief funds and put it toward whatever you owe them.
The last relief package Congress passed in December included language that barred garnishment of the second, $600 stimulus checks.
But lawmakers couldn’t add that language to President Biden’s American Rescue Plan bill because it was enacted through a process called budget reconciliation, which allowed Democrats to pass it without Republican support.
The American Bankers Association and 18 other banking and consumer trade groups urged Congress this week to pass standalone legislation protecting the $1,400 checks from garnishment.
“Otherwise, the families that most need this money — those struggling with debt and whose entire bank accounts may be frozen by garnishment orders — will be not be able to access their funds,” the groups wrote in a Monday letter to congressional leaders.
Sen. Ron Wyden, an Oregon Democrat who chairs his chamber’s Finance Committee, told news outlets that he would introduce such a bill protecting the stimulus checks from private debt collectors.
Wyden and Republican Sen. Chuck Grassley sponsored a similar bill last year to stop garnishment of the first $1,200 payments authorized by the CARES Act. The measure passed in the Senate last July but did not advance in the House.
While banks and even some debt collectors may believe the checks are protected from garnishment, depository institutions are required to comply with court orders and will have to fork over the money to creditors who try to garnish or freeze bank accounts, the banking groups said.
People who want to avoid having their payments garnished by private collectors could close the bank account where the funds would be deposited — but that means their check would likely take longer to arrive, CNBC reported.
The good news is that taxpayers reportedly won’t have to worry about the government coming after their payments.
The stimulus legislation prevents the feds and other officials from taking the money to pay child support, back taxes or other government debts, according to USA Today.