Your Bank Can Grab Your $1,200 Coronavirus Check

[RandySF]

This week, the $1,200 CARES Act payments Congress approved in response to the coronavirus crisis will begin to appear in Americans’ bank accounts. The funds will be wired to eligible recipients who previously authorized the IRS to post their refunds (or Social Security payments) through direct deposit. This will speed relief far more quickly than having the IRS mail a check, which could take up to five months.

But the money may not make it into the hands of those who need it to pay bills, buy food, or just survive amid mass unemployment and widespread suffering. Individuals might first have to fend off their own bank, which has just been given the power to seize the $1,200 payment and use it to pay off outstanding debt.

Congress did not exempt CARES Act payments from private debt collection, and the Treasury Department has been reluctant to exempt them through its rulemaking authority. This means that individuals could see their payments transferred from their hands into the hands of their creditors, potentially leaving them with nothing.
Banks would be first in line to grab the payments to offset a delinquent loan or past-due fees. Even if the individual thinks their account with that bank is closed, if the payments post there, the bank could conceivably use them to cover old debts.

The Treasury Department effectively blessed this activity on a webinar with banking officials last Friday. In audio obtained by the Prospect, Ronda Kent, chief disbursing officer with Treasury’s Bureau of the Fiscal Service, can be heard explaining that banks had posed questions to her about “whether these payments could be subject to collection from the bank to which the money is deposited, if the payee owes an outstanding loan or other payments to the bank.” She responded—twice—that “there’s nothing in the law that precludes that action,” while counseling that the banks’ compliance officers should consult with their legal offices about what policies their banks will implement. “You will want to know for your bank what your bank has decided to do,” Kent said.



https://prospect.org/coronavirus/banks-can-grab-stimulus-check-pay-debts/

[customerserviceguy]

1. Is this really going to happen to a lot of people?

If a person is in severe debt to a bank, where it's gotten to the point where deposited paychecks are seized to pay off credit card bills or car loan payments, do they still maintain a checking or savings account with that institution? If there's no account for the Treasury to send the stimulus payment to, then the person gets a check mailed to them.

Or, if they've been able to set up a bank or credit union account at another institution, they can use the IRS portal to substitute that entity's information to deposit the stimulus payment.

[jimfields33]

2. I'm torn. If you have a negative balance they'd do that with regular paycheck

If you are behind on a bank loan or credit card, they’d do the same. However, these are unusual times. This is not easy. Congress left it out so I trust nancy.

[SWBTATTReg]

3. I think part of this is to cover missed child support payments too. I don't know about the old...

debts, after all, if one went through bankruptcy (the legal process), the bank have no claim to the funds.

[roamer65]

4. Rule 1 of personal banking.

Never run a debt with the bank holding your checking and savings accounts.

I’ve seen too many get burned by it, so I broke that habit a long time ago.

[SheltieLover]

5. WTF?

People need to eat & pay rent. They should not be allowed to touch this money. This does not affect me, but I'll bet a lot of people will get screwed out of what tiny crumb of hope we, as natural persons, have been alloted.

[progree]

6. This is not just a worry about money you may owe your bank, but for other debts too

How to get your $1,200 emergency payment faster — But watch out for debt collectors, NPR, 4/13/20

Saunders worries that millions of Americans could get their emergency government payments snatched right out of their bank accounts. "It happens all the time to people," says Farah Majid, a lawyer at Legal Services Alabama. She notes that debt collectors often get court judgments against people, which enables the collectors to get the money from people's banks.

If debt collectors can find money sitting in a bank account, she says, "they can just grab whatever money is in there, so it's really easy for them to collect their money that way." Some states have protections, but many allow collectors to grab large sums of money, Majid says.

But there is something the government could do to try to block the debt collectors. There's already a system to protect benefits such as Social Security. Those government payments are coded in a special way. "Banks automatically know not to let collectors grab that money," says the NCLC's Saunders."We are trying to get these stimulus payments coded in the exact same way, because they are intended for food and basic necessities, just like Social Security payments." There's some bipartisan support for that. ...

In the meantime, if you think debt collectors or payday lenders with access to your bank account might grab the money, advocates say you'll probably want to be vigilant about getting that money before they do. Or you could have the money sent to a different bank account, or to a prepaid card if that becomes possible, the advocates say.

For people without a bank account who would like to open one, Saunders' nonprofit is telling people to go to http://www.joinbankon.org . That site has suggestions for ways to do that, even if you've had trouble with bank accounts in the past, so you can get your government payment more quickly.

More: https://www.mprnews.org/story/2020/04/10/npr-those-1-200-emergency-payments-are-arriving-and-debt-collectors-may-be-eyeing-th

[Solomon]

7. Probably tax debt as well. They call them offsets.