Debt collectors can seize money

Stimulus checks landing in millions of U.S. bank accounts are meant to help people cope with the effects of the coronavirus pandemic. But they could also help debt collectors, thanks to a loophole in the $ 2 trillion stimulus package.

The problem, lawyers say, is that stimulus checks aren’t explicitly prohibited from debt collectors or creditors, unlike other government payments such as Social Security and disability benefits. The oversight means debt collectors can enter bank accounts to enter stimulus payments, according to Lauren Saunders, associate director of the National Consumer Law Center.

Bank account garnishment occurs when creditors are legally allowed to withdraw money from your bank account to cover an unpaid debt. In some states, bank accounts are frozen when they are foreclosed, a devastating development for many consumers. And that makes the problem doubly problematic right now, given that millions of Americans are grappling with job and income losses. Not only could they lose some or all of their stimulus checks, but they could also be stranded in their bank accounts.

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“We hear a lot of stories of people whose bank accounts are frozen” because of a garnishment, says Saunders.

The loophole prompted 25 state attorneys general and the Hawaii Office of Consumer Protection to ask Treasury Secretary Steven Mnuchin to ensure that debt collectors and creditors cannot accept stimulus checks from Americans. .

“During this health and economic crisis, states do not believe that the billions of dollars allocated by Congress to help keep American workers afloat should be garnished,” they said in a statement. letter sent to Mnuchin on Monday.

A Treasury official reportedly told bank officials last week that the law does not prohibit banks from taking stimulus payments for overdue loans or overdue charges, according to The American Prospect.

A spokeswoman for the Treasury said the department was looking into the matter.

The Treasury said about 80 million Americans will receive their checks by the end of the week through direct deposit. The amount depends on your marital status, your income and the number of children under 17. For example, individuals earning $ 75,000 or less will receive $ 1,200, while joint filers earning $ 150,000 or less will receive $ 2,400.

People who earn more than that will get smaller and smaller checks until they are completely wiped out for single taxpayers with incomes over $ 99,000 and $ 198,000 for joint tax filers without children. Families with children under 17 will receive $ 500 per child.

This can add up to a considerable amount of money, with some families of four receiving up to $ 3,400.

Keeping debt collectors from collecting that money is a simple solution, according to the attorneys general. The Treasury could designate stimulus checks as exempt from garnishment, including redefining stimulus checks as “benefit payments” that would be prohibited from collection agents.

Not everyone is waiting for the Treasury to act. Already, Massachusetts and Ohio have said their residents’ stimulus checks can’t be touched by debt collectors.

“A significant number of people suddenly find themselves underemployed or unemployed and have lost their wages,” notes Lisa Stifler, director of state policy at the Center for Responsible Lending. Stimulus checks will “pay for things like food and other necessities, so if creditors can grab that for old debts, that completely negates the purpose of those necessary payments.”

Consumers who are concerned that their accounts may be foreclosed can request a paper check through IRS.gov’s “Get My Payment” service, Saunders noted. They can then cash their check instead of depositing it.

Saunders noted that others who have already received direct deposit and fear garnishment could withdraw money from their accounts, although visiting an ATM or bank could pose health risks during the pandemic, said she noted.

“People are stuck between a rock and a hard place,” she said.

About Sonia Martinez

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