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State Attorneys General Ask Treasury to Protect Stimulus Checks

Posted on Apr. 14, 2020

A coalition of attorneys general is calling on Treasury to protect stimulus payments from seizure by private debt collectors.

In an April 13 letter to Treasury Secretary Steven Mnuchin, 25 attorneys general — led by New York Attorney General Letitia James (D) — asked the department to issue guidance or regulations prohibiting private debt collectors from garnishing the economic recovery payments granted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136).

“The CARES Act was intended to serve the American peoples’ basic needs and provide a vital lifeline to all who have lost their jobs or seen their incomes reduced. The Treasury Department can stop suffering for millions of Americans by taking immediate action and protecting these payments before many of these payments go out," James said in an April 13 press release.

The letter follows similar calls from U.S. senators, including an April 9 letter to Mnuchin from Sens. Sherrod Brown, D-Ohio, and Josh Hawley, R-Mo. Brown also joined Senate Finance Committee ranking member Ron Wyden, D-Ore., and Sen. Elizabeth Warren, D-Mass., in signing an April 2 letter calling for the stimulus payments to be exempt from garnishment.

The CARES Act authorizes Treasury to disburse stimulus payments of up to $1,200 to single filers with income under $75,000, up to $2,400 for married filers with incomes under $150,000 and an additional $500 for each qualifying child under the age of 17. The payments will be based on 2019 adjusted gross income and will be treated as an advance refundable tax credit on 2020 returns that will not need to be repaid.

Under the act, the payments can be redirected for past due child support payments but are protected from being redirected to settle past tax debts or other debts owed to federal and state governments in an effort to ensure the stimulus payments reach their intended recipients. The act does not specifically exempt the payments from garnishment "in what appears to be a legislative oversight," the attorneys general letter said.

According to the letter from Brown and Hawley, Congress didn't intend the funds to be garnished by debt collectors.

“If Treasury fails to take action, the CARES Act direct payments are at risk of being seized by debt collectors. That is not what Congress intended. We came together to pass the CARES Act to help American families pay for food, medicine, and other basic necessities during this crisis. To carry out Congress’s intent and ensure that American families receive the help they need, we ask that you immediately exercise your authority to protect these payments from private debt collectors,” Brown and Hawley wrote.

The coalition of attorneys general requested that Treasury designate the payments as “benefit payments” exempt from garnishment, which is within the department’s authority.

Initial payments started appearing in taxpayers’ bank accounts on April 9. The National Consumer Law Center has advised recipients to immediately withdraw the funds as cash or transfer them to another account at a smaller banking institution that is under the radar of debt collectors. Massachusetts, Texas, and the District of Columbia have all limited the ability of creditors and collectors to initiate or threaten a debt collection lawsuit, according to the center.

Attorneys general who signed James's letter are from California, Colorado, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin, as well as the Hawaii Office of Consumer Protection.

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