Can The Bank Seize Your Coronavirus Stimulus Check? Senators Urge Treasury Department Action

A group of Democratic senators Friday urged Treasury Secretary Steven Mnuchin to issue rules preventing the stimulus checks being sent to taxpayers from being subject to garnishment. Bankers also are seeking clarification on whether banks can set aside court orders.

Fourteen senators, including former presidential hopefuls Bernie Sanders of Vermont, Kamala Harris of California and Amy Klobuchar of Minnesota, signed a letter to Mnuchin urging Treasury to shield the funds from debt collectors.

Treasury official Ronda Kent said in a webinar this week there is nothing in the $2.2 trillion coronavirus rescue package to prevent the stimulus funds from being seized to pay outstanding debts, American Prospect reported.

"There are concerns that the direct assistance checks that Americans are receiving may be subject to private debt collection, which could potentially deprive Americans of essential assistance that they need in order to pay bills and keep food on the table," the senators wrote in the letter obtained by The Hill.

"We ask you to act right away to use Treasury’s rulemaking authority to exempt Americans’ direct assistance payments from private debt collection. … We ask you to ensure that direct assistance checks cannot be garnished for private debt collection purposes."

The $2.2 trillion CARES Act provides $1,200 payments to taxpayers earning less than $75,000 annually and lesser amounts to those earning $75,000 to $99,000. It also provides for $500 per child so a family of four would receive $3,400. The checks began showing up in bank accounts this week for taxpayers whose account numbers were on file with the Internal Revenue Service.

The Bank Policy Institute, the American Bankers Association, the Consumer Bankers Association and the Credit Union National Association sent a letter this week to Warren and Sen. Sherrod Brown, D-Ohio, pointing out to the lack of guidance in the CARES Act regarding “otherwise legally binding garnishment orders.”

“Many of our depository institutions are taking extraordinary steps to ensure customers are able to access the full economic impact payment, notwithstanding whether the customer has a negative balance in the account,” the bankers said, adding, “Congress failed to define these payments as benefits subject to preemption from garnishment, and as a result, with regard to any legal garnishment, depository institutions have no discretion and are obligated to comply with applicable state laws and court-ordered garnishments.”