Bill Would Exempt $1,200 Stimulus Checks From Private Debt Collection
Democrats and Republicans seem to be finding slightly more common ground in Washington these days. Earlier this week, a bipartisan bill was introduced to offer a $4,000 skills training tax credit to workers displaced due to the Covid-19 outbreak. Today, a new bipartisan bill was unveiled that would prevent stimulus checks from being garnished by private debt collectors.
The bill was introduced by the chairman and ranking member of Senate Finance Committee, Senators Chuck Grassley and Ron Wyden, respectively, along with committee members Sherrod Brown and Tim Scott. It would help clean up a potential oversight in the $2.2 trillion CARES Act. While the CARES Act included language preventing stimulus checks from being reduced for tax, state, or federal debts, it omitted any language about private debt collection.
CARES Act Omission Has Caused Hardship For Americans
When stimulus payments started to be deposited in American’s bank accounts, reports quickly surfaced that money was not reaching the intended individuals, but instead was being redirected to banks and private debt collectors to offset existing debts, such as overdraft fees. In one notable case, USAA, whose field of membership focuses on military veterans, took $3,400 in stimulus payments from the family of a disabled veteran to cover existing debt.
The nation’s four largest banks – Bank of America, Citi, JPMorgan Chase, Wells Fargo – announced that they would pause collection on negative balances for 30 days; USAA also agreed to pause collection for 90 days after furor over its seizures. According to Lauren Saunders, associate director of the National Consumer Law Center, a nonpartisan advocacy group. up to a third of Americans have a debt in collection. “Congress authorized these payments because people have lost their jobs and are desperate for money for food. The money needs to go to food, not the debt collectors or back bank fees,” she said.
There has been widespread support for preventing stimulus checks from being garnished by private debt collectors. Last month a group of 14 senators, including Kamala Harris and Bernie Sanders sent a letter to Treasury Secretary, Steve Mnuchin, urging him to use the Treasury’s rule making authority to exempt payments from collection. Republican Senator Josh Hawley also joined the chorus of criticism in a separate letter with Senator Sherrod Brown, a co-sponsor of the current bill.
We established these recovery rebates to help individuals and families through the tough times of this pandemic,” Senator Grassley said in a statement Friday. “We did not establish them just so debt collectors could swoop in and undermine that purpose. Our bill will add additional protections from garnishment, preserving congressional intent and shielding folks who need the help.”
“This is a once-in-a-lifetime economic crisis,” Senator Wyden echoed in a statement. “Relief was intended for struggling families, not predatory debt collectors. Our legislation would ensure help gets to the folks who need it to pay their bills.”
If the bill were to pass, the Treasury Department would be directed to tag stimulus payments made via direct deposit, which would allow banks to identify and protect them from garnishment. It would also prevent garnishment for individuals who received paper checks when being deposited. The bill also defines an account review process “of examining deposits in an account to determine if an applicable payment has been deposited into the account during the lookback period,” which would presumably allow retroactive adjustments to any previous garnishments.
By Shahar Ziv