Some have praised Trump's one-time $1,200 coronavirus relief payments to help Americans cope with financial hardship. But now the details are emerging. The Treasury Department has given U.S. banks a green light to seize a portion or all of the one-time $1,200 to pay off individuals’ outstanding debts.
Ronda Kent, chief disbursing officer at the Treasury Department’s Bureau of the Fiscal Service, told bankers that “there’s nothing in the law that precludes” financial institutions from seizing a person’s payment and using it to pay off the individual’s debts.
Jeremy Funk, spokesperson for consumer advocacy group Allied Progress, said “It’s the middle of a pandemic. This money should be going toward food, rent, and medicine—it’s not the time to hand out favors to debt collection industry donors or pad some big bank’s bottom line,” said Funk. “Secretary Mnuchin needs to ensure that these $1,200 checks go straight into Americans pockets where they belong.”
Americans with direct deposit information on file with the Internal Revenue Service are expected to begin receiving the $1,200 payments in their bank accounts this week, provided that their banks do not opt to seize the money.
Ronda Kent, chief disbursing officer at the Treasury Department’s Bureau of the Fiscal Service, told bankers that “there’s nothing in the law that precludes” financial institutions from seizing a person’s payment and using it to pay off the individual’s debts.
Jeremy Funk, spokesperson for consumer advocacy group Allied Progress, said “It’s the middle of a pandemic. This money should be going toward food, rent, and medicine—it’s not the time to hand out favors to debt collection industry donors or pad some big bank’s bottom line,” said Funk. “Secretary Mnuchin needs to ensure that these $1,200 checks go straight into Americans pockets where they belong.”
Americans with direct deposit information on file with the Internal Revenue Service are expected to begin receiving the $1,200 payments in their bank accounts this week, provided that their banks do not opt to seize the money.
Congress explicitly exempted the one-time stimulus payments from collection under the CARES Act “if the debt is owed to federal or state agencies, unless the debt involves a child support payment.”
“But Congress did not extend this exemption to private debt collection,” The American Prospect‘s David Dayen reported. “The payments are defined as tax credits and not federal benefits, making them subject to ‘garnishment,’ in which a debt collector that wins a judgment in court can seize anything of value held by the debtor.” Congress did give Treasury the authority under Section 2201(h) of the CARES Act to write rules exempting the payments from private debt collectors,” Dayen noted, but the Treasury Department—headed by former Goldman Sachs executive Steve Mnuchin—has thus far refused to exercise that authority.
Dayen noted that “legally speaking, banks have the right to ‘offset’ any deposits to pay off delinquent loans, overdraft fees, or other charges.”
“Banks have more immediate access to the coronavirus checks by virtue of having them deposited into accounts at their institutions,” Dayen wrote. “They’re also in front of the line for repayment of debts ahead of other private debt collectors.”
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