Your bank could take your $ 1,200 stimulus check if you’re in debt
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This week, the federal government began sending out the first of the $ 1,200 coronavirus stimulus package checks. With unemployment offices saved throughout the country, many people who have lost their income are desperate for money to cover basic necessities like food and rent. But like David Dayen reported in The American Perspective On Tuesday, the money could fall into the hands of banks and private debt collectors before some people can spend it on the things they desperately need, creating a bastardization of the original intention of the stimulus that will only hurt more to an already deflated economy.
The CARES Act, as it is called, does not allow the seizure of stimulus checks due to federal or state debts. But the same cannot be said for private debts. On this issue, Congress returned the decision to the Treasury Department, which refused to write rules that would have prohibited private collectors and banks from withdrawing money from stimulus checks. This means that if the checks are deposited into a bank account, the banks can cash it first. As Dayen explains, “Banks would be the first to collect payments to offset an overdue loan or overdue charge. Even if the person thinks their account with that bank is closed, if the payments are there, the bank could potentially use them to cover old debts.
Did your bank or private collection agents seize part of your stimulus check? We want to know your story. Fill in this form or contact Signal at (310) 614-3752 and VICE will contact you.
Lisa Stifler, director of state policy at the Center for Responsible Lending, told VICE that any type of private debt can apply. This includes auto loans, payday loans, bank overdrafts, and private student loans. We are already seeing this happening – a man in Chicago told local TV station WGN9 that $ 1,200 has been deposited into his account. Four hours later, Pioneer Credit Recovery, a subsidiary of Navient Corporation, had subscribed $ 575 for the payment of his student loan. (Navient spokesperson Paul Hartwick told VICE after the post was published that the man had previously authorized the company to charge him and that “Pioneer is not taking or entering bank accounts, so this payment has nothing to do with the man’s stimulus payment. ”)
“These payments are meant to help people pay their rent, get medicine and put food on the table,” Stifler told VICE. “When creditors or other third parties come first before that, they basically say ‘we’re more important than letting people get out of this. “”
The National Center for Consumer Law published an article on Wednesday with detailed advice on how people at risk can try to prevent their money from being seized by creditors, for example by monitoring their accounts and withdrawing it as soon as it arrives. Some states and local governments take proactive measures and issue emergency orders to stay the execution of some or all garnishment orders. Ohio sent a reinforcing notice that under their state’s laws, stimulus checks cannot be taken by private debt collectors, although, as Dayen pointed out, it is “not clear if that will apply to banks clearing funds put back on their knees ”. But so far these orders have been rare.
Most workers across the country we’ve spoken to in recent weeks have told VICE that $ 1,200 is already not enough to cover their expenses. Melissa Love, an hourly Walmart worker who now takes care of her father after he was fired from his job, estimated the check would last them “maybe a few weeks” at most. The fact that some people may have their one-off payments withdrawn by creditors reduces what is already insufficient relief for workers.
Besides the obvious malice of banks and private collectors who seize relief checks, the federal government allowing them to do so undermines the value of a stimulus in the first place. As professor of economics at the University of California, Los Angeles, Till Von Wachter said to Los Angeles TimesThe idea is that if the economy is down, people don’t have that much money in their pockets. They are very likely to spend this [stimulus check] money instead of saving it, so that money will help the economy.
But if the money goes to the creditors, it won’t be spent by people on the goods they need. As Stifler said, “that’s the complete opposite of what these payments are intended for.”
This message has been updated to include information provided by Navient Corporation.