The government has been rolling out stimulus checks in an effort to activate the economy and to help Americans deal with the current economic downturn. However, because of a legal loophole in the stimulus package, debt collectors are allowed to garnish stimulus payments.
What is garnishment?
Garnishment is a practice often used by debt collectors to recover funds. It allows collectors to legally take money out of a person’s bank account. In most cases, debt collectors garnish wages, meaning they take a portion or all of a debtor’s paychecks until the debt has been repaid. Most government payments, like disability or Social Security benefits, are exempt from garnishment. This law ensures that vulnerable groups are protected.
Will some people not receive their assigned funds?
The National Consumer Law Center has noted that the stimulus payments do not come with any legal protection from garnishment. This means that those who are behind on paying back student loans, those with unpaid child support, or those facing tax or credit card debt might never see their stimulus money.
Closing This Legal Loophole
Twenty-five state attorneys general and Hawaii’s Office of Consumer Protection have together called on Treasury Secretary Steven Mnuchin to correct this issue. The point of the stimulus is completely lost if the money can be immediately taken away from people. In a letter to Mnuchin, the attorneys general said, “During this public health and economic crisis, the States do not believe that the billions of dollars appropriated by Congress to help keep hard-working Americans afloat should be subject to garnishment.”
Bank account garnishment could be especially disastrous for people living in certain states. In some states, garnishment automatically leads to an account freeze. This means a collector’s garnishment of the stimulus payment would not withhold stimulus money, but would put all spending on hold. This flies in the face of the goal of the $2 trillion stimulus package.
According to legal experts, as well as the coalition of attorneys general, a change in label would quickly solve this problem. If the stimulus payments were designated as “benefit payments,” debt collectors would not be able to touch the funds. A Treasury spokesperson claims that the department is exploring that option. Meanwhile, Massachusetts and Ohio have already both legislated against debt collection of stimulus money.