The Senate’s top taxwriter pledged to introduce legislation that would protect the third round of economic impact payments from garnishment for private debt.
“The two previous relief payments were shielded from predatory private debt collectors,” noted Senate Finance Committee Chair Ron Wyden, D-Ore., in a statement March 9.
Wyden said Democrats wanted to protect the latest round of stimulus payments from private debt collectors, but Senate rules wouldn’t allow it.
The American Rescue Plan Act of 2021 (H.R. 1319), pending President Biden’s signature, doesn’t exempt individuals’ economic impact payments from being taken from their bank accounts by a creditor with a court order, 19 financial and consumer organizations said in a March 8 letter to leaders of both parties in Congress.
“I will be introducing standalone legislation to ensure families receive their much-needed relief payments,” Wyden said. He didn’t provide details.
Noting prior bipartisan agreement on garnishment protection for the first two rounds of payments, Wyden added, “I would hope that Senate Republicans again support ensuring families receive the $1,400 they need to pay rent and buy groceries.”
‘Model Language’
Wyden’s announcement comes one day after the March 8 letter asked Congress to prevent the third round of coronavirus stimulus money from being garnished for debt.
The letter proposes section 272(d)(2) of the Consolidated Appropriations Act, 2021 (H.R. 133) as model language for a garnishment protection bill.
The letter’s signatories ranged from the American Bankers Association and the Credit Union National Association to Public Citizen and the Consumer Federation of America.
The American Rescue Plan stimulus payments should be treated as benefits subject to the federal exemption from garnishment, the letter’s signatories agreed in the letter copied to all House and Senate members but not specifically addressed to Wyden.
60 Days’ Leave
Assuming the American Rescue Plan becomes law, the IRS and Treasury’s Bureau of the Fiscal Service will calculate and deliver the next round of economic impact payments to individuals’ financial accounts by direct deposit or check starting in weeks.
Only after the stimulus payment is deposited could the account be reduced or seized by creditors using a court order that the financial institutions said they are powerless to resist.
Lauren Saunders of the National Consumer Law Center said that the garnishment protection would last about 60 days from the date of the payment’s deposit.
The proposed law isn’t intended to shield taxpayers from IRS tax debt collection by agency-approved private contractors, Saunders added.
Kristin Walter of the Partnership for Tax Compliance said that taxpayer participation in the IRS’s private tax debt collection program is voluntary and that there should be no involuntary garnishments from it.